A Structured Approach to Strategic Decisions

Making strategic decisions whether you're considering an acquisition, figuring out whether to launch a new product, or choosing a startup to fund involves boiling down a large amount of complex information so that you can rate competing options or arrive at a yes-no call on a single path. Such decisions are evaluative judgments and thus are highly susceptible to errors that stem from known cognitive biases or from random factors (known as "noise"). The unreliability of human judgment has long been recognized and studied, particularly in the context of hiring. For instance, a vast amount of evidence indicates that unstructured interviews lead to evaluations that have very little predictive value. That's because the interviewer forms a mental model (colloquially known as an "impression") of a candidate, a process that psychologists have shown has three specific limitations: excessive coherence, a "quick and sticky" quality (we form our models rapidly and alter them slowly), and biased weighting. The authors draw inspiration from that body of research and experience to suggest a practical, broadly applicable approach to reducing similar errors in strategic decision-making. They outline the core elements of that process, which, like the practice of structured interviewing in hiring, includes assessing attributes one at a time before arriving at a final judgment. The authors explain how to apply this approach to both one-off and recurrent decisions. The process is easy to learn, involves little additional work, and (within limits) leaves room for intuition.