Strategy Driven Sustainable Organization 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 - they 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. It very difficult 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 decrease in sales or sales growth, a new product entry by competitor(s); and events such as request for action from executive management, or simply a regular planning cycle. Some examples of strategic decisions include:
The outcomes of strategic decisions are usually contingent on effects - the behavior of other actors affected by the decisions' actions. These recursive relationships between decisions, decision outcomes, and effects on other actors' behavior make strategic decisions-making messier and more complex than operations decisions. Strategic decisions, when compared to 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.) are indeed 'messes' (Ackoff, 1974); they 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 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 decision-making is an ongoing cognitive process which involves "issue" comprehension, concepts structuring, and concepts formulation into cause-effect relations model, and whose outcomes are usually contingent on the behavior of other actors (individuals or organizations) affected by the decision’s outcomes. 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.
The recursive logic of thought and actions embedded in the strategic decision-making process is common to different levels of management functions and processes, each of which deals with different problems and relies on different sources of knowledge. Decision makers need then to engage in a cognitive process that demands them to create new solutions based on old experiences in the form of heuristics (rules of thumb, common sense, intuition or educated guesses). In these situations, managers face the extremely difficult problem in making decisions that demand a long-term perspective, committing the firm in the long run within a competitive landscape that is unlikely to stand still. The uncertainty and complexity of the situation demands that decision-makers take ‘short cuts’ that they can identify only if they have experience dealing with similar problems.
Understanding Sound Strategic Decisions
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 quality of strategic decisions can be improved by enabling managers and decision makers to improve:
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. Each decision with its elaborated set of connected intended actions and their effects - actors whose behavior are assumed to be impacted by the successful implementation and execution of the actions can be modeled and evaluated through visualization (Visual Analytics).
Strategic Decisions and Risk
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. Strategic risks arise from executive decisions concerning the organization’s objectives, and the potential risks of failing to achieve those objectives. These risks can be categorized as follows:
Strategic Decision-Making Challenges
Strategic decisions are long-term in their impact; they affect and change the direction of the whole business/organization. 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.
In the context of strategy execution, complexity refers to challenges to understanding an issue due to lack of information and lack of insight into the problem domain due to:
Decision Makers (i.e., Managers) need the decision making skills and judgment to identify and analyze factors that can affect outcomes and value delivered.
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.