STRATEGOSCASE-BASED STRATEGY DECISION MAKING

dr Jerzy Surma

Collegium of Business AdministrationWarsaw School of Economics

e-mail: jerzy.surma@sgh.waw.pl

Natura non facit saltus

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Herbert Alexander Simon – behavioral approach

decision-makers lack the ability and resources to arrive at the optimal solution, they instead apply their rationality only after having greatly simplified the choices available

ILL-STRUCTURED PROBLEMS

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Challenge

ILL-STRUCTURED PROBLEMS:

complex,

unrepeatable,

intuitive,

made under uncertainty

…

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Challenge

ILL-STRUCTURED PROBLEMS:

complex,

unrepeatable,

intuitive,

made under uncertainty

STRATEGIC DECISION MAKING

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STRATEGIC DECISION MAKING

SME CEO:

1. Routine – habitual

and reactive decision

making

2. Intuitive decision

making

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STRATEGIC DECISION MAKING

SME CEO:

1. Routine – habitual

and reactive decision

Making

2. Intuitive decision

making

Reasoning by analogy is

a common form of logic among

business strategists.

Facing a novel opportunity

or predicament, strategists think

back to some similar situation

they have faced or heard about,

and they apply the lessons from

that previous experience

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STRATEGIC DECISION MAKING

SME CEO:

1. Routine – habitual

and reactive decision

making

2. Intuitive decision

making

Reasoning by analogy is

a common form of logic among

business strategists.

Facing a novel opportunity

or predicament, strategists think

back to some similar situation

they have faced or heard about,

and they apply the lessons from

that previous experience

Case-Based Reasoning

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Circut City Car Max

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Strategos, plural strategoi (Greek: στρατηγός, pl. στρατηγοί; Doric Greek: στραταγός, stratagos; literally meaning "army leader") is used in Greek to mean "general". In the Hellenistic and Byzantine Empires the term was also used to describe a military governor. In the modern Hellenic Army, it is the highest officer rank

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Theoretical framework: A Theory of Case Based Decisions - Bilboa

Let :

P - be a set of decisions problems (case description),

A – a set of acts that may be chosen at the current problem,

R – a set of possible outcomes.

Then a case is a triple: (q,a,r), where: q (problem) є P, a (act) є A, r (outcome) є R

Formally, a decision maker with memory M, similarity function s, and utility function u, w

ho now faces a new decision problem p, will rank each act a є A according to:

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Company description: market share, location, products/services,

number of employees, sales volume (trends in at least two years period),

sales volume (export), EBITDA (trends in at least two years period), B2B/B2C.

Context description: industry, industry life cycle phase, Porter five forces analysis

(threat of substitute products, threat of the entry of new competitors, intensity of competitive rivalry, bargaining power of customers, bargaining power of suppliers).

Case description (P)

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General Knowledge as a warning system

Inappropriate case retrieval based on the rule:

“if the new case company and the retrieved company

are in the different industry life cycle phase

then the proposed decisions might be wrong”

Inappropriate proposed solution based on the rule: “if the company has just started to penetrate the market with current products and proposed decision is: intensive foreign market development then this is risky and unrealistic proposal”

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The act which is chosen as a solution for the current problem (A)

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Crucial phase - REVISE

Revise:

The solved case that was established in the previous phase has a planned strategic decision (act). This is a kind of proposal for a strategic actions plan. The most important goal of the revision phase is to recognize what has actually happened with that company after strategic decision was taken.

It is crucial to take into consideration the case utility value (u) and user remarks concerning the reasons why the proposed approach was successful or unsuccessful. In reality, there are several factors of different type such as economic trend, customers’ behavior, organizational

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Evaluation by CEO’s (1/2)

The test group was selected by the target selection and it is composed of 44 CEOs from SMEs

Industry Percentage (quantity)

ICT 66% (29)

Media 14% (6)

Others 20% (9)

Summary 100% (44)

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Sources of the strategy decisions pointed by SME CEO’s

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Evaluation by CEO’s (2/2)

Variable Explanation

Support Strategos is supporting me in the real strategy decision problemsEducation Strategos is teaching me in strategy managementDecision making Strategos is generating a final solution for my strategy problems

Support Education Decision making

Definitely no (1) 0,0% 0,0% 42,7%

No (2) 3,1% 2,8% 54,8%

I do not know (3) 10,3% 6,6% 2,5%

Yes (4) 42,4% 51,5% 0,0 %

Definitely yes (5) 44,2% 39,1% 0,0 %

Summary 100% 100% 100%

Test caseBankierTravelPlanetMacrologicK2 InternetPointGroupPerfect LineLSI SoftwareProcadPower MediaQuantum SoftwareOne-2-One

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Conclusions

1. acceptance of Strategos with a strong feeling of limitations

2. treated the system as an inspiration or verification for their actions

Suggested approach, together with methodological guidelines how to avoid superficial analogies,

may be used in practice as a form of popularization of strategic business consulting in SMEs.

The commercialization of suggested approach will contribute to the significant increase of

knowledge and “strategic” awareness in SMEs.

www.strategos.pl

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