COVID and the Need for Devil's Advocates

Insurers need to use a devil's advocate to head off painful mistakes as they rethink their strategies in the face of the pandemic and economic crisis.

Paul Carroll

July 20, 2020

Over the weekend, two articles made a compelling case that we need to better vet academic studies before they become set in the public consciousness on controversial topics like possible systemic racism and the coronavirus. Both recommended a solution that has been a focus of my career -- devil's advocates -- and that we all should use as we formulate personal and corporate strategies in these turbulent times.

Let's spend a minute on why they're so important and how you can use them -- rather easily, in fact.

The article related to the coronavirus argues that a serious attempt at research wasn't vetted quickly enough and, when published in April, had obvious shortcomings that allowed many to believe that the virus wasn't as dangerous as it has turned out to be. The one concerning a paper on possible systemic racism by police went through peer review, but the authors say the process isn't designed to catch fraud and is vulnerable to rigging. In the case of the paper they discuss, a reader caught a major error shortly after publication, and the paper was withdrawn -- but not before many used it to dismiss the notion of racism in policing.

Both articles obviously touch on hot buttons, and the specifics of the arguments about the research they discuss could distract from the point I want to make, so I won't go into more detail. You can read the articles and reach your own conclusions. I'll just note that both say problems would have been avoided if the virus and racism research had been put in front of devil's advocates -- people whose task is solely to identify potentially bad assumptions, in time to do something about them.

That need for devil's advocates is a theme I've been sounding with corporate America for a dozen years and is especially important now. The New York Times and the Wall Street Journal ran articles recently saying that corporations are starting to believe both that the economic crisis caused by the pandemic will last longer than they had hoped and that the new normal will look quite different. So, a strategic rethink is happening all at once in a whole lot of C-suites, which creates opportunities both for progress and for mischief caused by bad assumptions -- that devil's advocates could head off.

My belief in the power of devil's advocates dates back to a book, "Billion Dollar Lessons," that Chunka Mui and I published in 2008, on the lessons to be learned from corporate failures. Out of the 750 major writeoffs that we spent two years investigating in detail, with the help of 20 researchers, we found that 46% stemmed from strategies that should have been identified ahead of time as brain-dead. Think Avon deciding that its main asset wasn't its door-to-door sales force but was its "culture of caring," which led the company to buy a medical equipment manufacturer and operator of retirement homes -- then quickly selling them at a loss because the cosmetics company had no idea what to do with them. Or, think Blue Circle Cement, one of the world's biggest cement companies, deciding that it was really a home products company and should make and sell lawn mowers, among many other things -- then filing for bankruptcy protection and being acquired.

We posited in the book that loads of people internally must have seen the problems coming but couldn't stop the strategies because of internal dynamics -- for instance, the CEO is often the one championing a new strategy, so the tendency is to want to confirm the idea, not to challenge it. Our subsequent research and consulting, as devil's advocates, has confirmed our thesis. (We're not alone, either. Much has been written in recent years about the value of a devil's advocate, sometimes referred to as a red team/blue team exercise.)

The key issue is: How do you identify problems in a way that's acceptable within the complex culture of a C-suite? How do you help the company win without making some powerful individual lose -- or see the devil's advocate process quashed if it looks like the CEO will be the loser?

The main answer is to turn the devil's advocate process into a bloodless exercise. You don't give the devil's advocate the power to rule on whether a strategy is right or even to hazard an opinion. The decision needs to stay with the CEO. You simply have the devil's advocate interview senior executives to probe for vulnerabilities, then use the concerns to identify the assumptions that have to be true for a strategy to succeed. Because the CEO has authorized the process, he or she can face the evidence and kill the strategy without losing face. If the decision is to proceed, the CEO will have a better idea about the pitfalls that may lie ahead.

Choosing a devil's advocate can be tricky. You can hire an outsider, who will bring objectivity but may take time to get up to speed. You can ask for a volunteer among senior insiders, but few want to be known as the naysayer, at least on more than a one-time basis. It seems to work best to designate an insider, so the whole team knows that the person is simply playing a role. (Irving Janis, in his pioneering 1982 book "Groupthink," described how President Kennedy designated his brother Bobby to be the devil's advocate after the administration had botched the Bay of Pigs invasion; Bobby then routinely challenged claims by military leaders during the Cuban missile crisis and may well have saved the world from nuclear war. Quite the endorsement for a designated devil's advocate....)

As insurers reformulate strategies to prepare for what could be an extended economic crisis and for a rather different world on the other side of it, they should build a devil's advocate into the process. Companies are making a lot of assumptions, many of which they don't even know they're making or made long enough ago that the assumptions have been forgotten. Some of those assumptions are wrong -- and many senior executives either know or suspect which ones should be challenged and rethought. (If I had to bet, the biggest mistake that companies in general will make in this go-'round is to underestimate what competitors are doing. The tendency is to see competitors as static, but they're working just as hard and perhaps as creatively in their strategy rooms as you are in yours.)

By the way, a devil's advocate approach can help you get better feedback on personal issues, just by having you rephrase questions. Don't ask a friend or family member if some plan of yours is a good idea. They'll know you want affirmation and give it to you. Instead, present a plan neutrally, say you're looking for holes in the idea and ask your friend or relative to help you identify the potential problems. Then, on your own, you can weigh those concerns against the benefits that you've already seen.

Knowing about pitfalls won't always matter. I consistently underestimate how long it will take me to write something, even though I allow for the fact that I always underestimate. But at least a devil's advocate process will open your eyes to many of the problems that lie in wait out there.

So, challenge those assumptions.

And stay safe.

Paul

P.S. Here are the six articles I'd like to highlight from the past week:

Why Traditional Insurance Won’t Work

With the sudden shift to remote-only interactions, insurers can no longer dictate the speed of their transformations.

Tipping Point for Claims Automation

While virtual estimating for auto claims—using photos in place of a physical inspection—is not new, the pandemic has made it the preferred method.

Time to Focus on Cyber Resilience

Here are five ways that businesses should be shoring up potential weak spots in their cyber security program’s incident response plan.

Increased Threats for Manufacturers

Manufacturers must understand that the digital push to run more efficiently creates a security gap that must be addressed.