George S. Day and Christine Moorman

The Subtle Power of Mental Models

Friday Oct 22, 2010

All managers use mental models to simplify complex markets and make sense of their competitive positions. Unfortunately, we often find that the prevailing mental model imposes a subtle inside-out myopia. In Chapter One we describe a number of myopic inside-out mental models to which managers often fall prey.

The inherent simplifications and untested ideas don’t announce themselves. Instead, you have to go looking for their outcroppings. This takes ingenuity. For example, a major life insurance company used content analysis to examine a sample of reports, memos and e-mails to see what words were used to describe their customers. It discovered that the word “customer” itself was scarcely used. Instead, each division had developed its own vocabulary, which spoke volumes about the prevailing inside-out mind-set. In the pension division, customers were referred to using terms such as active lives, deferred lives, or certificate holders; group insurance dealt with claimants, eligible, and dependants; personal insurance had insureds, policyholders, annuitants, and participants.

Customers were reduced to paper contracts, digitized records and obligations—not opportunities. The company also faced huge problems in developing coordinated strategies for its customers. Because each division was looking at contracts and not people, they had no way of knowing when they had a pension contract and group and personal life policies with the same person. Valuable opportunities to cross-sell were being missed.

Without mental models to impose order, the deluge of market information would overwhelm our capacity to extract meaning or make decisions, but we must examine the models themselves before accepting the analysis they offer.

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December 8th, 2011 | 12:15 pm
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