When is a decision strategic

The same goes for most personal investment decisions. 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.

For many first-field decisions, research has taught us to be aware of and try to minimize these common biases. 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. Some activities call for us to move between the first and second fields, shifting our mind-set back and forth. Anders Ericsson, Michael J.

Prietula, and Edward T. Cokely, HBR July—August , is based on objective and deliberate thinking before an event, full commitment with a positive attitude while taking action, and then a return to dispassionate analysis after the event—what is known as an after-action review.

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. 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.

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. The crux of our discussion comes into focus when we consider the fourth field. 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. By the way they lead and communicate, and through their ability to inspire and encourage, executives can influence outcomes. The decisions to enter a new market, release a new product, or acquire another firm are all in the fourth field, but we can find many examples beyond business.

In sports, a coach shapes the performance of athletes, melding them into an effective team that can outperform the opponent. Or think of politics. 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—only one person can win—and outcomes can and must be shaped.

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. It is what remains, in other words, the foundation stones of the organisation itself. Once the mission, vision and values are embedded into each strategy, the following three-stage process can help guide executives to make better strategic decisions:. An analysis is an attempt to understand where the organisation is, including the strategic position of the organisation in relation to its environment and its internal capabilities.

Analysis aims to provide a better understanding of the internal and external environment. It requires a certain distance and perspective. It must be rigorous and supported by data, while also identifying opportunities and anticipating trends. A strategy is a decision: without a decision there is no strategy. The purpose of this part of strategic management is to choose a strategy. It requires generating options, comparing them and deciding. The art of management lies in choosing a unique mixture of options that includes choosing a course to follow, and in so doing, setting a course for the future.

Decisions have to be implemented. Implementation is the last part of a strategy and is the part you can see and feel. The question is how to move from making a decision and turning it into reality. This has to do with people and resources, being able to effect change and make things happen. People and organisations can learn. This circle can be seen as a learning wheel, a continuous process in which the organisation can learn and get better at strategic decision-making.

It represents learning by doing and by deciding, correcting mistakes and providing new solutions. It involves learning in a double loop. I have never seen anyone become a good strategist without practice. As in sport, this is a discipline that requires training and practice. You can learn to manage strategies through practice by practicing management in making decisions, putting them into practice and analysing the results.

However, with strategic decision-making, the most sophisticated solution can often be the simplest one. Previous Back to Top. Figures References Related Information. Hazhir Rahmandad , Michael Shayne Gary. Leiblein , Jeffrey J. Reuer , Todd Zenger. Strategy Science 3 4 Close Figure Viewer. Some are essential to make our site work; Others help us improve the user experience.