Situational Awareness: How to Escape Cognitive Ruts and Solve Business Problems with Clarity, Context, and Collaboration

By Kevin McDonnell

You’re Not Stuck—Your Thinking Is

Most leaders like to think of themselves as adaptive, creative problem solvers. But under pressure—during integrations, restructurings, or periods of rapid growth—we tend to default to what’s familiar. The frameworks that once made us successful become shortcuts. Experience becomes a filter.

Instead of increasing clarity, it quietly narrows situational awareness.

Situational awareness is not just knowing what’s happening around you. It is the ability to deconstruct a situation into its core elements, distinguish what is familiar from what is novel, and recognize when old solutions no longer fit new circumstances.

When leaders fail to do this, they don’t just make suboptimal decisions—they misdiagnose the problem entirely.

Why Experience Can Become a Liability

Cognitive psychology has long shown that expertise, while valuable, can trap us in predictable patterns of thought. Several well-documented mechanisms explain why seasoned executives are especially vulnerable:

1. Functional Fixedness

We struggle to see alternative uses for familiar tools, processes, or structures. Duncker’s classic Candle Problem demonstrated how prior assumptions prevent people from seeing simple solutions once context changes.

In organizations, this shows up when leaders insist, “This is how we’ve always run finance,” or “That’s how product launches work.”

2. Mental Set

Once a solution has worked, we apply it again—even when conditions are different. Luchins’ Water Jar experiments revealed how people persist with inefficient strategies long after better ones appear.

In business, this often manifests as copy-pasting past playbooks into new markets, acquisitions, or technologies.

3. Cognitive Entrenchment

Expertise can backfire when mental models become over-optimized for historical success. Research shows that experts may struggle more than novices when conditions shift because their schemas are too rigid (Dane, 2010).

4. The Einstellung Effect

Highly trained professionals sometimes overlook superior solutions because familiar patterns dominate attention. In chess, even grandmasters miss better moves when a known pattern presents itself first (Bilalić et al., 2008).

The common thread: the brain prioritizes efficiency over accuracy. Without deliberate intervention, we see what we expect to see—not what is actually there.

Situational Awareness Is a Diagnostic Skill

True situational awareness requires leaders to pause before solving and ask:

• What are the core elements of this situation?

• Which aspects are structurally familiar, and which are genuinely new?

• Are we facing a variant of an old problem—or an entirely different category?

Research on analogical reasoning (Gentner, 1983) shows that effective problem solvers focus on deep structure, not surface resemblance. This distinction matters.

Two problems can look similar—same org chart, same systems, same KPIs—yet differ fundamentally in constraints, incentives, or time horizons. Applying yesterday’s solution to today’s problem often fails not because execution was poor, but because the diagnosis was wrong.

Think Experience, Not Prestige

In fast-moving environments—particularly those scaling through acquisition or transformation—organizations need leaders with contextual experience, not just impressive résumés.

Instead of defaulting to candidates from prestigious or highly mature firms, consider people who have:

• Scaled organizations at your current growth curve (e.g., $200M → $2B)

• Integrated multiple systems under time pressure

• Led through ambiguity, not stability

• Operated in cultures where collaboration was required, not optional

These leaders are more likely to recognize which elements of a situation are familiar—and which demand new thinking. They bring transferable insight, not rigid templates.

Build Diversity of Thought—Not Just Diversity of Background

Situational awareness degrades rapidly in homogenous teams. When everyone shares the same training, career paths, and assumptions, blind spots compound.

High-performing organizations deliberately expand perspective by:

• Encouraging cross-functional challenge

  
  

  Finance, operations, engineering, and sales should surface assumptions—not just align on outputs.

• Introducing external voices

  
  

  Advisors, board members, and consultants can see patterns insiders miss because they are not constrained by institutional memory.

• Benchmarking outside the industry

  
  

  Analogous problems in other sectors often reveal alternative solution paths.

• Promoting a learning culture

  
  

  Exposure to unfamiliar ideas sharpens pattern recognition and reframing skills.

Research by Chi, Feltovich, and Glaser (1981) showed that experts outperform novices only when they correctly identify a problem’s deep structure. That insight rarely emerges without contrast, debate, and dissent.

From Insight to Action: Avoiding the Same Mistakes Twice

If your organization is scaling, integrating, or reinventing itself, situational awareness must be treated as a leadership capability—not a soft skill.

Practical steps include:

• Hire people who’ve “been in the movie.”

  
  

  Match experience to context, not just title or scale.

• Diagnose before prescribing.

  
  

  Ask whether the problem truly belongs to a known category.

• Break the mental model.

  
  

  Use reframing exercises, scenario planning, and structured dissent.

• Blend inside and outside perspectives.

  
  

  Combine institutional knowledge with fresh lenses.

The goal is not novelty for its own sake—but accuracy of understanding.

Final Thought

Creativity in business is not about raw genius. It is about situational awareness—the discipline of slowing down, decomposing complexity, and resisting the gravitational pull of what worked before.

If you want better answers, you need better framing.

If you want better framing, you must challenge the experience that made you successful.

That is how leaders escape cognitive ruts.

That is how organizations avoid repeating the same mistakes—at a higher cost.

And that is how you truly think outside the box.

References

• Bilalić, M., McLeod, P., & Gobet, F. (2008). Why good thoughts block better ones: The mechanism of the pernicious Einstellung effect. Cognition, 108(3), 652–661.

• Chi, M. T. H., Feltovich, P. J., & Glaser, R. (1981). Categorization and representation of physics problems by experts and novices. Cognitive Science, 5(2), 121–152.

• Dane, E. (2010). Reconsidering the trade-off between expertise and flexibility: A cognitive entrenchment perspective. Academy of Management Review, 35(4), 579–603.

• Duncker, K. (1945). On problem-solving. Psychological Monographs, 58(5), i–113.

• Gentner, D. (1983). Structure-mapping: A theoretical framework for analogy. Cognitive Science, 7(2), 155–170.

• Luchins, A. S. (1942). Mechanization in problem solving: The effect of Einstellung. Psychological Monographs, 54(6), i–95.