The Art of Decision Making and Strategic Thinking
Fundamentals of Case Analysis
UCF MAR 4804
Based on:
“Smart Choices”by Hammond, Keeney and Raifa
“The Mind of the Strategist” by Kenichi Ohmae
Handout by Samar Das
The Mind of the StrategistSuccessful business strategies result from aparticular state of mind. In what I call the mindof the strategist, insight and a consequent drivefor achievement fuel a thought process which isbasically creative and intuitive rather thanrational. Strategists do not reject analysis. Theycan hardly do without it. But they use it only to stimulate the creative process.
Kenichi OhmaeManaging DirectorMcKinsey & Co., Japan
The Strategic Thinking Process
Mechanical Thinking
Intuitive Thinking
Creative Strategic Thinking
Case Analysis
Analytical
Convergent
thinking
Creative
Divergent
thinking
Practical
Feasible
thinking
Defining the Problem
“if you don’t know where you are going, all roads will take you there!”
Diagnosing the Problem Jane has malaria. Doctors treat her
with the most powerful and latest drug for pneumonia.
What happens? Jane dies
Your problem diagnosis determines alternatives, criteria and ultimate choice of a solution.
Problem definition: Be creative
The LAZY way…often the wrong way. What pops up first in your mind How it has been viewed in the past What is stated as the problem in the
case When symptoms are seen as the
problem
Problem Definition: Be creative There is always a different way of
looking at a problem
- Dig deep!- Ask what no one else has asked before- Look at it from several different angles- Question what is stated and obvious
Problem: -> Opportunity
Problems often can be turned around as big opportunities
Finding the opportunity hidden in the problem can open up exciting possibilities and wonderful options and alternatives
How easy is it to do so?
Steps in creatingsuperior strategies
1. Problem definition2. Characterize the situation3. Identify objectives4. Generate alternative solutions5. Evaluate alternative solutions6. Develop action plan
THE CASE OF TOM STEADY First, write down the stated problem
- Steady Watches is losing market share Next, what triggered the need for a
decision- Steady’s sales are dropping
Implied connection of the trigger to the problem- Steady’s sales are dropping…because Precise is taking away market share
Most People Stop Here!
Decision Outcome:Let us find a way to compete with Precise
What could be done?$20 million ad campaignPrice promotionsSix months later-> NO JOB
Is something framing the decision problem? Identify what could be constraining your
thinking…- Steady and Precise are the two direct competitors- Sales can only come if I gain share from Precise
Are there other things we should consider? Is the market shrinking? Are there other new competitors? Are there different needs?
Identify essential elements and connections with other issues
Identify the essential elements of the problem analysis showed market is shrinking consumers are more concerned with the
design than with the quality of watches What other decisions impinge on or
hinge on this decision? Losing market share in watches will erode
the company’s standing in the consumer personal products market
Establish Scope
Establish a scope for your problem definition: Should we focus only on the Steady
brand? Or should we look at the Timing device
product line? Or should we consider the entire
company’s consumer product line strategy?
Get inputs from others
How do others view the situation? Get insights and fresh perspectives
from several sources Avoid the trap of falling in love with
your own ideas Obtain another “expert opinion”
before making a major decision
Re-examination of the problem
Re-examine your problem definition as you go You may find when you look for the
solution, your perceptions of the original problem may change
With more information, you may need to revise your problem definition
Iterative process
How would you define the problem of Steady watches?
Final Problem Definition Steady watches is losing sales due to
three important trends:
Consumers are placing more importance on the design than on the quality
Other devices such as cell phones and PDAs are becoming more popular
New competitors carefully target niche markets
What next: Identifying Objectives Write down all the concerns you hope to
address through your decision. Long term, medium, immediate or short
term Don’t be restrictive or too orderly in your
thinking Consider hidden concerns Make a wish list, dream up best scenarios,
worst scenarios, outlandish alternatives, infeasible alternatives
Identifying objectives Convert your concerns into succinct
objectives – clear, focused, action orientedSteady watches To expand into new market opportunities in
the timing business by offering new products and designs for different market segments
To strengthen the position in the watch market To increase sales of the Steady watch brand
Identifying objectives
Understand the fundamental objective you are trying to achieve -> Develop a set of criteria for evaluation Long term profits Long term viability of the business Maintain current profitability and cash
flow Increase the value of the business
Generate ALTERNATIVES
Two laws of alternatives
You can never choose an alternative you haven’t considered
No matter how many alternatives you have, your chosen alternative can be no better than the best of the lot.
Generate ALTERNATIVES
As many as you can for each of the objectives creative ideas, practical ideas,
impractical ideas… worry about the feasibility later
Use judgment to narrow down the list to a set of most useful alternatives
Evaluation of Alternatives First, cut down the list to the most
attractive alternatives, judgmentally Then, evaluate the consequences of each
alternative by creating a free form description of consequences
Further eliminate any clearly inferior alternatives
Analyze the remaining on detailed criteria Financial, managerial, market, competitive,
time
Consider tradeoffs
Some alternatives are clearly dominated by other better alternatives – eliminate them
Some alternatives can be combined to make a more powerful alternative
Some alternatives can be traded off against other alternatives
Assess risks
Uncertainty can influence the consequences of chosen alternative
Consider the risk tolerance capability of the organization
Look at the linkage of your chosen alternative to other issues that might confront the organization
Develop actionable plans
Consider presenting your plans for long term, medium term and short term
Develop the plans with as much detail as possible
Beware of some psychological traps Over-relying on first thoughts:
The Anchoring trap Protecting earlier choices:
The Sunk Cost trap Seeing what you want to see:
The Confirming-Evidence trap Being too sure of yourself:
The Over-Confidence trap