This year 2009 marks the 200th anniversary of Charles Darwin’s birth and the 150th anniversary of his seminal work, “On The Origin Of The Species”. His theory is now associated with business as “Darwinian Economics”—which claims that organizations that are best able to adapt are the ones most likely to survive, particularly in a recessionary climate. Many purchasers are so busy making decisions, analyzing problems and seeking answers that they pay no attention to simply observing. Darwin, on the other hand, spent much of his career observing. That is to use the power of observation. Observation leads to critical thinking and critical thinking leads to creativity and innovation. A survey by the American Management Association had 500 CEOs answer the question, "What must one do to survive in the 21st century?" "Practice creativity and innovation" was the top answer across the board, but only 6 percent felt their organizations were doing a "great job" of it. This creativity deficit may be the single most dangerous gap in American business today. It leaves employees frustrated and disgruntled, and can easily send a Fortune 500 company into Chapter 11. “Today, more than ever before, your ability to capture information and then leverage it to work smarter empowers you to produce cash for the bottom line …and create value for your companies. Mere ‘purchasing agents’ won’t survive this revolution …To survive it, let alone exploit it, you’ve got to be an agent of change, a master of intelligence,...” Volney Taylor, former Chairman and CEO, Dun & Bradstreet Corporation This presentation will help you answer the following questions. How much time do you spend on the front-line observing your team or your suppliers rather than analyzing second or third-hand data? What are your powers of observation? Do you employ critical thinking or critical inquiry? Are you apt to investigate problems, ask questions, pose new answers that challenge the status quo, discover new information that can be used for good or ill, question “experts” and “best practices”, and challenge accepted norms? What is your organization's capacity for creativity, innovation and successful renewal? This presentation focuses on how you can increase your understanding of:  The Power of Observation  Observation and Awareness  Interpretation, Brainstorming, and Hypothesizing  The Attitude of Critical Thinking  Creativity and Innovation

1. Power of Observation: What
Purchasers Can Learn From
Darwin
Track 2-Strategic Cost Analysis and Management
The 63rd Annual Southwest
Purchasing Conference
By
Thomas L. Tanel, C.P.M., CTL, CCA, CISCM ,
CATTAN Services Group, Inc.
College Station, TX
cattan@cattan.com
Created by CATTAN Services Group, Inc. © 2009

2. The Power of A Theory and Darwin’s
Observations
Power of a theory
=
That which it
explains
÷
That which it needs to
assume in order to
do the explaining

3. Darwin and the Power of Observation

Here was a man who applied his powers of
observation and rigorous testing to everything
he looked at in great detail, from the
movements in plants and barnacles, to how
pigeons navigate, to the importance of
earthworms in soil health and ecology.

The essence of Darwinism is nothing more than,
that simple-minded observation, as near as we
can tell.

4. Darwin and the Power of Observation
What Darwin did
for most of his
career was
observe.
 Only later on did
he come up with a
theory to explain
his observations.


5. Darwin and Survival of the Fittest

It is so simple that in the guise of “survival of
the fittest” (the renaming that Darwin
adopted from Herbert Spencer): the fittest
are defined as those that survive, so the
catchphrase amounts to “those that survive,
survive.”

But Darwin didn’t define the fittest as those
that survive. His “fittest” were those
endowed with the best equipment to survive,
and that makes all the difference.

As Darwin observed (and he himself was at
pains to point out), natural selection is all
about differential survival within species, not
between them.

6. The Power of Observation




Charles Kettering, the famous inventor, once said: “A
problem well stated is a problem half solved.”
This implies that a good portion of problem solving
should be devoted to a thorough understanding of
what’s going on [observation] before any corrective
action steps are taken.
In many cases, too much time is spent on proposing
various solutions before the problem has been correctly
defined.
Observation is a powerful technique that can be used
to help understand problems. Often, clues about how to
solve a problem can come from simply observing the
process .

7. Tips for Making Observations




Use all of your senses (sight, hearing,
touch, and smell) to make qualitative
observations.
Review your observations to be sure
they are accurate and objective.
Whenever possible, count or use
measurement devices to make
quantitative observations. Be sure to
include units of measure with them.
Check your observations to be sure
that they are statements about
information gained through your senses,
not explanations of what you observed.

8. What Do You Observe?
A
Woman
at a
Vanity
or a
Skull?

9. Observation and “Thin-Slicing”



Activate your powers of
observation.
Writer Malcolm Gladwell refers
to this process in his book Blink
as "thin-slicing."
Thin-slicing calls upon the use
of limited information to come to
conclusions.

10. Colin Powell on the Use of Limited
Information to Come to Conclusions
“When I am faced with a decision…I dredge up
every scrap of knowledge I can…I use my intellect
to inform my instinct. I then use my instinct to test
all this data. Hey, instinct, does this sound right?
Does it smell right, feel right, fit right?
We do not have the luxury of collecting information
indefinitely. At some point, before we can have
every possible fact in hand, we have to decide.”

11. Powell on P40 to 70: Thin-Slicing
“I have a timing formula, P-40 to 70, in which P
stands for probability of success and the numbers
indicate the percentage of information acquired.
I don’t act if I have only enough information to give
me less than a 40% chance of being right.
And I don’t wait until I have enough facts to be
100% sure of being right, because by then it is
almost always too late. I go with my gut feeling
when I have acquired information somewhere in
the range of 40-70 percent.”

12. “Thin-Slicing” and the Power of
Observation
Both "thin-slicing" and using the power of
observation, are concerned with the
challenge of identifying and focusing on
only the most significant information.

13. Marcus Aurelius on Observation
“Observe
constantly that all
things take place by change, and
accustom thyself to consider that the
nature of the Universe loves nothing
so much as to change the things
which are, and to make new things
like them. “

14. Observation in the Land of the Blind

“In the land of the blind
the one eyed man is
king.”

The thing is, the saying
isn't about how many
eyes you've got, or how
good they are, it's
about how well you use
them.

15. Observation in the Land of the Blind:
Wake Up and Take Notice



So the ability to be blind to
most of what we see and deaf
to most of what we hear is
quite useful. It helps us get by
in life.
Whatever our role we tend to
be so busy just getting along
that we rarely make the time to
sit up and really take notice.
We are in the habit of not
looking, of not hearing, and of
not noticing.

16. Practice Observation In the
Land of the Blind


Observation is
probably the most
succinct description
there is of the practice
of scenario planning.
Pierre Wack, the influential
scenario planner used to refer to
himself a “the eyes of the wolf at
the front of the pack” at
Royal/Dutch Shell.
His view was that: "Scenarios help
us to understand today better by
imagining tomorrow, increasing the
breadth of vision and enabling us
to spot change earlier… Effective
future thinking brings a reduction
in the level of crisis management
and improves management
capability, particularly change
management."

17. Observation and Seeing
What’s Invisible

As Jonathan Swift said: vision is
the art of seeing things invisible
to others.

And why does so much of what's
in front of us seem invisible?

Well, perhaps because people
only see what they are prepared
to see (Ralph Waldo Emerson),
and because what we see
depends mainly on what we look
for (John Lubbock).

18. Techniques to Become
Truly Observant






Become hyper-observant of the more discreet
elements of your everyday environment
Look for patterns amidst your everyday routines
Regard anything out of ordinary patterns as
possibly a risk or intentional distraction
Focus on incongruent people, equipment,
processes, methods, material flow, etc.
Look beyond what you are shown or told, and
Do not tune out familiar surroundings---look
deeper for things that you may have missed

19. Have You Become Truly Observant?:
How Many Human Faces Do You See?

20. Creativity and Innovation




In any organization today, sooner or later the
words "innovation" and "creativity" will come up.
Few leaders truly know how to foster creativity
and innovation in their workplace.
And even fewer actually do it!!!
"The way forward is paradoxically not to look
ahead, but to look around [observation],"
explains John Sealy Brown, the director of the
Palo Alto Research Center (PARC) for Xerox.

21. The Practice of Innovation
In most companIes today,
In most companIes today,
the “practIce” of
the “practIce” of
InnovatIon
InnovatIon
can be lIkened to
can be lIkened to
the matIng of pandas:
the matIng of pandas:
Infrequent, clumsy and
Infrequent, clumsy and
often IneffectIve.
often IneffectIve.

22. Sawyer’s “Group Genius”

The heart of this book Group
Genius is Sawyer’s proposal
that “collaboration is the secret
to breakthrough creativity”

He has found that true creativity
and innovation only comes
through the open sharing of
information between groups of
individuals.

23. Sawyer’s “Group Genius”

Sawyer discovered that innovation truly emerged
from “small sparks gathering together over time,
multiple dead ends, and the reinterpretation of
previous ideas”.

True organizational collaboration means letting go
of preconceived notions for how to attain success.

When true sharing of ideas is fostered, then real
innovation can occur.

24. Sawyer’s “Aha” Moment

The idea of small sparks, which are small
moments of creativity that, when added together,
provide the larger picture for the “Aha” moment.

This “collaboration over time” suggests that
great inventions emerge from a long sequence
of small sparks.

Collaboration brings small sparks together to
generate breakthrough innovation.

25. Four Step Creative Process
1.
2.
3.
4.
Preparation: To train
your mind.
Incubation: To set
back from the
problem.
Illumination: The
idea arises in the
mind like a sudden
flash.
Validation: You have
to check the validity
of the idea.

26. Four Step Creative Process—Step 1
Preparation: To train your mind.






Concentration and attention play a great role in
preparation
Read everything and as much as you can
Meet people
Keep a log
Choose a motivating environment
Increase your intellectual capacity

27. Four Step Creative Process—Step 2
Incubation: To set back from the
problem.



Incubation is a contingency phase
It means that you have not solved your
problem during the creative session
Very often the solution you were looking for
is easily found after a good sleep.

28. Four Step Creative Process—Step 3
Illumination: The idea arises in
the mind like a sudden flash.



Brainstorming
Mind Mapping
Mind Revolution

29. Four Step Creative Process—Step 4
Validation: You have to check the
validity of the idea.




All of the previous steps aim to produce new ideas.
It does not mean that these ideas are worthy or useful.
Organize a validation session and discuss with friends,
colleagues, associates, etc.
If you get interest and support, it means that your idea is
innovative and that you can start the process of studying
the project.

30. Definition of Critical Thinking
A process by which we use our
knowledge and intelligence to
effectively arrive at the most
reasonable and justifiable positions on
issues, and which endeavors to
identify and overcome the numerous
hindrances to rational thinking.

31. Critical Thinking

Critical thinking is more than
thinking logically or analytically;
it also means thinking rationally
or objectively.

Logic and analysis are
essentially philosophical and
mathematical concepts.

Whereas thinking rationally and
objectively are broader
concepts that also embody the
fields of psychology and
sociology.

32. Critical Thinking: Five Step Process





Step 1: Adopt the Attitude of a Critical
Thinker
Step 2: Recognize and Avoid Critical
Thinking Hindrances
Step 3: Identify and Characterize
Arguments
Step 4: Evaluate Information Sources
Step 5: Evaluate Arguments

33. Adopt the Attitude of a Critical
Thinker: Step 1

The first step to becoming a proficient critical
thinker is developing the proper attitude.

Such an attitude embodies the following
characteristics:
Open-mindedness
Healthy skepticism
Intellectual humility
Free thinking
High motivation

34. Recognize and Avoid Critical
Thinking Hindrances: Step 2


Each day of our lives we become exposed
to things that hinder our ability to think
clearly, accurately, and fairly.
These hindrances can be divided into four
categories:




Basic Human Limitations
Use of Language
Faulty Logic or Perception
Psychological and Sociological Pitfalls

35. Identify and Characterize
Arguments: Step 3


At the heart of critical thinking is the ability
to recognize, construct, and evaluate
arguments.
In the context of critical thinking, an
argument means the presentation of a
reason(s) to support a conclusion(s), or:
Argument = Reason + Conclusion

36. Evaluate Information Sources: Step 4




Most arguments reference facts to support
conclusions.
A critical thinker must have a sound approach for
evaluating the validity of facts.
Facts are usually acquired from information
sources such as eyewitness testimony or people
claiming to be experts.
These sources are typically cited in the media or
published in reference books.

37. Evaluate Information Sources : Step 4

In order to assess credibility, truth, and exactness, the
critical thinker must seek answers to the following types
of questions:
1. Does
the information source have the necessary
qualifications or level of understanding to make the
claim (conclusion)?
2. Does the source have a reputation for accuracy?
3. Does the source have a motive for being inaccurate or
overly biased?
4. Are there any reasons for questioning the honesty or
integrity of the source?

38. Evaluate Arguments : Step 5

The last step to critical thinking, evaluating
arguments, is itself a three-step process to
assess whether:




Assumptions are warranted;
Reasoning is relevant and sufficient, and
Relevant information has been omitted.
The first step to evaluating arguments is the use
of assumptions or inferences which are
essentially reasons implied in an argument that
are taken for granted to be true.

39. Evaluate Arguments: Einstein on
Knowledge and Experience

Albert Einstein once said, “The only source
of knowledge is experience.”

Experience allows us to use both our
education and our observations to gain a
greater understanding and become a more
valuable resource for others.

40. Evaluate Arguments : Step 5



The second step to evaluating arguments is to
assess the relevance and sufficiency of the
reasoning (or evidence) in support of the
argument’s conclusion.
A convincing argument is one that is complete, in
that it presents all relevant reasoning (evidence),
not just evidence that supports the argument.
Thus, the final key to evaluating arguments is
attempting to determine if important evidence has
been omitted or suppressed.

41. H.G. Wells on Inductive Thinking:
Seeing Things Before They Happen

H.G. Wells argues that inductive thinking allows one
to build up an understanding of the broad outlines of
future history by “the comparison and criticism of
suggestive facts”.

Wells suggests using existing or researched
information to infer a future state of affairs.

He proposes that such inferences can be reasonably
accurate.

42. Peter L. Bernstein on Risk: Seeing
Things Before They Happen


The objective is not to control things you
can’t control but to enable you to be
relatively better at delivering results and
performance over time, no matter what the
“weather” is.
The ability to do that means we have to
manage our companies and our divisions
by understanding what they’re actually
doing, not just by looking at their results.

43. Peter L. Bernstein on Risk: Seeing
Things Before They Happen

In his book Against the Gods
he states, "The essence of
risk management lies in
maximizing the areas where
we have some control over
the outcome while minimizing
the areas where we have
absolutely no control over the
outcome and the linkage
between effect and cause is
hidden from us."

44. As Henry Mintzberg Explains It:
Seeing Things Before They Happen
Why? Because good planning requires a view of the
future, and since forecasts based on current trends
or estimates of growth based on history will be
dangerous to organizations if their environment is
changing fast. And as we know, everything is
changing fast. A major source of change in the
world today is the adoption of information
technology. The changes visible in the last few
years, as the financial services industry reinvents
itself, are expected to change the way we work,
play, shop, are governed, bank, and the
communities we belong to. In this environment,
scenario planning is a must...

45. Mintzberg on Extracting the
Significance from the Noise
“There is no phenomena unless
it is an observed phenomena.”
John Wheeler
Always keep in mind
that the successful
organizations are
those which have
found ways of
looking for early
warning signs---the
significant through
the noise.

46. (There Is No Alternative) Shell Scenario
Planning: Seeing Things Before They Happen
The present may be murky; the future
may be up for grabs.
But strategy that separates what's
inevitable from what's unknowable
is the essence of the game.
There Is No Alternative (TINA)
T: Tackle it yourself.
I: Isolate certainties.
N: Name it.
A: Act on it.

47. Go to The Source for Better Decisions:
Seeing Things Before They Happen

Make it routine to go to many individuals
directly influenced by the issue so you
can see firsthand and fully understand
the subtle details, realties of a situation
and their “histories of the future”.

Keep informed about the future and new
trends.

Get out and visit your supply chain both
internally and externally---observe.

48. Observation and the Periphery:
Seeing Things Before They Happen

Valuing the periphery requires a seismic shift in organizational
thinking.

Instead of considering any deviation from standard operating
procedure to be irrelevant, excessive or unnecessarily expensive,
organizations must begin to view such variances as portals to the
future.

With wide eyes and an open mind, they must actively and
systematically extend the range of observation outward, beyond
the comfort of the known.

Those who do not pay attention to the periphery are soon
overcome by the waves of change.

49. Being Fit to Ride the Waves of Change:
Seeing Things Before They Happen

50. Thank You !