Mastering Strategic Thinking for Business Success

MGMT 475 – Strategic Management Capstone Class 1 Reading Key Terms and Concepts CRITICAL THINKINGBEING ANALYTICAL GOOD JUDGMENT RATIONAL vs. RATIONALIZING STYLES OF THINKING LOGICAL ARGUMENTATION PROBABLISTIC DECISION-MAKINGSTRATEGIC MANAGEMENT COMPETITIVE ADVANTAGEFIRM AS (and in) A SYSTEM This course isn’t about making you a strategist or a strategic analyst. This course isn’t really about how to ‘do strategy’. This class is a capstone, integrative course to bring together all your prior studies about business and wrap them into a way of THINKING about business that is necessary for success – your individual success and the success of your firm or your employer. Specifically, we are talking about deliberate thinking, and deliberate thinking requires a PROCESS for deriving conclusions, making decisions, and selecting among alternative choices. We, of course, are going to focus on the application of such thinking and thinking processes in relation to a business enterprise. The concepts and methods, however, are also useful for other decisions and choices you must make in your life. One flaw of human nature is that we tend to spend our intellectual capability RATIONALIZING to make the world around us fit what we believe to be true rather than BEING RATIONAL to objectively figure out cause-effect relationships and to evaluate the probability of our choices leading to desired ends. This class attempts to develop your ability to break from human nature and your natural biases, heuristics (look that up), and logic traps. Instead, the aim is to help you become more analytical and make better decisions, recommendations, and choices. What we will cover are fundamental concepts and methods for good thinking and decision making. The methods presented are not the only ways or necessarily the best ways, but they are the most widely recognized principles and approaches. A great place to start your journey as a better business thinker. ----------------- -------------------------------------------- You are taking this class as part of your greater aim to get a business degree and you are pursuing that because you want to have a successful career in business. Search the Internet for ‘how to be successful in business’ and you will get a LOT of tips and advice. But there is one underlying thing that underscores all those lists and tips and stories and advice: making good and appropriate decisions. Some things that influence your life are out of your control. For example: your parents; where and when you were born; how you were raised; were you received your primary education; etc. Your career success will, to some degree, also be affected by luck, timing, and being in the right (or wrong) place at the right (or wrong) time. There is, however, one key – even related to random luck and timing – that you can strive to control: your decisions - - your choices on how you respond to things, what goals you choose, how you choose to behave and think, and what you pay attention to and prioritize. A business enterprise (let’s call it a ‘firm’ just to be short) is really just a group of people doing things toward a common end result. Just as for individuals, the success or failure of a firm is based on choices. If you are self-employed, your firm’s results are clearly a result of your choices. If you work for a business, employees’ choices matter to some degree at some level. Getting promoted and moving up in a firm is largely determined by your ability to contribute to achieving the firm’s desired results. In other words, your ability to make and act on good decisions – and to help others make and act on good decisions – is really valuable! Choices. Decisions. Conclusions. …. it all sound so straightforward. But business is very, very, complex. Things are changing all the time – customer demands, competitors, suppliers, employees. Each of those variables is about people...and people are all different; people change their minds and behaviors all the time. And think about technology… technology is rapidly changing, sometimes radically. This creates a great deal of complexity and uncertainty for making decisions in business. It’s not just what you know, or even who you know…. It’s also about how you navigate the complex and uncertain world of business by gathering up valid information, understanding a situation (an opportunity, a problem, a decision, etc.), and getting to a conclusion, a decision, or a choice among alternatives. There is another hurdle, too. Often you will not be able to make and act on important business decisions all alone. You will need to convince and persuade people to agree and accept your conclusion and decisions. Some examples: you may need to convince the CFO to allocate resources for a new project; you may need to persuade your team that your solution is best; you may need to convince your client that your recommended solution to their problem is best. How do you make good business decisions? How do you persuade others to agree with your conclusions and recommendations? Good questions! Read on. CRITICAL THINKING In the natural science fields (medicine, geology, chemistry, physics, etc.) there are natural laws that dictate and explain how things exist or happen. Business is a social science, however. It’s all about people and how people’s choices and behaviors affect one another in complex and dynamic ways. There are no scientific, natural laws to help you make choices when people are involved. Decision-making in social sciences is about striving for a high probability of being correct, best, or otherwise successful. This is referred to as probabilistic decision-making. We can also label this ‘good judgment’ (i.e., the ability to make well-considered decisions or derive sensible conclusions.). When you apply appropriate processes and techniques in your probabilistic decision making, not only do you increase your odds of making good decisions you also enhance your ability to persuade others that your proposal or decision has a high confidence of being successful. The deliberate path to good judgments is critical thinking. First, you must choose to be a critical thinker. Critical thinking is a deliberate act, it is purposeful. Critical thinking contrasts with what Nobel Prize-winning behavioral economist Daniel Kahneman calls system 1 thinking. System 1 thinking is automatic, responsive, emotional, instinctive, and habitual thinking that drives most of our choices. System 1 thinking is based on past experiences, biases, beliefs, stereotypes, and generalizations. System 2 thinking, the deliberate and thoughtful kind of critical thinking, is about seeking to understand something so well that you can make more effective decisions related to that issue. Critical thinking requires that you: Recognize issues that deserve system 2 thinking. Problems that need to be solved Opportunities that are attractive and should be pursued Decisions that must be made Prioritize issues and decision factors What is most urgent- what decisions need to be made now What is irrelevant or of trivial importance What data is most important for a decision? How to prioritize and rank viable alternatives to select the ‘best bet’ option Gather appropriate data and evidence, organize it to understand it, synthesize a variety of data; AN