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Slow Deciders Make Better Strategists

Strategy Decision Making

Strategy Decision Making

Imagine recording decision-makers' solutions to a competitive-strategy problem using four categories:

  1. Now-I-know
  2. I-already-know
  3. I-don't-know
  4. I-guessed

The Now-I-know and the I-already-know are very confident while I-do don't-know and the I-guessed are unsure. The Now-I-know and the I-don't-know are slow in making a strategy-decision while the I-already-know and the I-guessed are fast at making a decision.

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IDEA EXTRACTED FROM:

Slow Deciders Make Better Strategists

Slow Deciders Make Better Strategists

https://hbr.org/2016/07/slow-deciders-make-better-strategists

hbr.org

4

Key Ideas

Good/bad strategy decision-makers

It's not easy to split people into the good/bad strategy decision-makers.

  • Track records are useful to some extend. Those with business degrees seem to be good signs, but they may differ on what works. Veterans look promising, but so do outsiders with new ideas.
  • There's a difference between someone confident after laboring over a thoughtful decision and one who's convinced after a quick judgment. There's a difference between someone unsure after serious thought and someone who's uncertain after a quick view.

Experiments with strategic decision making

A database of business executives, consultants, professors, and students was given the same unfamiliar pricing-strategy problem.

  • Generally, the I-already-knows and the Now-I-Knows tend to be older males.
  • The I-don't-knows tend to be somewhat younger.
  • Females make up over half of the I-don't-knows.
  • The best performing group was the I-don't-knows.
  • The overconfident I-already-knows had strategies that would not work. Not because they were incompetent, but because they were overconfident.

A lesson about overconfidence

When the overconfident think they already know the answer, they may believe it's a waste of time to keep looking for answers. But in deciding on a strategy, overconfidence may not lead to a workable option.

An essential lesson for competitive-strategy decision-makers is not to be so fast. Take your time and don't be so sure.

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Real and self-appointed experts
Real and self-appointed experts

The rise of social media means that experts willing to share their knowledge are more accessible to the public. One might think that communication between experts and decision-make...

How experts compete

Real experts are often confident in their claims, but in the private market, the opposite can be more common.

  • Self-appointed experts want airtime and overstate their conclusions.
  • Actual experts want to draw attention to their work. They may not have all the answers and may admit it.
  • Consultants want future business. They have to try to pretend they have complete certainty about uncertain things.

Mixing the information of the pundit, scholar, and consultant creates information noise that makes it difficult for decision-makers to know what to do.

Three kinds of questions for scientific knowledge

When communicating scientific knowledge to policymakers and the public, there are three levels of questions:

  • Level-one questions: Anyone with even modest expertise or access to a search engine can answer these questions. For example, 'Will price controls cause shortages?'
  • Level-two questions: Only the most qualified experts, within existing paradigms of scholarly knowledge, have something to say. For example, 'Can we design algorithms to assign medical residents to programmes in an effective way?'
  • Level-three questions: Even the experts don't know the answers, such as what interest rates will be in two years.

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Overconfidence bias
Overconfidence bias

Most people think they know more than they really do.

Researchers showed that people believe they understand familiar manufactured objects much better than they really do. ...

The details that form our reality

When we don't understand the details, it can cause much trouble. If a nation is overconfident that they will win a war, they will fight more wars. An investor that is to sure of their estimate of an asset's value will trade too much.

The world is too big to process and understand everything. We have to oversimplify the world to be able to function in it. The difficulty is that we don't think our models of how the world works are oversimplified. We believe they are correct. This creates a hidden risk.

The hidden risk of not understanding the details of our reality

Focusing on specific details in a complex system while ignoring the amount of detail contained within the system may at first show a benefit. However, it can create a massive collapse in the long-run.

In the late 18th century, the German government wanted to grow "scientific forests" to track and harvest timber. Underbrush was cleared, and tree species reduced. The first planting did well because of nutrients that were still left in the soil. But the clearing of underbrush reduced insect, mammal, and bird populations essential to soil building. Pests had few enemies left and infected the entire forest, resulting in massive forest death across the country.

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Two strategies

When it comes to setting strategy, there are benefits to both popular and loner strategies.

  • Popular strategies are those that are identified by the crowds. The more people that ch...
Outperforming the crowd

If you want to outperform the crowd, learn the following two essential skills.

  • Generate ideas by broadening your decision frame.
  • You must be able to distinguish between good and bad loner strategies. It is best done by embracing critical thinking.
Broadening the Frame

When we need to make a decision, we tend to ask "What should we do?" However, it narrows our thinking to one right decision.

If we ask the question: "What could we do?"  it broadens our decision-making frame, because we can consider multiple futures. Could ask what if, what else, and why not.

For example: Ask what would be the equivalent in your industry of something that’s working well in another.

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