(2021-07-27) Chin Every Great Business Person Has The Same Mental Model Of Business

Cedric Chin: Every Great Business Person Has The Same Mental Model of Business. It’s nearly always more fruitful to mine the literature for already-extracted mental models of expertise. A few weeks ago, I learnt of Lia DiBello, an NDM researcher who specialises in the extraction of tacit mental models of business expertise.

She writes, in The Oxford Handbook of Expertise: After several years using different methods, we noticed that highly talented business performers are very similar to each other.

This led us to realise that —as a domain—business itself is an orderly closed system of relations between principles, and that so-called intuitive experts in business have an implicit grasp of this.

she has spent the bulk of the past 20 years consulting for big companies, applying her research to the real world.

The bulk of her work follows from these three big ideas:

Business expertise consists of a handful of properties

team-based

business expertise is actually a form of distributed cognition

domain-specific mental models of the business and cognitive agility

there is a deeper mental model that underpins those domain-specific mental models

general problem solving ability does not matter so much in business so much as a property she describes as cognitive agility — which is the ability to update mental models in light of new information.

Her primary innovation is an intervention known as the FutureView Profiler. The Profiler is able to evaluate the shared mental models of an executive team

DiBello’s insight that domain-specific prediction tasks are a useful way to evaluate business skill is a huge contribution to the literature on expertise

Her company, Workplace Technology Research Inc (WTRI), has spent years implementing company training simulations in virtual worlds

DiBello argues that business expertise is primarily a matter of organisation

business experts rely not on greater analysis or greater information, but better ways of structuring or organising their knowledge

spend the rest of this piece examining the tacit mental model of business expertise that DiBello successfully extracted

in-depth studies of talented business leaders who were repeat successes—even in very challenging markets

shared mental model is essentially a triad: deep understanding of the following three core areas: (1) factors involved in effective operations, (2) forces influencing the market, and (3) those driving business finance and economic climates.

Beyond this, they are expert at keeping the triad in balance, or shifting the balance when external conditions are conducive to do so.

DiBello describes the triad using different names. One way of describing it is ‘supply/demand/capital’. Another is ‘leadership/strategy/finance’.

• Supply, or leadership...operations... you have to be good at product development if you’re in consumer software, and you must have competent manufacturing if you’re Chobani... org design, incentive structures, execution cadence, and even the ability to get things done within the company
• Demand, or strategy: forces influencing the market... market shape, competitive analysis, positioning, changing consumer demand
• Capital, or finance: cash flow lockup, return on invested capital, margins

As DiBello mentions, the key property of business expertise is in understanding how a change in one leg of the triad affects the other two legs, at least within the context of one’s specific industry.

it tells us that expertise may be evaluated according to the facility an exec has with each of the three categories

competent managers (one level down from experts) tend to be very talented in only one or two of these areas; however, they often do not understand the dynamics between these areas as well as the “superstars” do.

The implication is that if you want to get really good at business, you should systematically acquire skills in each of the three categories, specific to your particular business, and then — more importantly — grok the relationships between the three categories.

Do I buy this model of business expertise? Yes, I do. Nearly everything I know about business lines up with the model

With the triad, it’s clearer to me that temporary competitive advantage may emerge from any of the three categories.