What Makes Strategic Decisions Different. Photography: Stephen Petegorsky. Artwork: Matt Phillips. Prop, 2. 01. 2, oil on canvas, 2. At the same time, a growing chorus has noted that business executives, in particular, are largely impervious to its lessons. They seem unable to apply those lessons, or perhaps uninterested in doing so. Management information system (MIS). Top managers make strategic decisions. Information Systems: Types Information System Categories Related to Specific Functional Areas of Business. Advances in our understanding of decision making have not been matched by improvements in practice. Having thought about this puzzle for some time, I suggest that there is a good explanation for the disconnect. The problem lies elsewhere. Their most important and most difficult decisions. When a grocery store customer encounters an entire aisle of breakfast cereals, we say he has a decision to make. When a high school senior considers which college to attend, we say she is facing a decision. When a poker player weighs whether to raise or fold, that. Some typical management decisions of a manufacturing business. The impact that different personality types have on leadership style. When it comes to management. This type of manager makes consultative decisions and needs a great deal of input from different sources. KRISHNAN AND ULRICH Product Development Decisions: A Review of the Literature Table 1 Comparison of Perspectives of the Academic Communities in Marketing, Organizations, Engineering Design, and Operations Management Marketing. Principles of Management: Previous: NATURE AND TYPES OF MANAGERIAL DECISIONS:Decision-Making Styles: Next >>>. NATURE AND TYPES OF MANAGERIAL DECISIONS:Decision-Making Styles; NON RATIONAL DECISION MAKING: Group. And when a company faces an opportunity? The same term is applied to routine as well as complex deliberations, to both small- stakes bets and high- stakes commitments, and to exploratory steps as well as irreversible moves. It stands to reason that insights about decisions in one kind of circumstance might not shed much light on decisions in another. Even worse, they may lead a decision maker astray. In this article I. For that, we need to break the universe of decisions into a few categories. We can then suggest the best approach for each. Let me propose a way. Categorizing Decisions. Decisions vary along two dimensions: control and performance. The first considers how much we can influence the terms of the decision and the outcome. Are we choosing among options presented to us, or can we shape those options? Are we making a onetime judgment, unable to change what happens after the fact, or do we have some control over how things play out once we? The second dimension addresses the way we measure success. Is our aim to do well, no matter what anyone else does, or do we need to do better than others? That is, is performance absolute or relative? There are other ways to think about decisions, of course. Some are made by people acting as individuals and others by people acting as leaders of organizations; some are one- offs while others are part of a sequence, with the results of one letting us improve the next. But as a basic way to understand how decisions differ, control and performance are the two dimensions that matter most. Combining them creates four fields of decisions. Those items, perhaps a jug of milk or a jar of jam, are what they are. You have no ability to improve them. Moreover, you make the choice that suits you best. Performance is absolute. The same goes for most personal investment decisions. You may be able to decide which company. You want high returns but aren. The goal is to do well, not to finish first in a competition. In recent years, trailblazing research by cognitive psychologists and behavioral economists has demonstrated that people make decisions in ways that do not conform to the tenets of economic rationality. They exhibit systematic biases. Those findings have shed light on many first- field decisions in particular. For example, we now understand that the way options are framed and presented can shape our purchasing decisions. We know that investors often misunderstand the nature of random events, imagining that several gains indicate that a correction is due or that a string of losses means gains must follow. They also fall victim to the sunk cost fallacy, throwing good money after bad in an effort to recoup what they. For many first- field decisions, research has taught us to be aware of and try to minimize these common biases. Influencing outcomes. Many decisions involve more than selecting among options we cannot improve or making judgments about things we cannot influence. In so much of life, we use our energy and talents to make things happen. Imagine that the task at hand is to determine how long we will need to complete a project. Here, positive thinking matters. By believing we can do well, perhaps even holding a level of confidence that is by some definitions a bit excessive, we can often improve performance. The approach known as . Anders Ericsson, Michael J. Prietula, and Edward T. The ability to shift effectively between mind- sets is a crucial element of high performance in many repeated tasks of short duration, from sports to sales. For many routine choices and judgments, research has taught us to be aware of and try to minimize common biases. Placing competitive bets. The third field introduces a competitive dimension. Success is no longer a matter of absolute performance but depends on how well you do relative to others. The best decisions must anticipate the moves of rivals. Now you need to make decisions with an eye to what your rivals will do, anticipating their likely moves so that you can have the best chance of winning. In the third field, guidance comes from the branch of economics that studies competitive dynamics: game theory. Well- known illustrations of game theory include the prisoner. Game theory can illuminate areas from price competition to geopolitics, yet it has an important limitation: Players cannot alter the terms of the game. The possible moves are specified, and gains and costs cannot be changed. Management, after all, is precisely about influencing outcomes over time. For these decisions, we can actively influence outcomes, and success means doing better than rivals. Here we find the essence of strategic management. When positive thinking can influence outcomes, only those who go beyond what seems reasonable will succeed. Business executives aren. By the way they lead and communicate, and through their ability to inspire and encourage, executives can influence outcomes. In sports, a coach shapes the performance of athletes, melding them into an effective team that can outperform the opponent. For a voter, casting a ballot is essentially a first- field decision: You vote for the candidate you prefer. For the candidate, however, the reality is very different. Election day is the last hurdle in a long process in which performance is relative. Candidates need to inspire donors, build an organization, attract and motivate campaign workers, and ultimately persuade voters. A winning political campaign depends on a smart assessment of rivals as well as the ability to mobilize supporters, often in the face of long odds. When we can influence outcomes, it is useful to summon high levels of self- belief. And when we need to outperform rivals, such elevated levels are not just useful but indeed essential. Only those who are able to muster a degree of commitment and determination that is by some definitions excessive will be in a position to win. But in tough competitive situations where positive thinking can influence outcomes, only those who are willing to go beyond what seems reasonable will succeed. In recent years a great deal of attention has focused on teaching executives to be aware of common biases and to avoid their ill effects. But if we apply those lessons to the world of strategic management, we. When facing decisions in the fourth field, executives need on the one hand a talent for careful and dispassionate analysis, which we call left- brain thinking, and on the other hand a willingness to push boundaries, which we call the right stuff. Discernment and Versatility. In the course of their daily responsibilities, executives face a range of decisions, often in each of the four fields outlined here. Before making any decision, the most important thing is to understand which field it is in. For routine judgments and choices, where we cannot influence outcomes and need not consider the competition, well- known lessons about avoiding common biases make good sense. For other decisions, a different set of skills is needed. In his profile of St. Louis Cardinals manager Tony La Russa, Buzz Bissinger wrote that baseball managers require . The tactician plays a competitive game. The psychologist must shape outcomes by inspiring others, by setting goals and providing encouragement, and by offering clear and direct feedback. The riverboat gambler knows that outcomes aren. First, they must be able to discern the nature of the decision at hand. Second, they need to respond with the appropriate approach, able to act now as a psychologist, then as a tactician, next as a riverboat gambler, and perhaps once again as a psychologist. When it comes to the most complex decisions of all, those that drive the fortunes of organizations, executives need more than an ability to avoid common errors. They require a seemingly contradictory blend: a talent for clear- eyed analysis and the ability to take bold action. A version of this article appeared in the November 2. Harvard Business Review.
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