![]() While executives should accept that decisions could always be better, what matters is that they make progress, achieve their objectives - and avoid disaster.īusiness Strategy: A Guide to Effective Decision Making by Jeremy Kourdi is published by Profile Books at £20. Of course, many great decisions are made every day. They engage people and gather their own momentum. The decisions that work best are honest and compelling. By deciding to go for an illegal, unethical solution to the pressures of rising shareholder expectations, senior executives lost everything. Try to see things from others' viewpoints.Įnron's decision to resort to financial chicanery and fraud highlights the fact that for decisions to work well, they need to inspire trust. If an option seems too clever to be true, it probably is. Other examples are British Airways, when under Robert Ayling, rebranding its fleet with ethnic designs and Royal Mail plumping for Consignia. These choices reinforced perceptions of consultants as lacking substance. The rebranding gaffe has been made by PricewaterhouseCoopers, which renamed its consulting business Monday, and Andersen Consulting, which switched to Accenture. The lessons from Coke's mistake are avoid basing decisions on biased research, stay close to customers and know what makes you or your product special. Unfortunately, millions of Americans decided they hated New Coke and responded to the change in formula as if the organisation had killed off a beloved member of the family. The lessons? Avoid complacency, dare to be different and recognise the inevitable: if it ain't broke, then perhaps it should be.Ĭoca-Cola discovered it was losing out to rival Pepsi so it introduced New Coke. This may have been true for a while, but it could not last forever. For years, the firm believed that its culture was geared to the customer. It was a shocking decision, thankfully now corrected. Marks & Spencer's decision not to advertise or even to appoint a marketing director came to characterise its arrogance, complacency, inflexibility and lack of market focus. Third, think long and hard about purchase decisions, and never pay more than you can afford. Second, recognise technology is only a panacea if customers want it. The lessons are: first, plan decisions carefully, understanding all elements. The telecoms industry marched into debt with massive hype and expectation that customers would embrace new 3G technology. If the solution is technology, it will be expensive and you need to get there first. With the companies caught between a slowing, maturing market for mobile telephones and pressures to keep revenues and share prices rising, the result was a belief that technology was the solution. All of the thinking flaws can be seen here: sunkcost thinking, hindsight bias, the overconfidence trap and others conspired to send the share price through the floor.Īnother flawed decision was that of telecoms companies to rush to buy newgeneration telephone licences. Its decisions, piling mistake on mistake, were based on a belief that the future core business lay in telecoms. GEC decided to buy Marconi, rebrand the business as a telecoms company and buy telecoms-related businesses. Guesstimates are inadequate understand why situations areĭeveloping and where that change might lead. The lessons? Understand the forces that affect markets. Visions of the future, market share, cost reduction and shareholder value are all welcome, but what matters most is adding value for the customer. The belief was that internet channels and content would combine to create a profit-making machine. Time Warner's merger with AOL was the high-water mark of hype exceeding reality during the dot com boom. The overconfidence trap appears when someone has exaggerated their ability to understand situations. Confirmation bias is when we seek information to support an existing view and discount opposing information. The mistakes of the past are perpetuated by sunk-cost thinking ('We have invested so much that we cannot alter course now'). The status quo trap biases us toward maintaining the current situation, even when better alternatives exist. These include anchoring, where we give disproportionate weight to the first piece of information received, and hindsight bias, which leads us to give undue weight to a recent (possibly dramatic) event. Sometimes the fault lies not in the process but in the mind of the decision-maker, so-called 'thinking flaws'. One of the biggest challenges is avoiding the pitfalls of decision-making. Sadly, business tycoons are not renowned for their humility, and their mistakes can cause disaster. New West End Company BRANDPOST | PAID CONTENTĪKING decisions is like making love: tricky to do the first time, fun and fulfilling but not something to get overconfident about. ![]()
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