Cognitive Hierarchy Theory

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Camerer, Ho and Chong (2004) first proposed cognitive hierarchy theory following a slightly more elaborate versions that were put forward by Wilson and Stahl (1994, 1995). This theory is founded on rationality designed to model players who reason with various levels of strategic depth. In economics, cognitive hierarchy theory can be used to comprehend bargaining, pricing incentive contracts and firm competition. In cognitive hierarchy theory, almost all the analysis nonetheless assumes individuals plan ahead and carefully figure out what other individuals will do. This then often results in mathematical claims that are highly unrealistic cognitively. The cognitive hierarchy has five categories that include data, information, knowledge, understanding and wisdom. In terms of data, P&G has only symbols that may be found in symbols and the data are in raw form. With information P&G uses the data that has been collected and processes the data to become useful information. The information is vital to P&G since it offers answers to questions such as who, where, and when. In other terms the processed information gives P&G what is to be done, the individuals who are responsible and when a specified task is to be accomplished.

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In terms of knowledge, the cognitive hierarchy offers he applications of information that gives answers to the how questions. The intent of the collected data is to be useful. The cognitive hierarchy also has a category of understanding whereby P&G appreciates why they take or do certain things. The difference between knowledge and understanding is the same as the difference between learning and knowledge. The last category is wisdom. P&G uses the wisdom that they have attained to evaluate their understanding. It is the process whereby P&G can discern or judge between what is either right or wrong.

Classical Greek Period

Many individuals refer to the classical Greek Period as the launching point of western civilization. The classical Greek period lasted from the time of the establishment of Athenian Democracy to the time of the rise of Alexander the Great. This is a period of less than 200 years (510 BC to 554BC). The events that occurred during this time had a great impact on the face of western culture. The key reason as to why the classical Greek period is fondly remembered has little to do with the military. It is known as Classical Greece due to the fact that the Greek culture reached its height. This period also provided classical knowledge and it was from this knowledge that the famous renaissance would get much of its inspiration. This period was also characterized by external threats and this led to competitions between two cities, Athens and Sparta.

Takeoffs Apex

Ackoff was a professor of organizational change and a systems theorist. He noted that the contents of the human mind could be classified into five categories. These categories included data, information, knowledge, understanding and wisdom. According to ackoff, the first four categories can be used to relate to the past. This means that these first four categories deal with what is already known or what has been. It is only the fifth category of wisdom that deals with the future since it incorporates design and vision. It is through wisdom that individuals can create future rather than trying to just grasp the past and the present.

P&G supply chain process using Rothwells 5 models of innovation

Rothwells five generation of innovation offers an historic overview of innovation management. The five various innovation generations arose due to the variant and distinct business environments. The observation made by Rothwell is that the more effective innovation process can lead to a decrease in the time spent at the market as well as a reduction in the costs of developing a product. The five categories include;

Technology push. The fast economic growth between 1950s and 1960s led to an increase in demand that allowed for a strong technology push during the industrial expansion in japan and in the western world. P&G focused predominantly of different scientific breakthrough. P&G considered development and research as a corporate overhead that had been relegated to an ivory tower position. This was because innovation happened at a fast growing rate and many multinationals innovation had lagged behind from universities.

Market Pull. During the mid-1970s and mid-1980s, there was a great market shares battle that forced companies to focus their development to a need pull. The main focus that P&G implemented was to respond to the market needs. P&G conducted cost benefit analyses for each of their individual projects that they were undertaking. These analyses included management of resources and systematic allocation.

Coupling of R&D and marketing. Under the pressure of stagnation and inflation, rationalization efforts arose between the mid-1970s and mid-1980s. The strategic focus of P&G was on corporate consolidation and thereby resulting in product portfolios. Most companies including P&G moved away from their individual R&D projects.

Integrated business processes. After the economy recovered in the early 1980s through to mid-1990s, the central theme in many companies changed to a time based struggle. P&G focused on interpreted processes and products so as to develop total concepts. Externally, P&G created stronger supplier linkages and coupled with leading customers.

System integration and networking. Resource constraints became central from the early 90s. This means that P&Gs main focus was to ensure system integration and networking since they had to guarantee their speed of development and flexibility. P&G automated their business processes through manufacturing information systems and resource planning. Additionally, P&G was able to set up advanced strategic partnerships, research arrangements as well as collaborative marketing.

Is P&G innovative or not innovative

For any business, it is vital that the business model should be game changing innovation. In regard to this concept, innovation should not only be seen as the invention of new products but also the ability of the organization to systematically convert the ideas that they have into new offerings that change the very context that the business operated in. as the businesses continue to lead repeat purchases, the offerings that they provide shape the market. This means that the company plays a new game that other businesses have to adapt. P&G is one of the companies that continues to offer game changing innovations. After the appointment of Lafley as the chief executive in 2000, P&G as an organization has worked hard to ensure that they make innovation as part of their daily routine. This also means that they had to establish an innovation culture. The key aspect that Lafley ensured that he maintained was P&Gs research and development capability. This is because it was critical co ensure that world class technologists who were the masters of core technologies and personal care businesses were maintained at the company so as to maintain high levels of innovation. Additionally, P&G was able to bring in more employees who were outside the R&D into the innovation game. The key strategy that P&G implemented was to ensure that they kept a laser sharp focus on their consumers, established a repeatable, disciplined and scalable innovative process. The end result was that they created organizational and funding mechanism that supported innovation.

Currently, the success rate of P&G runs between 50 and 60 percent. About half of the products introduced by P&G to the market are successful. This is also the key goal of P&G in that they do not want to be tempted by a higher success rate since they mat err thereby exercising some caution. The strategy implemented this instance is to play safe by focusing on innovations that have little game changing potential. The strategy to focus on innovation by P&G as a core strength through the company has had positive returns. Currently, the company is getting more value for each dollar that they invest in innovation. P&G is also constantly innovating new strategies on how to innovate. The company keeps refining their product launch model meaning that they use a process that starts form an idea to prototype then development to qualification and finally to commercialization. By using this strategy, the organization is able to apply a sequential practice on a large scale thereby making it replicable. This however does not mean that they eliminate judgement. Scalability is crucial for an organization of P&Gs size. This is because if they cannot scale their processes, then the products that they innovate do not have much use for them. It has to be comprehended that scalability is often the justification of P&Gs existence as a diversified multinational company. The innovation practices employed at P&G are designed for deliberate learning across all their product categories, functions and geographic locations. This means that once the individuals who are tasked with innovation at P&G comprehend a particular process, they are able to replicate the process and at the same time train other individuals. In the long run, this process me comes simpler and a part of normal decision making.

Initially, most of the employees at P&G were not working at innovation. Most of them were stationed in line management, sales, administration, operations or marketing. The company saw the need to redefine their strategy to get everyone involved in the innovation process.

Currently, all the employees at P&G are expected to comprehend the role that they play in innovation. Even when the employees are operating, they are still expected to have some form of innovations in them. All business strategies implemented at P&G is connected with innovation. P&G is also open to ideas that come from more regions than they initially accepted. There are more than 40% of constant innovated products that come from outside the united states i.e. India, Africa, china and Latin America. The company also maintains open work systems that are situated in many placed worldwide. All the offices are open as well as the conference rooms. The company made it round so as to portray their new approach strategy of continuous innovation. The new recruits in the company are expected to learn the culture of the organization that is innovating based and this flows through the values, leadership and accomplishments of the company. This is because it is only through curiosity, connectedness and collaboration that the company can continue being innovative in the coming years.


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