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The high cost of accurate knowledge
Kathleen M Sutcliffe1, Klaus Weber
1University of Michigan Business School, Ann Arbor, USA. ksutclif@umich.edu
Harvard Business Review
|May 16, 2003
Summary
Senior managers should focus on interpreting competitive information rather than just collecting it. Effective interpretation, especially positive yet not overconfident responses to opportunities, drives better business strategy and performance.
Area of Science:
- Business Strategy
- Organizational Behavior
- Information Management
Background:
- Senior managers are tasked with scanning the external environment to inform company strategy.
- Debate exists on whether to prioritize information accuracy/abundance or interpretation skills.
Purpose of the Study:
- To investigate the relative importance of information accuracy versus interpretation in strategic decision-making.
- To identify the characteristics of interpretations linked to high organizational performance.
Main Methods:
- The study by Sutcliffe and Weber examined how senior executives interpret competitive environmental information.
- Analysis focused on the link between interpretation style and strategy/organizational changes.
Main Results:
- The accuracy of senior executives' environmental assessments is less critical than their interpretation of that information.
- Investments in shaping interpretations yield more durable competitive advantages than information acquisition.
Conclusions:
- Managing meaning through interpretation is more crucial for top executives than managing information.
- High-performing organizations exhibit interpretations that are opportunity-seeking but not overconfident.