About a decade ago my firm bought a CRM software system (CRM = “customer relationship management”). After we implemented it, we noticed that almost nobody was using it to record client interactions or to keep track of to-dos. Given that was the main reason we bought the software, we were frustrated and began brainstorming solutions to get our people to use the software as intended. Should we do more training? Add additional processes? Create incentives and penalties relating to its use?

Around that time I read a research paper titled A Theory of Strategic Problem Formation by three professors at Washington University’s Olin School of Business. The gist of the paper was that usually people don’t properly frame a problem before jumping into solutions. That’s an issue because without adequately defining the problem, the solution probably won’t fit. You can think of this as “solutions in search of problems.”

The Wash U professors recommend that businesses specifically define what problem they are wanting to solve before jumping into identifying solutions. The researchers suggest creating a “hetrogeneuous group” charged with defining the problem. The most important thing is to stop, think about what the problem is, and then specifically define it before moving to solutions.

Back to our CRM system issue. Before implementing more training, creating more processes, introducing incentives and penalties, or other steps to increase usage of the software, we decided to circle back to defining the problem. What we realized was that the problem wasn’t really “people aren’t using the software.” Rather, that was just a symptom of the real problem: the software sucked — we had made a bad purchase decision.

As you can imagine, realizing that the problem was the software and not our people took our solution in an entirely different direction: we needed better software. It was frustrating to realize that we had spent time and money on software that didn’t work, but in the long run it was much better to realize what the real problem was, eat the time and money alread spent, and switch to software that actually fit our needs (which is what we did).

Since reading the Wash U paper, I’ve noticed that inadequate problem formation is rampant. It happens in the investment realm all the time. For instance, so far in 2022 the stock market has been brutal and pretty much everyone’s portfolio is dropping. Seeing the value of your investments drop may make you want to do someting — to find a solution. However, if you stop and define the problem you may decide a different solution. For example, is the problem really that your stocks are down? Maybe. But more likely, the problem you’re worried about is having enough money for something in the future like retirement or paying for college. Framing the problem that way is illuminating because it requires a big picture and long-term focus. Realizing that you need the money in 10, 20 or 30 years rather than today and knowing that the stock market will have it’s ups and downs over those decades provides a different solution (do nothing) than focusing on the fake problem of your stocks being down.

Even with the lesson of problem formulation firmly in hand, I find that sometimes I still forget to adequately define problems before jumping to solutions. This IFOD is really a reminder to myself to do better — to circle back to problem formulation before coming up with solutions.