The Case of the Misinformed, Desperate CEO
Leo faces a delicate decision
A wrong move by Ben, CEO of mat-corp, put his company in play for a hostile takeover. Desperate, seeking a defense, Ben traded on his friendship with Jim, CEO of a computer company.
On a golf course, he asked Jim for an opportunity to use mat-corp’s material skills at Jim’s company. Ben hoped this would signal shareholders that mat-corp was entering an attractive market.
Leo, mat-corp’s, Dir. Bus. Dev., learned about Ben and Jim’s conversation through a command from one of Ben’s courtiers. (These favorites surrounded Ben and influenced him behind the scenes.)
According to the courtier: Jim made a quick suggestion to Ben on the golf course. Jim said: “Your technical folks should talk to our group that specializes in digital storage.“
The courtier said: “Leo, your electronic materials business is the only entry we have in Jim’s market. I want you to find out fast what the digital storage market is all about.”
Leo was familiar with my B2B customer research work. He engaged me for a project to understand what the digital storage market wanted and why.1
Customer Research Report: Executive Summary
Gathered elicitation interviews with 30 knowledgable individuals in the digital storage industry. In opening the conversation, I said: “My client’s innovation is in digital storage systems. It is a low cost process for making the material for the (xyz) storage system.” (The system Jim mentioned in his quick suggestion.)
No respondent found the client’s process interesting. The following comment was typical.
“Your client must have been asleep the past year. We, and others, are switching fast to a superior digital storage system. In two years there will be no need for your client’s process … at any price.”
VP, R&D major West Coast, computer company
Leo presented the results of the customer research report to the courtier. The courtier’s response:
“I want you bury this report and not discuss it with anybody. Ben does not need its message.2 He has set up a meeting next month with Jim’s digital storage group in Colorado. Our R&D materials group will do a show-and-tell for Jim’s materials’ people. You are invited. But, don’t say a word about the report. ”
A week after the Colorado meeting, Jim called Ben and apologized. He did not know that his off-the-cuff suggestion on the golf course would lead to unrewarding work for Ben’s people.
Eight months after the meeting, two companies purchased mat-corp. They divided up the parts each wanted and sold the rest. Mat-corp’s shareholders were pleased.
Ben retired on a golden parachute and spent his time improving his golf game. The courtier retired on a silver parachute.
Leo discovered his expertise for developing electronic materials business was in high demand. He joined a small company on the rise and in 5 years was a member of the C-suite.
- My work followed the Rule of 30 method.
- Blind study
- Gathered intelligence through 30 elicitation conversations with experts in the digital storage industry. They were from a random sample of 230 knowledgeable individuals.
- The courtier intentionally committed the Continued Influence Effect fallacy. This fallacy is a need to believe in previous misinformation even after it has been corrected. (Courtiers are a group of favorites who surround a king, and some CEOs. Usually, courtiers do not hold major titles. They influence the CEO behind the scenes.) (Wikipedia List of Cognitive Biases: accessed 12/15/19)