Two important books of 2023
Usually around December, it is customary for people to make their end-of-year book recommendations. You will see a lot of photos of book covers shared on people’s LinkedIn feeds.
I am one month late! In any event. I thought, as the saying goes: better late than…. So decided to share my book recommendation for 2023. At first glance, these two recommendations couldn’t be more different but they both have had a profound impact on how I believe companies need to design their commercial decision ecosystem.
My first recommendation is “The Design of Business” by Roger Martin. This is a book about innovation and the formula to build a truly innovative team and company. In the author’s words, “It’s about exploring really wicked problems whose solutions can’t be found in past experiences or proven data”.
This book is filled with profound thoughts and ideas. The one that found the most interesting and resonated with me was the concept of the “Knowledge Funnel”.
In this book author argues that “everything we know in the world goes through a progression. Things start as a mystery, which is characterized by us not knowing how to think about the thing in question” and “When something is a mystery and we don’t yet have a productive way of thinking about it, we have to consider everything.” In order for us to think productively about a problem we need to develop “Heuristics”.
In the author’s words: “There are many definitions of heuristic, but the one I (Roger Martin) use is an approach to problem-solving that aids progress toward a solution but does not guarantee the solution will be as desired. In business, a heuristic would be a way of doing an M&A transaction, or a way of onboarding a new board member, or in my field, an approach to creating strategy.”
As someone who has worked in energy markets and has spent the last 8 years building analytics teams and capabilities, the ability to use modeling (of different kinds) to transform mysteries in business into useable heuristics is a critical skill set and key to the success of any analytics team.
Transforming “Heuristics” to Algorithms and subsequently to code which in turn allows us to scale commercial decision-making beyond “bounded rationality” has always been elusive to me. In the past, I have had (and seen others) success in an albeit limited fashion to close of loop on the knowledge funnel. However, I have never seen this done systematically as the models have been inadequate in predicting real life dynamics.
This brings us to my second book recommendation: Reinforcement Learning and Stochastic Optimization: A Unified Framework for Sequential Decisions by Warren Powel.
This is a highly technical book with lots of formulas and mathematical concepts. Not an easy read by any stretch of the imagination. Warren Powel uses the concept of “Sequential Decision Process” to model several business decisions that fall under the category of optimization problems called “stochastic decision process”.
Generally, I do believe every business decision can be modeled as an optimization problem. In business problems, as with any system, you need to maximize the utility of the system (or minimize the cost) subject to real-life constraints. “Deterministic” optimization problems suffer from two flaws: (1) The world is uncertain and hence the inputs to the models are “stochastic” (2) Decisions we make today have an impact on the future payoff hence the concept of sequential decision process.
The concepts outlined in these books are the premise behind our startup/consulting group. Quantim Intelligence (QI). We help companies develop the right capabilities to analyze and model their commercial decisions and scale their decisions across their organization. What makes us different from other consulting companies is we help you develop, execute, and scale commercial strategies. You can reach out to us at: https://quantim.ca/contact
