Why Strategic Decision Making Goes Wrong
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Transcript of Why Strategic Decision Making Goes Wrong
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Why Strategic Decision Making Goes Wrongin companies & government
Peter Cochrane
COCHRANE a s s o c i a t e s
cochrane.org.uk
ca-global.biz
Monday, 26 August 13
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* An incomplete understanding* Dynamic data/information* Unappreciated complexity* Unintended consequences* Changing environment* Misplaced motivation* Management hubris* Personal reward* The unexpected* Novel situation* Short termism* Inexperience* Short termism* + + + + + + + + +
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C O M P A N I E S A R E
AWASH WITH DATA
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C O M P A N I E S A R E
AWASH WITH DATA
...thas is stored..
...and may beexamined
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...andspecific features
extractedMonday, 26 August 13
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...to be discussed at length
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...and identifiableparameters
classified
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. . . t o c re a t ereasonable
& sensible options
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...and by far the most popular methodor techniquefor choosing ?
I n t u i t i o n !
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...This often seems to work well in the short term, but then turns
into a long term failure - oftenwith dire consequences!
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And worse, the impact then spreads across
the entirecompany !
Monday, 26 August 13
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C O M P A N I E S A R E
AWASH WITH DATA
How come
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. . .and ancient m a n a g e m e n t m e t h o d s n o longer work
Everything and everyone is now connected
The world is no longer a simple, linear, well b e h a v e d a n d w e l l understood place
It all got complex, dynamic and non-linear !
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In a non-linear and chaotic world a minor error can result in a very big outcome....
So what is needed and what should we be doing ?
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An effectivemodel of thecompany andmarket is a m i n i m u mrequirement
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F I N D I N G T H E
RIGHT DATA
IS VITAL
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Take into account the stochastic nature of business and the rate of informational change
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Build a computermodel - conductMonte Carlosimulations forall scenariosmany manytimes toreduce thevariance &the overall risk to some level of acceptability
σ
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...thereby reducing risk and chance
even further
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W A R G A M EEvery aspect and area of doubt around the corevalues identified by the computer model.....
.test and check...
..test and check...
...test and check...
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Press GO and then mitigate the risk in real time by feeding actuality back into the model as decisions are enacted...
...the change you invoke will change the environment and the optima of the model.....which will dynamically move in near real time...
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GOStarting
Conditions
Output/ Change
Cont inuousoutput/changef e edba ck to m o d i f y t h e initial/starting conditions of the model
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Complexity dictates that we ‘navigate’ our way through a rapidly changing environment....
. . .continual mid course corrections are the new norm
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As of today this is the best the military and business can do!
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The
future
will be
different
ca-global.biz
cochrane.org.uk
COCHRANE a s s o c i a t e s
Our machinedependencewill grow asour intuitionincreasingly
fails to accountfor complexity...
Monday, 26 August 13