Tools, techniques, and processes for making better strategic decisions.
DECISION MAKING TOOL
WHY USE IT?
Use System 2 to make strategy decisions
Impulsive, reactive decision making has no place in strategy creation and execution.
Look for evidence before hypothesizing
Seeking more evidence in lieu of forming an opinion of the situation can avoid jumping to the wrong conclusion and over-reliance on anecdote.
Recognize and eliminate anchoring
We can be "primed" by an initial piece of information (valid or not) in making comparisons and decisions.
Average multiple judgments
Averaging multiple judgments yields an estimate more accurate than its individual components, on average.
Use the base rate
In decision making, people often focus on irrelevant information rather than considering prior knowledge of the probability that something will occur.
Not looking for "reversion to the mean" is a trap: We see an outcome that in reality is extreme and unlikely to occur again, but we tend to predict it will recur.
Generate options but don’t overload
Requiring or accepting that a choice must be made among limited strategy options is a false dilemma. But too many options can inhibit decision making.
Have others challenge your thinking
Power can lead to bad decision making.
Reframe for change
The meaning of a situation or set of circumstances comes from the frame in which we view it. Reframing the "facts" gives the situation new meaning.
Discern among experts
“Experts” who deal with the future and base their skills on the non-repeatable past (except short-term physical processes) “are close to a fraud, performing no better than a computer, blinded by intuition.” – Nassim Nicholas Taleb
Discount sunk costs
A sunk cost is paid: It can't be recovered. Escalation of commitment to an activity based on sunk costs can block needed change and limit innovation.
Consider opportunity costs
Considering opportunity costs in strategy decisions helps ensure wise use of scarce resources.
Be a Bayesian
Statistical analysis can lead to false conclusions because of bad data, loose confidence intervals, sample bias and erroneous assumptions. Bayesians look for the base rate and then revise predictions in light of new evidence.
Lead a learning process
Planning as group learning combats shared information bias and narrow framing.
Check it off, simulate and keep score
Using a checklist, simulating, doing a pre-mortem and keeping score helps assure the quality of strategy decisions.