3. #1
Bain & Company ManagementTools Survey, 2013
Strategic planning today
most used business tool
- globally!
4. but just 45%
of organizations use it.
Bain & Company ManagementTools Survey, 2013
Strategic planning today
5. 58%of leaders
say it’s extremely or
very important in their
organization’s success.
Forrest Consulting Strategic Leader Survey, 2013
Strategic planning today
6. but 42%of leaders say
planning is not important
to the success of their
organization.
Forrest Consulting Strategic Leader Survey, 2013
Strategic planning today
7. 74%of leaders say
their organization doesn’t
use a formal planning
process to make
strategic decisions.
Forrest Consulting Strategic Leader Survey, 2012
Strategic planning today
8. 70%of organizations
with a plan fail to
implement it.
Balanced Scorecard Collective
Strategic planning today
10. “Doubles likelihood of SURVIVAL.”
Noel Capon and James M. Hurlburt, Columbia University,
and John U. Farley, University of Pennsylvania, 1994
“Increases company LONGEVITY.”
J. Berman, D. Gordon, and G. Sussman, study of 555 small firms, 1997
“12% greater increase in SALES”
when “top management had a high
commitment to planning.”
M3 Planning, study of 280 companies
The case: survival and growth
11. “Strategic planning has a positive
effect on PERFORMANCE, both in
quantitative and qualitative terms.”
Correlation coefficients with strategic planning:
Earnings per common share +0.79 Attainment of profit objectives +0.51
Return on invested capital +0.64 Community acceptance +0.48
Return on owner’s investment +0.58 Service efficiency +0.47
Change in return on invested capital +0.56 Attainment of corporate objectives +0.44
Return on net worth +0.42
Anders McIlquham-Schmidt, Aarhus University, 2010. A meta-analysis of 45 years of
research involving 88 studies representing a total sample size of 32,472 observations.
The case: performance
12. Evidence showsts strategic planning
also brings INTANGIBLE BENEFITS.
Optimizes growth and development
Looks ahead
Anticipates threats
Capitalizes on opportunities
Sets priorities
Identifies resources needs
Focuses resources
The case: other benefits
39. 69% form a planning team of
eight or fewer individuals.
Bad practices: Planning team
Forrest Consulting Strategic Leader Survey, 2013
34% don’t include Directors or
other stakeholders on the team.
40. 57% say strategic decisions are
made by the CEO or a small group.
Forrest Consulting Strategic Leader Survey, 2012
Bad practices: Involvement
64% say their process doesn’t
ensure those who carry out strategy
are involved in making it.
41. Forrest Consulting Strategic Leader Survey, 2012
Bad practices: Involvement
47% say planning discussions
don’t include the most knowledgeable
and influential participants.
47% don’t report on planning
progress and the final plan to the
wider organization.
42. 56% don’t gather pre-planning
input from stakeholders.
Bad practices: Input
Forrest Consulting Strategic Leader Survey, 2013
49% don’t develop information
on the external environment.
43. 39% want better use of market
and competitive intelligence.
Bad practices: Input
Forrest Consulting Strategic Leader Survey, 2013
44. 58% don’t believe their process
assesses risks as well as benefits.
Bad practices: Process
47% don’t develop specific action
steps for implementing each strategy.
45. 64% say their organization has
too many conflicting priorities.
Bad practices: Strategies
Forrest Consulting Strategic Leader Survey, 2013
46. 46% don’t include plan review,
reporting and adjustment.
Bad practices: Implementation plan
Forrest Consulting Strategic Leader Survey, 2013
46% don’t assign responsibility for
implementing tactics to individuals.
47. 41% don’t include the next plan
update/ re-planning time.
Bad practices: Implementation plan
Forrest Consulting Strategic Leader Survey, 2013
28% don’t assign responsibility for
implementing tactics to individuals.
48. 38% don’t report implementation
and performance to the executive team
at regular intervals.
Bad practices: Reporting
Forrest Consulting Strategic Leader Survey, 2013
61% don’t report regularly to the
wider organization on plan
implementation and performance.
.
49. 36% don’t track plan performance
against measurable objectives.
Bad practices: Tracking
Forrest Consulting Strategic Leader Survey, 2013
53% don’t track implementation
against a pre-set timeline.
.
50. 60% don’t link strategy
and budgeting.
Balanced Scorecard Collective; Forrest Consulting Strategic Leader Survey, 2012
Bad practices: Resource allocation
42% are challenged to
allocate resources in a way
that really supports the strategy.
52. 1. Only top
management is
involved.
PROBLEM
Employees and
stakeholders know little
about the plan: It’s not
theirs. Little or nothing
happens.
REMEDY
Make the planning
process inclusive. Use
surveys, town meetings,
drafts, representation
and sounding boards.
2. Not looking
externally.
PROBLEM
The plan produces sub-
optimal results, is not
transformative, and can
put the organization on a
bad course.
REMEDY
Conduct an environmental
scan to find relevant
trends and forecasts. Use
results in visioning, gap
analysis, strategy making.
3. Execution
resources are
lacking.
PROBLEM
Implementation is
ineffectual or dies
because people, funds
and other resources are
not in place.
REMEDY
Assess resources.
Develop strategies and
action steps based on
resources. Link execution
to the annual budget.
16 strategic planning problems
53. 4. Little or no
progress after
initial efforts.
PROBLEM
Implementation starts
with a bang, but then
fizzles. “Don’t we have a
plan somewhere?”
REMEDY
Use progress reviews and
communication.
Spotlight execution so
employees don’t fall back
to operational activities.
5. No bounds.
PROBLEM
In the name of the vision
everything becomes
important. People go on
tangents, wasting energy,
attention and resources.
REMEDY
Rein in any initiative not on
the lists of strategies and
action steps, unless it
should have been listed or
is essential for operations.
6. Grandiosity.
PROBLEM
The vision sees a grand
future, but the
organization can’t reach
it. Strategies can't
produce needed results.
REMEDY
Ground the plan on
stakeholder input and an
environmental scan.
Seek input on the draft
plan and stress test it.
16 strategic planning problems
54. 7. No commitment.
PROBLEM
Leaders pretend to
embrace planning, but
don’t think real change is
needed. The resulting
plan sits on the shelf.
REMEDY
Use credible sources and
cases, benchmarking,
trends and forecasts to
stress the need for
change and planning.
8. Complexity.
PROBLEM
The plan is filled with
strategies and action
steps. It’s unclear what's
most important. Execution
falls short.
REMEDY
Keep it simple! Limit the
number of strategies to a
handful. Prioritize and
phase action steps.
9. No coordination.
PROBLEM
Units implement using
their own lenses. No
coordination. Execution
is disjointed and results
are unintended and poor.
REMEDY
Show dependencies and
communicate among
units. Coordinate through
meetings, reports, cross
teams and a dashboard.
16 strategic planning problems
55. 10.The leadership
is clueless.
PROBLEM
Leaders have no insight
on execution and results.
Implementation goes off
track; the organization
drives off the road.
REMEDY
Set up measures, a
dashboard and reporting.
Track execution and its
effect and results through
regular review sessions.
11.Habit.
PROBLEM
The habits and rhythm of
people and organizations
are hard to change. In
spite of the plan, direction
and results don’t change.
REMEDY
Apply an “unbalanced
force.” Implementation is
organizational change
management. Build
commitment to execution.
.
12. Pretending.
PROBLEM
The plan exists only to
deceive others. No real
plan is being executed.
No change or
improvement results.
REMEDY
Stakeholders need to
appraise the plan to
assure it isn’t “window
dressing.” Speak up if the
plan is only for "show."
16 strategic planning problems
56. 13.Resisting new
activities and
roles.
PROBLEM
Key people resist
changing activities and
roles. Implementation
actions don’t occur,
despite general buy-in.
REMEDY
Assign responsibility for
action steps. Visibly track
implementation by party.
Don’t let naysayers block
needed change.
14. No marching
orders.
PROBLEM
People, teams and units
are unclear about their role
in execution. Strategies
that look good on paper
don’t get implemented.
REMEDY
Develop and cascade
specific action steps for all
organizational levels and
units.
.
15. The
unexpected.
PROBLEM
Something big and
unanticipated occurs,
e.g. 9-11. The plan won’t
work or the vision is not
obtainable or desirable.
REMEDY
Use scenario planning to
game out responses to
likely situations. Restart
planning from where the
current plan is derailed.
16 strategic planning problems
57. 16.One and done.
PROBLEM
Implementation stops
after the first year. The
investment in planning is
squandered. The level of
change is minimal.
REMEDY
Treat strategic planning
and implementation as a
core process. Build annual
assessment and re-
planning into the plan.
16 strategic planning problems
62. Undecidability
Leap of faith needed because
we never can know enough
Decisions are always a leap of faith
Undecidability
“Strategic decisions are always about action under
contingency and uncertainty” Andreas Rasche
63. UnknowabilityWe can never know enough
Unknowability
?
? ?
“Not only must the person taking the decision not know everything…
the decision must advance towards a future which is not known,
which cannot be anticipated” Jacques Derrida
64. Problems seeing the futureDecisions are about the future
Problems seeing the future
65. Problems seeing the futureMental traps lead to bad decisions
Errors, biases,
shortcuts,
fallacies and
traps that lead
us into making
bad decisions
Psychological
Perception
Memory
Logic
Physiological
Social
66. Problems seeing the futurePsychological traps
“Processing problems”
Errors occurring as a result of our
cognitive biases and mental shortcuts
that can lead to systematic deviations
from logic, probability or rational choice.
67. Problems seeing the future165 psychological traps
Adaptation level
Ambiguity effect
Anchoring effect
Anecdotes before data
Availability Heuristic
Backfire effect
Bad news avoidance
Belief bias
Belief bias
butterfly effect
Buyer's Stockholm Syndrome
Categorization
Choice blindness
Choice overload
Choice-supportive bias
Cognitive dissonance avoidance
Commitment heuristic
Confirmation bias
Conflicts Create Productive Change
Trap
Conservatism (Bayesian)
Consistency bias
Cumulative advantage
Current Moment Bias
Decision paralysis
Decoy effects
Default option
Denomination effect
Denominator neglect
Disconfirmation bias
Distinction bias
Distinction bias
Dunning–Kruger effect
Duration neglect
Egocentric bias
Ellsburg paradox
Emotion
Endowment effect
Epistemic arrogance
Escalation of commitment
Exaggerated expectation
Experimenter's or expectation bias
Fading affect bias
False causality
Familiarity heuristic
Focalism
Focusing effect
Force Can Do It Trap
Forer effect or Barnum effect
Forever Changeless Trap
Framing
Frequency illusion
Functional fixedness
future blindness
Hard–easy effect
hindsight bias
Hostile media effect
Hyperbolic discounting
IKEA effect
Illusion of certainty
Illusion of control
Illusion of external agency
Illusion of truth effect
Illusion of validity
Immune neglect
Impact bias
Impulsivity
inability to predict impact on self and
others
Inability to self assess
Information bias
investment trap
Irrationality
Isolated Problem Trap
Leniency error
Loss aversion
Loss avoidance
Matthew effect
Medium-maximization
Mere exposure effect
Money illusion
Moral credential effect
Moral luck
More Is Better Trap
Myopic loss aversion
Naïve diversification
Naive realism
Narrow framing
Negativity Bias
No Limits Trap
Normalcy bias
Not invented here
Not using the unconscious
Observational Selection Bias
Observer effects
Observer-expectancy effect
Omission bias
Opportunity costs
Optimism bias
Order effect
Ostrich effect
Outcome bias
Overconfidence effect
Paradox of choice
Pessimism bias
Placebo effect
Planning fallacy
Positive expectation bias
Positivity effect
Post hoc interpretation
Post purchase rationalization
Power
Preferential attachment
Present bias
Primacy effects
Priming effects
Primus inter pares effect
Probability matching
Probability neglect
Process-Event Trap
Pro-innovation bias
Pseudocertainty effect
Recency effects
Reframing
Regret
Relativity trap
Representativeness Heuristic
Restraint bias
Rewards
Rhyme as reason effect
Risk blindness
Risk averse
Risk compensation / Peltzman effect
Risk seeking
Scandal of prediction
Scarcity
Scarcity heuristic
Scope neglect
Selective perception
Self deception
Self-serving bias
Semmelweis reflex
Serial position effects
Similarity matching
Single Effect Trap
Solve It by Redefining It Trap
Status-Quo Bias
Stereotypes
Subject-expectancy effect
Subjective validation
Suggestibility
Survivorship bias
System justification
Telescoping effect
There's Got to Be a Winner Trap
Time-saving bias
Tournament effect
Unawareness of cognitive process
Unawareness of thought
Underestimating the importance of
luck
Unit bias
Unknowledge
Useless introspection
Vivid representation
Well travelled road effect
Zero-risk bias
Zero-sum heuristic
68. Problems seeing the futureExamples of psychological traps
•When we are trying to determine how likely something is, we often base such
estimates on how easily we can remember similar events happening in the past.
Availability Heuristic
•We subconsciously begin to ignore or dismiss anything that threatens our world view,
since we surround ourselves with people and information that confirm what we think.
Confirmation Bias
•We tend to make risk-averse choices if the expected outcome is positive, but to make
risk-seeking choices to avoid negative outcomes.
Pseudocertainty Effect
•We tend to overweigh or underweigh evidence based on the order in which it is
presented. But if the order is meaningless, it should not affect our strength of belief.
Serial Position Effects
•Being apprehensive of change, we often make choices that guarantee things will
remain the same, or change as little as possible. This leads to the often unwarranted
assumption that another choice will be inferior or make things worse.
Status-Quo Bias
69. Problems seeing the futurePerception traps
“Input problems”
Effects and errors in the organization,
identification, and interpretation of sensory
information we use to represent and
understand the environment around us.
71. Problems seeing the futureExamples of perception traps
•Sometimes we don't recognize that we've made an interpretation of information that
could have been interpreted in many other ways.
Fundamental Cognitive Error
•We tend to perceive not the sum of an experience but the average of how it was at its
peak (e.g. pleasant or unpleasant) and how it ended.
Peak-End Rule
•Colorful, dynamic, or other distinctive stimuli disproportionately engage our attention
and accordingly disproportionately affect our judgment.
Salience Biases
• We often fail to notice unexpected stimuli in the world around us.
Inattention blindness
•We have difficulty recreating a past state from current results. We tend to think that
the form we have in our mind is the one we are observing, yet multiple theories and
distributions can fit a set of data.
Inverse Problem
72. Problems seeing the futureMemory traps
“Storage and recall problems”
Errors from the process in which
information is encoded, stored, and
retrieved from our brain.
74. Problems seeing the futureExamples of memory traps
•Confidence is not a good indicator that our memory is accurate. False memories can
be expressed with confidence, detail and emotion, with the same characteristics as
true memories, and can mislead us into thinking that something is real when it's not.
False Memory Reconstruction
•We tend to remember high values, likelihoods, probabilities and frequencies as lower
than they actually were and lower ones as higher than they were. Often, memories are
not extreme enough.
Regressive Bias
•We remember self-generated information best. We are better able to recall memories
of statements we have made than similar statements made by others.
Generation Effect
•Our predictions of future experiences are often based on memories of related past
experiences. Because memory is fallible, this creates biases in our predictions.
Memory Bias
• Our memories of the past often paint it as better than it really was.
Rosy Retrospection
75. Problems seeing the futureLogic traps
“Reasoning problems”
Errors arising from making fallacious
arguments that are deductively invalid or
inductively weak or that contain an unjustified
premise or ignore relevant evidence.
76. Problems seeing the future80 logic traps
100% effect
A priori problem
Ad hoc rescue
Affirming the consequent
Anecdotal evidence
Appeal to ignorance
Appeal to money
Base-rate neglect
Be fair….in the middle
heuristic
Begging the question
Biased generalizing
Black Swan blindness
Certainty bias
Circular reasoning
Clustering illusion
Common cause
Concorde fallacy
Confusing an explanation
with an excuse
Congruence bias
Conjunction fallacy
Converse Accident
Denying the antecedent
Exclusive alternatives trap
Expert problem
Explosive forecasting
difficulty
Fallacy of origins
Fallacy of silent evidence
Fallacy of virtues
False analogy
False dilemma
Faulty comparison
Faulty generalization
Fooled by randomness
Gambler’s fallacy
Genetic fallacy
Group think
Guilt by association
Hasty generalization
Hot-hand fallacy
Inconsistency
Inductive conversion
Insensitivity to sample size
Insufficient statistics
Interview illusion
Irrational escalation
Jumping to conclusions
Lay rationalism
Less-is-better effect
Line-drawing
Ludic fallacy
Narrative fallacy
Non Sequitur
Not averaging
Not thinking statistically
Opposition
Persistence of commitment
Prediction with limited
experience and information
Pro rata bias
Problem of induction
Prosecutor's fallacy
Regression
Regression toward the mean
Retrospective distortion
Reversing causation
Reversion to the mean
Round trip fallacy
Rule-based decisions
Sample bias
Selection bias
Selection factors
Self reference problem
Source confusion
Statistical regress argument
Subadditivity effect
Subjective probability
Sunk-cost fallacy
Texas sharpshooter fallacy
Traditional wisdom
Type 1 error
Type 2 error
Undecidability
77. Problems seeing the futureExamples of logic traps
•We are vulnerable to overinterpreting facts and prefer stories. We find it difficult to
look at a set of facts without seeing an explanation for them or forcing a logical
relationship among them. This wrongly increases our impression of understanding.
Narrative Fallacy
•When we assess the probability of a future event, we tend to ignore less conspicuous
background evidence in favor of the case-specific information obvious at the moment.
Base-Rate Neglect
•We engage in faulty reasoning when we require or accept that a choice must be made
among a short menu of options.
False Dilemma
•We tend to persist in achieving a goal due to our already committed investment, even
when the prognosis is poor. By continuing, we justify our previous decision and avoid
loss based on the confidence we made a good bet, whether or not this is the case.
Sunk-Cost Fallacy
•We don't reconize that systems involving luck revert to the mean for the group over
time. An extreme outcome is more likely to be followed by one closer to the average.
Reversion to the Mean
78. Problems seeing the futurePhysiological traps
“Limbic system problems”
Mental processing and judgment
shortfalls caused by physical factors that
affect the function of our brain, such as
arousal, depression and fatigue.
79. Problems seeing the future5 psychological traps
Chemical arousal
Decisions fatigue
High stress
Sleep deprivation
Stimulated limbic system
80. Problems seeing the futureExamples of physiological traps
•Our brain gets tired just like a muscle. When our brain is exhausted, we tend to make
worse decisions.
Decision Fatigue
•Use of alcohol or drugs (prescription, over the counter, in food - such as caffeine in
coffee - or recreational) can lead to a higher than normal rate of perception errors and
bad decisions.
Chemical Arousal
•Stress releases chemicals into our blood stream that cause us to make greater than
normal perception errors that can lead to bad decisions.
High Stress
•Getting too little sleep can lead to a higher than normal rate of perception errors and
bad decisions.
Sleep Deprivation
•A stimulated limbic system, whatever the cause, can lead to a higher than normal rate
of perception errors and bad decisions.
Stimulated Limbic System
81. Problems seeing the futureSocial traps
“Interpersonal problems”
Biases and errors stemming from how we
view and interact with the people around us,
with causes including social categorization,
in-group favoritism, prejudice,
discrimination, and stereotyping.
82. Problems seeing the future45 social traps
Above average effect
Actor–observer bias
Authority
Availability cascade
Bandwagon Effect
Bias blind spot
Bystander apathy
Curse of knowledge
Defensive attribution
hypothesis
Egocentric bias
Empathy gap
Essentialism
Extrinsic incentives bias
False consensus effect
Foot-in-the-door technique
Fundamental attribution error
Group attribution error
Group polarization effect
Halo effect
Identifiable victim effect
Illusion of asymmetric insight
Illusion of transparency
Illusory superiority
Independent Self Trap
Inevitable Antagonism Trap
Ingroup bias
Just-world hypothesis
Lake Wobegon effect
Liking
Low-ball procedure
Naïve cynicism
Negativity effect
Outgroup homogeneity bias
Projection Bias
Reciprocation
Sense of relative superiority
Shared information bias
Social comparison bias
Social desirability bias
Social proof heuristic
Spotlight effect
Superiority bias
Trait ascription bias
Ultimate attribution error
Worse-than-average effect
83. Problems seeing the futureExamples of social traps
•We tend to bond with our in-group and to be suspicious, fearful, and disdainful of
others. We overestimate the abilities and value of our in-group members over others.
Ingroup Bias
•We find it difficult escape the bounds of own consciousness and preferences. We tend
to assume most people think just like us — even without justification for it.
Projection Bias
•Most of us demonstrate flawed self-assessment skills. We tend to overestimate our
own abilities, competencies and characteristics, and underestimate our undesirable
qualities, especially as compared to how others assess us.
Illusory Superiority
•Our collective belief in something can gain more and more plausiblity through a self-
reinforcing process of increasing public repetition - even without more evidence.
Availability Cascade
•A group tends to focus more on discussing information that all members are familiar
with and less on discussing information that only some members are aware of.
Shared Information Bias
89. Problems seeing the futureDecision making tools
•We use two mental systems to make decisions:
System 1- Quick, primitive, and automatic, e.g. fight
or flight reaction.
System 2 - Careful, calculated and conscious.
Performs complex computations, exercises self
control.
•For strategy, slow down and engage System 2.
Impulsive, reactive decision making has no place in
strategy creation and execution.
Use System 2 to make
strategy decisions
90. Problems seeing the futureDecision making tools
•Our natural tendency is to immediately fit facts to a
simple story: the "narrative fallacy."
•"Favor experimentation over storytelling, experience
over history, clinical knowledge over theories" (Taleb)
•Seeking more evidence in lieu of forming an opinion of
the situation can avoid jumping to the wrong
conclusion and over-reliance on anecdote.
•"It is a capital mistake to twist facts to suit theories,
instead of theories to suit facts." (Sherlock Holmes)
Look for evidence
before hypothesizing
91. Problems seeing the futureDecision making tools
•Question your intuition. "The voice of reason may be
much fainter than the loud and clear voice of an
erroneous intuition.” (Kahneman)
•Find another scenario to explain the evidence.
Seeking alternative explanations can help avoid traps
such as group think and hasty generalization.
•"We know…that for people to let go of information
they have initially encoded, the best way to achieve
that is to provide them with an alternative explanation
for the same situation." (Lewandowsky)
Look for an alternative explanation
92. Problems seeing the futureDecision making tools
•We can be "primed" by an initial piece of information
(valid or not) in making comparisons and decisions.
•Comparing an anchor value to options only shows the
differences between options, not each one’s worth.
•Recognize anchoring to avoid bait and switch, decoy
effects and other framing traps.
• Anchoring on "a likely initial elementary event...leads
to unwarranted optimism in the evaluation of the
likelihood that a plan will succeed or that a project will
be completed on time.” (Kahneman and Tversky)
Recognize and eliminate anchoring
93. Problems seeing the futureDecision making tools
•We avoid averaging in decision making, in part due to
traps such as authority (leader knows best), false
consensus (we think alike), and illusory superiority
(I'm smarter).
•Averaging multiple judgments "yields an estimate
more accurate than its individual components, on
average." (Krueger and Chen)
•Accuracy is better even when averaging two estimates
by the same person. “As aggregation raises accuracy,
“correspondence rationality” is enhanced and the risk
of being wrong is reduced." (Krueger and Chen)
Average multiple judgments
94. Problems seeing the futureDecision making tools
•The base rate is prior knowledge about the probability
of something (e.g. 50% of all commercial airline
crashes with fatalities were caused by pilot error).
•"Base rate neglect" is ignoring the base rate in
making assumptions and predictions (e.g. assuming
Malaysian Airlines flight 370 crashed due to sabotage
ignores the base rate: The first assumption should be
pilot error).
•In decision making, people often focus on irrelevant
information rather than considering prior knowledge of
the probability that something will occur.
Use the base rate
95. Problems seeing the futureDecision making tools
•In systems involving luck (think investing), results over
time cluster around the mean (average) outcome.
•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.
•We don't recognize that with some luck involved the
next outcome will most likely be "average," not
extreme (e.g. above average performance for three
years will more likely be followed by average
performance the next year, all things equal).
Consider luck
96. Problems seeing the futureDecision making tools
•When developing a vision or strategies, avoid the false
dilemma trap - requiring or accepting that a choice
must be made among limited options. Use a technique
such as brainstorming to develop more options.
•But beware of the paradox of choice: Too many options
can inhibit decision making (e.g. when seniors are
offered many Medicare drug plans, they may “choose
on the basis of irrelevant features, because relevant
features are too complex to evaluate”). (Schwartz)
•Use a multi-voting technique such as N/3 to narrow a
long list of options.
Generate options, but don't overload
97. Problems seeing the futureDecision making tools
•“…the smartest thing you might ever do is bring
people together who will inspect your thinking and who
aren't afraid to challenge your ideas." (Fast)
•Power can lead to bad decision making. It's "a self-
esteem enhancing drug that surges through the brain
telling you how great your ideas are. This leaves the
powerful vulnerable to making overconfident
decisions that lead...to dead-end alleys." (Galinsky)
•Having others inspect our thinking can counter traps
such as naive realism, self deception, the Dunning-
Kruger and ostrich effects, as well as logic errors.
Have others challenge your thinking
98. Problems seeing the futureDecision making tools
•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.
•Reframing shifts reference points (e.g. anchoring) or
presents a situation or choices differently. It changes
our approach and offers new possibilities for action.
•To reframe, look at it another way. Reverse the
meaning (e.g. "empty" means "ready to fill").
Redefine, emphasize or downplay words and actions
(e.g. an impossibility can become a possibility).
Reframe for change
99. Problems seeing the futureDecision making tools
•A sunk cost is already paid: It can't be recovered.
•In the sunk cost fallacy, we consider past costs - not
future costs and benefits - to decide if we will continue
an activity or invest more, even in a losing proposition.
•It's "a wasteful loop of behavior because of your fear
of loss."(McRaney) "People tend to have a much
stronger preference for avoiding losses than for
acquiring gains." (Kahneman and Tversky)
•Escalation of commitment to an activity based on sunk
costs can block needed change and limit innovation.
Discount sunk costs
100. Problems seeing the futureDecision making tools
•We often don't recognize that when we do anything we
are paying an “opportunity cost” for our choice,
because we could have done something else instead.
•Opportunity costs are not only financial; they can
involve output, time, pleasure - any benefit or value.
•We don't ask: “Do we want to do something else?”
•The opportunity cost of a choice is the value of the next
best alternative, given our limited resources.
•Considering opportunity costs in strategy decisions
helps ensure wise use of scarce resources.
Consider opportunity costs
101. Problems seeing the futureDecision making tools
•Statistical analysis can give false conclusions due to
loose confidence intervals, skewed distributions, bad
assumptions and data, and unrepresentative samples.
•Instead, use Bayesian inference: Identify probabilities
with degrees of beliefs (e.g. If rain has 0.9 probability,
consider the possibility of rain extremely likely).
•Bayesians revise predictions in light of new evidence.
Bayesian analysis assigns a probability to each
possible outcome using available evidence. With more
evidence, the probability for each outcome is revised.
Be a Bayesian
102. Problems seeing the futureDecision making tools
•"Leaders must direct a learning process from which
they also learn." (Beer and Eisenstat)
•Strategy creation and execution is a major exercise in
learning and change.
•Planning as group learning combats shared
information bias and narrow framing (evaluating
options singularly rather than as part of a portfolio).
•"Learning in the process of strategic planning leads to
increased effectiveness of anticipation and
implementation." (Schäffer and Willauer)
Lead a learning process
103. Problems seeing the futureDecision making tools
•Use a checklist to assure the quality of strategy
decisions. Assess the quality and independence of
information, the possibility of group think, the leader's
influence and how group consensus was postponed
and judgments were kept independent. (Kahneman)
•Simulate or “war-game” proposed strategy "to identify
risks and opportunities and facilitate change." (Paton)
•Do a plan pre-mortem to see how it might fail. (Klein)
•Learn from your mistakes: Keep score on the quality of
your strategy decisions. (Kahneman)
Check it off, simulate, keep score
104. Lee Crumbaugh, SMP
President, Forrest Consulting, Glen Ellyn, IL, USA (Chicago)
President,Association for Strategic Planning (2014-2016)
leec@strategicbusinessleader.com
www.forrestconsult.com
Presenter
