This blog post is a part of a larger Strategic decision-making collection I am constantly adding to and focuses on the idea of following a systematic step-by-step process.
Take a guess: analysis vs. process
Let’s start with a pop quiz:
Based on your experience, can you guess which of the following statements are true?
Effective strategic decision-making requires solid analysis and practitioner judgement
Process and analysis are equally important for effective strategic decision-making
Process is more important than analysis for effective strategic decision-making
Process is less important than analysis for effective strategic decision-making
Analysis is top of mind
Often, when we hear the phrase strategic decision-making, the first thing that comes to mind is analysis.
Why? In college, we take many courses about tools and analytical frameworks, but the step-by-step process is rarely discussed. At work, some of us live in an Excel spreadsheet, often without seeing a glimpse of the surrounding process.
Dan Lovallo (professor at the University of Sydney and a senior research fellow at the Institute for Business Innovation at the University of California, Berkeley) and Olivier Sibony (a director at McKinsey) teamed up to investigate what actually leads to good strategic decisions.
The process is 6 times more important!
After looking at more than 1,000 situations, these researchers concluded that while solid analysis is a must-have, the process matters more than analysis.
In fact, the study indicated that process is 6 times more important than analysis!
There are multiple reasons why the process is so important, but the main one is because we need to guard ourselves from our own subconscious biases that would otherwise undermine strategic decision-making.
Our brains play tricks on us all the time, and this affects how we make decisions.
Most common biases
Here are the 5 types of decision-making biases, as summarized by McKinsey & Company:
Action-oriented biases (e.g., excessive optimism, overconfidence, competitor neglect) drive us to make decisions less thoughtfully than we should.
Pattern recognition biases (e.g., confirmation bias, management by example, false analogies, power of storytelling, champion bias) lead us to recognize patterns even where there are none.
Social biases (e.g., sunflower management, groupthink) arise from the preference for harmony over conflict.
Stability biases (e.g., anchoring, loss aversion, sunk-cost fallacy, status quo bias) create a tendency toward inertia in the presence of uncertainty.
Interest biases (e.g., misaligned incentives, inappropriate attachments, misaligned perception of corporate goals) arise in the presence of conflicting incentives, including non-monetary and even purely emotional ones.
Even being aware that we might be biased is a huge step forward.
Take a moment to reflect: Which of the above biases do you think you are most influenced by?
Here are a few examples of typical “de-biasing” practices to incorporate in your strategic decision-making process:
Open and broad deliberation / asking others for their opinion
Reframing / seeking multiple perspectives / playing devil’s advocate
Asking “what if” questions / testing assumptions
War gaming / imagining how competitors would respond
Recognizing uncertainty / playing out scenarios
De-personalizing discussions (e.g., by role playing).
Link to your experience
Can you think of any other “de-biasing” practices that you’ve observed or have practiced yourself? Jot them down for your own record.
How would you apply the knowledge that following an effective process helps you remove biases and improve outcomes in your work?
As you go about informing — or making — decisions today, make an intentional effort to be conscious of when bias(es) may arise.
Originally written by Aneta Key in February 2016. Last edited November 2018.