Strategy Driven Organization Change for Sustainable Profitable Growth
Strategic Decision Making
Strategic decision-making is an ongoing cognitive process triggered by "issues" and events of strategic relevance. The strategic decision-making process is distinct from other decision making processes such as: consumer choice problem (e.g., selecting a particular brand of tooth paste) or a mundane managerial decision (e.g., where to ho;d the company picnic), and operations decisions; (e.g., which jobs to schedule into production, etc.). Strategic decisions are typically more complex, novel and open-ended (Mintzberg, Raisinghani and Theoret, 1976), and are characterized by independent elements 'that by definition cannot be formulated, let alone solved, independently of one another.' (Mitroff and Emshoff, 1979:1).
Strategic decision-making determines the objectives, resources and policies of the organization. One characteristic of a strategic managerial decision making that differentiate it from other types of decision making is the particular setting or context. The context for strategic decision making is comprised of the following elements:
When faced with the task of making a strategic decision, the manager may use his/her mental model of the situation and environment in concert with a set of decision rules to arrive at a particular decision. Managers make strategic decisions within a business environment comprising the organization and its relationship to customers, competitors, and the broad public; and these decisions affect a number of other players such as customers, competitors, etc.. Moreover, the reaction of these other players normally affect the final decision outcome. These other players may include customers, competitors, and broad public (i.e., society, regulators, investors, etc.). A major problem with strategic decision-making is predicting the future of the organization and its environment and matching the characteristics of the organization to the environment. Strategic decision-making is more than a set of rules to follow; these decisions are novel, important and non-routine; there are no well understood or agreed upon procedures for making them. It requires the decision makers to provide judgement, evaluation, and insights into the problem definition. Strategic decision-making involves "issue" comprehension, concepts structuring, and concepts formulation into cause-effect relations. While the cause-effect relations model is a deductive reasoning model, the issues comprehension that triggers it, involves choice of assumptions which is to some extent arbitrary and inductive in nature.
The viability of managers' strategic decisions depends in large part on managers' knowledge about the current situation, and probable reactions of their company, competitors, customers, and broader public.
In the absence of certain cause-effect relationships or experience in how these dialectical processes between organizations will unfold, the firm can only hypothesize about the effects of different possible initiatives, and learn more about them through interaction with other actors such as competitors, regulators, customers, suppliers, and partners in its competitive landscape.
Strategic decisions are the output of strategic decision-making process. Strategic decisions affect the overall positioning and direction of the organization; they are different from operational decisions which affect day-to-day activities in operations to implement the strategic decisions. Strategic decisions are more complex than operations decisions; (e.g., which jobs to schedule into production, etc.), or mundane managerial decisions (e.g., where to hold a company's picnic, etc.), or customer choice decisions (e.g., selecting a particular brand of tooth paste, etc.). Strategic decisions affect and change the direction of the whole business/organization, and are long-term in their impact. They are difficult or expensive to reverse because they substantially alter (and irrevocably so) in the short run the relationships between the decision makers' organization and customers, competitors, etc. The quality of a strategic decision is defined in terms of the gap between expected outcomes and the actual outcomes achieved. The outcomes of strategic decisions are usually contingent on their effects on the behavior of other actors affected by the actions deriving from the decisions. The cause-effect relationships between decisions, actions, effects, and decision outcomes.
Strategic decisions always represent risk because they deal with the future and changes in behavior of organizations and institutions which cannot be predicted with any degree of certainty. The risks associated with strategic decision-making are strategic risks which arise from executive decisions concerning the organization’s objectives, and the likelihood (measure of risk) of failing to achieve those objectives. These risks can be categorized as follows:
Factors Influencing Sound Strategic Decisions
Some of the factors that influence the quality of strategic decisions and create challenges to effective decision-making include:
Decision Makers (i.e., Managers) need the decision making skills and judgment to identify and analyze factors that can affect outcomes and value delivered. Typically, the value delivered by enhanced and strengthened existing assets or new assets is causally and temporally separated from the successful completion of the strategic initiatives (resulting from the strategic decisions to implement and execute a given strategy) that produced those assets. Any cause-effect relationships may involve two (2) or more stages; making it difficult for managers to fully comprehend the contribution of these assets to the success/failure of the implementation and execution of the strategy.
The decision complexity relate to problems with multiple and related dimensions and their high uncertainty, for which the desirability of the range of possible alternative courses of action cannot be assessed exhaustively, at least in a reasonable time frame, relying on ‘packaged’ knowledge; making it very difficult decision makers to choose the best course of action analytically, due to high complexity and uncertainty and independent behavior of the different actors involved in these strategic decisions.
Improving Strategic Decisions and Decision-Making
The quality of strategic decisions can be improved by improving the strategic decision-making process, to make it work more effectively through decision models and visualization. The visual analysis enables managers and decision makers to improve:
I am a computer scientist interested in modeling of complex business systems, and model-driven analysis and evaluation of strategic management and operations management and the interplay between them. Specifically, I am interested in the use of modeling to improve understanding of strategy, its formulation, implementation and execution, and the interplay between intended strategy, emergent strategy and leaning to inform better strategic decision-making.