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Know What You Don’t Know – Best Business Practices

Hiker MountainReal knowledge is to know what you don’t knowConfucius

To “know what you don’t know” sounds a lot more difficult than it actually is, and identifying gaps in your knowledge is a process that requires research and delving into different data points.

The illusion of explanatory depth is a cognitive barrier that masks gaps in knowledge and makes you believe you fully understand something when you really don’t. For example, most people will be confident that they understand how simple, everyday objects like zippers or sewing machines work, but if asked to describe the particulars of how the function, will quickly see the gaps in their knowledge.

This same thing can be seen in the use of buzzwords when discussing important aspects of business. Art Markman, PhD, the Annabel Irion Worsham Centennial Professor of Psychology and Marketing at the University of Texas, gives the perfect example of the pitfall of buzzwords in business, when he talks of attending a corporate meeting where the vice president spoke of “streamlining business practices in the coming year.” Everybody listening nodded in agreement, though afterwards, when discussing what streamlining actually meant, couldn’t define how one would go about streamlining their business practice. Though these small gaps can seem relatively harmless, they can be extremely detrimental to business, as evidenced by the 2007 United States market crash which was a direct result of investment banks not fully understanding the complex financial products they were selling.

Being aware of these explanatory gaps is vital for business success, as undiagnosed gaps can hinder the business in finding innovative solutions for the problems they are trying to solve.

On the flip side, being unaware of your explanatory gaps can lead to The Dunning Kruger Effect, which is described as the “cognitive bias in which unskilled individuals suffer from illusory superiority, mistakenly rating their ability much higher than is accurate.” In other words, not knowing what you don’t know can lead you to overestimate your abilities and make stupid mistakes.

The ‘matrix of knowledge’, designed by Donald Rumsfeld in 2002 splits knowledge into four quadrants:

  • What you know that you know
  • What you don’t know that you know
  • What you know that you don’t know
  • What you don’t know that you don’t know

Identifying the things that you know you know is relatively easy, but for the other three quadrants, it can sometimes be necessary to call on an outside perspective – especially for things that you don’t know that you don’t know.

Knowing what you don’t know, and in fact, knowing that there are things that you don’t know that you don’t know, is vital for making smart business decisions. Knowing that you don’t know something will prevent you from making decisions without first understanding all the facts

Explanatory gaps can apply to more than just business concepts, and can also affect the way businesses see their consumer base. According to Leslie Ament, co-founder and research vice president of Hypatia Research LLC, consumers are expecting a higher level of customization and personalization from the businesses they interact with, and because of this, many companies are gathering large quantities of data about their consumer base.

Unfortunately, simply having reams of demographic and behavioral data is not enough, and it is vital that businesses be aware that even with this data, there are still things about their customers or business partners that they don’t know. Before doing business with a vendor or even a customer, more thorough research should be done to help mitigate any risks. Avoiding risk is not the only reason to know more about what you don’t know, this data can also be used to align products and services to customer needs.

For any vendor, business partner or customer that a business is entertaining the possibility of working with, it is vital to know what you don’t know, and make every attempt to fill those explanatory gaps before making decisions that could affect the bottom line.