Seven principles of strategic decision making
- How can we assure that our new market entry gains us profitable market share?
- How can we motivate our organization to create value for our constituents?
- How can we distinguish between competitor strategies worth following from the dead ends?
- How can we make robust decisions that will maximize our gains even if things don’t turn out as we planned?
- How can we keep success from going to our heads?
- How can we adapt to changing customer needs, upstart competitors, and new technologies?
- How can we assure that our acquisitions are profitable?
Through my consulting work and business strategy teaching, I have developed seven key principles of strategic decision making which I believe can help executives make more effective decisions, including the following:
- Confirmation bias filters reality --> Assess capabilities objectively before entering a new market.
- Incentives matter --> Understand customers’ and partners’ incentives.
- Shareholder value and financial performance do not move together --> Value Leadership is a more useful mission than Maximizing Shareholder Value.
- Expect the unexpected --> Use scenarios and uncertainty analysis.
- Competitor-focused strategies happen --> Exploit them by creating customer value.
- Success breeds failure --> Maintain a healthy paranoia.
- Most mergers fail --> Analyze them rigorously.