Strategic Thinking & Decision Making

Session 1
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IIMB Strategic Thinking & Decision-Making, Lecture 1 1

Course Objectives

• Learn how we think

– Intuitively and analytically
– How emotions help or hinder decision-making
– Ethics in making decisions
• Strengthen strategic thinking
– Gain a nuanced appreciation of what Strategic Thinking is
– Acquire working knowledge of relevant theoretical principles
– Apply strategic mindset to everyday life and business.

You will be encouraged to find answers, resolve dilemmas.

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 Course content
1. Rational, Analytical thinking
• Framework thinking
• Game theory – conceptual bases and application
• Ethics and values
2. The non-rational mind
• Bounded rationality, insight and intuition
• Cognitive biases
• Emotion in decision making
3. Leveraging the two systems for strategic thinking and
innovation.

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My Approach
Classes Assessment
• Coverage of some concepts • Exams and tests as in course
– More in reading material outline
• Discussion based …. • Application based Qs
– Questions, exercises… – Business, military, politics,
– Real world issues…. society, human behaviour ….
– Dilemmas and • Will test grasp, application of
paradoxes…. concepts
– Your questions – Ability to explore different
perspectives
READ, PREPARE, PARTICIPATE Session 5: Biz Game. Groups.
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 You will enjoy the classes more if you…..

• Read the COURSE OUTLINE, if you haven’t done so.

– Course material is on Moodle.
• Read the relevant articles, book chapters BEFORE the class
• Think about and relate your experiences to them
• Practise observing your thinking while making decisions
• Try to apply learning in everyday life….and business
• Develop your ability to apply concepts in class, tests and
exams, and to everyday life

Observe the world around you, interpret and infer objectively!

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Examinations and Assessment

• Examinations: on DigiExam or DigiProctor. Open book + notes

– Mid-term exam syllabus: sessions 1-10
– End-term exam syllabus: sessions 7-20.
– Fixed date quizzes: better of two. Syllabus  previous 3 sessions
– Questions will be application based
• Examples, real world observations, etc.
• Will test your grasp and application of concepts
• Only on concepts from course syllabus.

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 Strategy is a firm’s theory of how to compete
successfully.
- Jay B. Barney, Professor of Corporate Strategy, Fischer
College of Business, Ohio State University

“It is unwise to be too sure of one's own wisdom. It

is healthy to be reminded that the strongest might
weaken and the wisest might err.”
- Mahatma Gandhi (1869 - 1948)
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What is Strategic Thinking

Competencies: Skills
and capabilities Awareness B

Intuition Foresight
Risk appetite
Resources: Assets People
Environment:
Technology Cash
Insight
Polititical Economic
Social Technological Judgement
Abstract
thinking

Analysis Players:
Customers Competitors Signature characteristics of
A Ethics and Suppliers Employees
morality
strategic thinking?

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 Characteristics of Strategic thinking?

• Anticipatory thinking
– Foreseeing other’s actions
– Reading trajectory of events, trends
• Holistic, big picture, system thinking
– 30,000 feet view
Goal-oriented • Seeing all parts and the whole
Anticipatory • Pattern recognition
Holistic, system thinking – Systems view and latter order
effects. Anticipatory thinking
• Rat infestation in Hanoi
• Demonetisation, Nov 2016?

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Why do we learn Strategy Models?

• Strategy models are like lenses

– They reveal different perspectives, facets of problems
– Use of multiple models creates holistic view
• South West Airline: Generic Strategies, Activity System, VRIO…..
• Frameworks demand rigorous analytical thinking
– Data collection, analysis, interpretation
• To decide: Market entry, new product or variant, promotion….
• Does not preclude, indeed they leverage insight, intuition
– iPod?
They facilitate strategic thinking
• Help make balanced judgement
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 Strategic thinking
• A complex, abstract thought process
• Directed at achieving a desired end or solution in future
• Complex synthesis of:
– Rational and non-rational thinking
• Self-awareness
• Analysis, emotions, morality….
• Insight
• Intuition Is it conscious,
• Judgement or
• Anticipation
• Foresight and a vision of the future
unconscious?
• Strategic thinking is INTEGRATIVE
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How do we really think?

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 Source: Kahneman Prize Lecture Source: Kahneman Prize Lecture
Q1. Are 2a and 2c the same height?
Q2. Do the tiles in 2a cover as much area as 2b, more or less?

Observe your thinking as you answer two questions.

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Thinking processes

Source: Kahneman Prize Lecture

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 System 1: Intuitive Thinking

• Driven by heuristics (thumb rules)

– Associative, extensional, extrapolative in nature
– Hard-wired by evolution
– Experience based, rules of thumb
• Heuristics enable
– Rapid educated guesses
– Iteration
– Judgement
– Spontaneous processing without being aware

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System 2: Analytical Thinking

• Deliberate
• Effortful
• Slow
• Rule based
• Flexible
• Rational

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 Which system of thinking
Two systems of thinking do we use more often?

• Synthesis of System 1 and System 2

– Work in conjunction, complementarily
– Permit iteration, validation
– They feed each other
– Sometimes they create conflict.
• Euthanasia or abortion
Taking life is God’s work vs. Right to a life of dignity
We resolve dilemmas by weighting one reason, or argument more!
We tend to simplify and see one perspective only or mainly.
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Case: DHARNA

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 DHARNA
1. What is the principal objective of residents?
2. What are the top 2-3 assumptions behind their strategy?
3. What possible objectives might the builder have?
4. What key assumptions might drive the builder’s strategy?
5. What options of action are available to the builder?
6. Is Press an independent actor? Do they make their own decisions?
7. Might they have own objectives and strategies?
8. Can their strategies impact residents’ plans?
9. Will residents achieve their objective?

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Residents?

Builder?

Press?

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 Fundamental principles of Game Theory

1. Determine whether a situation requires you to

make a decision or play a game.
2. Consider the game from the other players’
points of view. Their choices, your strategies,
and the outcomes of their interaction.
3. Then choose your strategy.

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Why do we often frame binary choices?

• To do this, or not to do it.

• To do a Dharna or not to do it.
• To go shopping today or not.
• And so on….

Cognitive ease. Easier, quicker, more efficient. INTUITIVE. SYSTEM 1

To make better decisions, think expansively, more options.

 Cognitive strain
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 How should we make decisions?

• Rationally?
– Analysis?
– Strategy models?
– Game Theory?
• Intuitively?
• Use ethical, moral principles?
• Emotionally?
• All of the above?
• Some of the above?
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Recap
• Thinking is a product of rationality and intuition
• Strategic thinking is:
– Abstract, complex, goal directed, future oriented
– Synthesis of information and insights
– Creativity and innovation are imperative
• Begin with the end in mind
• Develop rational, critical thinking.

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 Alice asked at the crossroad, “Which road should I take?”
“Where do you want to go,” asked the Mad Hatter.
“I do not know,” said Alice.
“Then it does not matter which road you take,” he replied.

- Lewis Caroll, Alice in Wonderland

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