Every day, managers make decisions about products, customers, resource allocation, employee pay, and more, basing them on assumptions that have never been critically examined, much less challenged. “I’ve always been successful doing it this way and never thought about doing it another way” is what we often hear when managers are asked why they didn’t question practices that turned out to be faulty. But when skeptics show that ideas underlying practices are wrong, confounding, or even costly, leaders grasp the importance of systematically testing assumptions.

Consider what happened at the hotel and casino company Harrah’s Entertainment in the early 2000s, when one of us, Gary, who was then its chief operating officer, worked with his analytics team to reevaluate the company’s approach to marketing incentives. The leaders of Harrah’s had subscribed to the industry’s conventional wisdom that financial incentives such as reduced room rates, food credits, and vouchers for retail stores heavily influenced customers’ decisions to visit Las Vegas and that offering more of them increased the likelihood that people would book rooms there. Gary and the team set out to improve the efficiency of marketing spending by rigorously testing initiatives individually. (Trained as an economist, Gary understood the importance of assessing the incremental contributions of each element of the marketing program—instead of measuring the collective impact of the entire program, which was the industry practice.) They ran hundreds of tests to see which incentives induced people to stay at the company’s hotels and to what degree. The results revealed that some, such as retail-store discounts, didn’t affect hotel bookings and could be eliminated. Moreover, if the money spent on them was reallocated to effective incentives, such as deeper room discounts, Harrah’s could boost both responsiveness and profits.

By 2005 the company was using experiments to improve many other strategic and operating decisions. For instance, its executives had assumed that because people liked transparency and fairness, they preferred an orderly physical queue at Caesars Palace’s all-you-can-eat Bacchanal Buffet to a virtual queue—a digital notification system that allowed customers to leave the vicinity while holding on to a place in line. But a test revealed that if the restaurant sent customers a text 10 minutes before their turn to be seated, they used the time to buy drinks or gamble, generating revenue that far exceeded the revenue lost from people who didn’t want to wait. Over time similar experiences led Harrah’s to develop a culture of curiosity, where poking holes in the industry’s conventional wisdom became not only acceptable but celebrated.

If challenging assumptions is so valuable, why don’t managers make it a standard operating procedure? After decades of studying and practicing innovation and decision-making, we’ve concluded that the fundamental reason is that most business leaders don’t think or act like scientists. This is a huge lost opportunity. Research by one of us, Stefan, has found that rigorous experiments can help managers discover whether a new product, service, or business program will succeed. (See “The Discipline of Business Experimentation,” HBR, December 2014.) And in his roles as a chief operating officer, CEO, and president of large entertainment and health care businesses, Gary has seen that investments in data analytics lead to better decisions. But many managers are still reluctant to fund experiments, and despite decades of admonitions about the dangers of gut instinct, continue to overrely on intuition and personal experience in decision-making—even when the evidence contradicts them.

Acting like a scientist is difficult for leaders because it can challenge their legitimacy. Undoubtedly, that’s because someone’s position in the corporate hierarchy is often assumed to be the result of experience and a track record of successful moves and ideas. Senior executives live in a feedback loop of positive reinforcement that makes them unlikely to question the foundations of their decisions. The scientific method, in contrast, requires intellectual humility in the face of difficult problems and relies on an objective, evidence-based process, rather than predominantly personal insight, to frame and address decisions.

When we think scientifically, we recognize that human beings make cognitive and judgmental errors and can drift into a complacency built on flawed assumptions. When we act scientifically, we relentlessly probe our assumptions and change them if evidence shows that they’re wrong. Taking a scientific approach to decisions is critical for today’s organizations, particularly in light of the enormous upheavals the Covid-19 pandemic has wrought.

In this article we’ll discuss five elements of the scientific method that we find to be particularly useful in management practice.

[Here’s the first.]

When business leaders adopt this mindset, their biases and errors won’t get in the way of finding the truth. They will employ reason, demand evidence, and be open to new ideas. In scientific practice this means seeking independent confirmation of facts, placing more value on expertise than on authority, and examining competing hypotheses. Above all, skeptics question assumptions. They ask, “Why do we believe this?” or “What is the evidence that this is true?” History is full of examples where such skepticism helped overturn commonly held ideas and led to important scientific advances.

When managers are knowledgeable skeptics, it can transform how a company operates. Consider Sony. When Kazuo Hirai was put in charge of its consumer electronics businesses, in 2011, the company was struggling. Its once-successful TV business had experienced increasingly deeper financial losses for years. That’s because Hirai’s predecessors had a core assumption: To restore profitability, the business needed to increase the number of TVs sold in order to cover Sony’s high cost of doing business. Hirai (who would become Sony’s CEO in 2012) was skeptical and commissioned an analysis. It revealed that the business would need to sell 40 million TV sets a year to be viable. But in 2010 the company had sold only 15 million. More problematic, to achieve volume targets, previous leaders had repeatedly instituted price discounts, which triggered a further cycle of losses.

Felix Schöppner explores themes of experimentation, perception, physics, and astronomy by artfully arranging everyday objects in his photo studio. 

Hirai ordered Sony’s sales organization to sell fewer TVs and raise prices. The company reduced the number of LCD TVs it sold in developed countries by 40% or so and cut the number of its U.S. models nearly in half. At the same time, it restructured to lower fixed costs, asked engineering to improve picture quality to justify higher prices, and launched a retail model that differentiated its products: a store-within-a-store at Best Buy. In 2015, Sony’s TV business reported the first operating profit in 11 years. The skeptic’s intervention had worked.

The global pandemic has introduced us to a world full of peril and much greater uncertainty. Assumptions about how we work and live have been turned on their heads. Supply chains no longer seem to function, and answers to the most pressing business problems appear elusive. What happens to organizational cultures, for example, when people no longer work in offices? Can a manufacturer run a factory with no people? Can we bring down skyrocketing insurance costs by motivating employees to take action to improve their health? But a time of great uncertainty is also an opportunity to rethink what business leaders have assumed to be true. It would be a mistake to rely only on experience, intuition, and judgment to guide us through this tumultuous era.

Men and women who have practiced the scientific method have given us amazing medical remedies; a vastly safer and more plentiful food supply; new kinds of energy, transportation, and communication; and so much more. It’s a highly effective way to help businesses increase the likelihood of success, reduce errors in judgment, and find sources of innovation and growth. It should play a central role in their decision-making processes.