Strategy Driven Organization - Sustainable Growth and Profitability
Copyright Enterprise Design Labs 2005 - 2018
Strategic decisions are a form of managerial decisions that deal with situations characterized by high complexity and uncertainty. 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
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.
Strategic decisions can be identified by the strategic 'issues', events or factors that trigger them. These triggers may include observed issues such as:
The quality of a strategic decision is based on 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 [...],
and effects on other actors' behavior make strategic decisions 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 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 Process
Strategic decision-making is an ongoing cognitive process which involves "issue" comprehension, concepts structuring, and concepts formulation into cause-effect relations, and whose outcomes are usually contingent on the behavior of other actors (individuals or organizations) affected by the decision’s actions. 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. 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/implications 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.
Factors Influencing Strategic Decision Making
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. Some of the factors that influence the quality of the results - strategic decisions - of the strategic decision-making process include:
Strategic Decisions and Risk Management
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:
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.
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.