Dear All

During our first class (1 Oct 2019 Tuesday) we have focussed on the FRAMEWORK of the class (how we can see the class as prep for real life CEO thinking).

  • We have agreed that we will have as many as 10-12 quizzes (at lease 9) instead of 2 midterms and a final exam.
  • Each quiz (this may change) will be covering the topics we have focussed the week before
  • After 6-7 classes where we looked into theories we will have guest lecturers to share a case with us
  • We will then prepare a presentation to answer our guest lecturers specific questions

Class 1- Ground Rules - Diagnostic Thinking

AntiVirus Analogy

We used ANTIVIRUS analogy as the FRAMEWORK of the class. We said IF OUR MIND was to be considered as a computer in order to stop viruses effectin our performance we must install updates and as a result identify viruses that we may be affected.

Diagnostic Thinking

https://youtu.be/18uZpJWpfDs

We have discussed the Critical Thinking concept

Critical thinking is the objective analysis of facts to form a judgment. The subject is complex, and there are several different definitions which generally include the rational, skeptical, unbiased analysis or evaluation of factual evidence

Self Serving Bias,

Self-serving bias is any cognitive or perceptual process that is distorted by the need to maintain and enhance self-esteem, or the tendency to perceive oneself in an overly favorable manner. It is the belief that individuals tend to ascribe success to their own abilities and efforts, but ascribe failure to external factors. When individuals reject the validity of negative feedback, focus on their strengths and achievements but overlook their faults and failures, or take more responsibility for their group’s work than they give to other members, they are protecting their ego from threat and injury.

Optimism Bias

Optimism bias (also known as unrealistic or comparative optimism) is a cognitive bias that causes a person to believe that they are at a lesser risk of experiencing a negative event compared to others. Optimism bias is quite common and transcends gender, race, nationality and age. Optimistic biases are even reported in non-human animals such as rats and birds.

QUIZ Tips

Next weeks quiz will be at the beginning of our first hour

Question(s) might be similar to following

Q: What is self serving bias and how it might effect our judgement and as a result of this bias how might our career be effected.

Q : What is diagnostic thinking and what is action bias

Class 2 Decision Making Traps Part 1(8/10/2019)


Satisficing

Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met. The term satisficing, a portmanteauof satisfy and suffice,[ was introduced by Herbert A. Simon in 1956, although the concept was first posited in his 1947 book Administrative Behavior. Simon used satisficing to explain the behavior of decision makers under circumstances in which an optimal solution cannot be determined. He maintained that many natural problems are characterized by computational intractability or a lack of information, both of which preclude the use of mathematical optimization procedures. He observed in his Nobel Prize in Economics speech that “decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world. Neither approach, in general, dominates the other, and both have continued to co-exist in the world of management science”.

Simon formulated the concept within a novel approach to rationality, which posits that rational choice theory is an unrealistic description of human decision processes and calls for psychological realism. He referred to this approach as bounded rationality. Some consequentialist theories in moral philosophy use the concept of satisficing in the same sense, though most call for optimization instead.

In decision-making research

In decision making, satisficing refers to the use of aspiration levels when choosing from different paths of action.

By this account, decision-makers select the first option that meets a given need or select the option that seems to address most needs rather than the “optimal” solution.

Example: A task is to sew a patch onto a pair of jeans. The best needle to do the threading is a 4 inch long needle with a 3 millimeter eye. This needle is hidden in a haystack along with 1,000 other needles varying in size from 1 inch to 6 inches. Satisficing claims that the first needle that can sew on the patch is the one that should be used. Spending time searching for that one specific needle in the haystack is a waste of energy and resources.

A crucial determinant of a satisficing decision strategy concerns the construction of the aspiration level. In many circumstances, the individual may be uncertain about the aspiration level.

Example: An individual who only seeks a satisfactory retirement income may not know what level of wealth is required—given uncertainty about future prices—to ensure a satisfactory income. In this case, the individual can only evaluate outcomes on the basis of their probability of being satisfactory. If the individual chooses that outcome which has the maximum chance of being satisfactory, then this individual’s behavior is theoretically indistinguishable from that of an optimizing individual under certain conditions.

Another key issue concerns an evaluation of satisficing strategies. Although often regarded as an inferior decision strategy, specific satisficing strategies for inference have been shown to be ecologically rational, that is in particular decision environments, they can outperform alternative decision strategies.[

Satisficing also occurs in consensus building when the group looks towards a solution everyone can agree on even if it may not be the best.

Example: A group spends hours projecting the next fiscal year’s budget. After hours of debating they eventually reach a consensus, only to have one person speak up and ask if the projections are correct. When the group becomes upset at the question, it is not because this person is wrong to ask, but rather because the group has already come up with a solution that works. The projection may not be what will actually come, but the majority agrees on one number and thus the projection is good enough to close the book on the budget.

Optimization

One popular method for rationalizing satisficing is optimization when all costs, including the cost of the optimization calculations themselves and the cost of getting information for use in those calculations, are considered. As a result, the eventual choice is usually sub-optimal in regard to the main goal of the optimization, i.e., different from the optimum in the case that the costs of choosing are not taken into account.

The Hidden Traps İn decision Making (Article)

Making business decisions is your most crucial job—and your riskiest. New product development, mergers and acquisitions, executive hirings—bad decisions about any of these can ruin your company and your career.

Where do bad decisions come from? Mostly from distortions and biases—a whole series of mental flaws—that sabotage our reasoning. We all fall right into these psychological traps because they’re unconscious—hardwired into the way we all think. Though we can’t get rid of them, we can learn to be alert to them and compensate for them—monitoring our decision making so that our thinking traps don’t cause judgment disasters.

The higher the stakes of your decision, the higher the risk of getting caught in a thinking trap. Worse, these traps can amplify one another compounding flaws in our reasoning.

Here are five of the nine traps:

Anchoring:

Giving disproportionate weight to the first information you receive

Example:

A marketer projects future product sales by looking only at past sales figures. In a fast-moving marketplace, poor forecasts result.

Avoiding the Trap:

• Pursue other lines of thought in addition to your first one.

• Seek information from a variety of people and sources after thinking through the problem on your own.

Status quo:

Favoring alternatives that perpetuate the existing situation

Example:

A key merger stumbles because the acquiring company avoids imposing a new management structure on the acquired company.

Avoiding the Trap:

  • • Ask if the status quo really serves your objectives.
  • • Ask if you’d choose the status quo if it weren’t the status quo.
  • • Downplay the effort or cost of switching from the status quo.

Sunk costs:

Making choices in a way that justifies past, flawed choices

Example:

Bankers who originate problem loans keep advancing more funds to the debtors, to protect their earlier decisions. But the loans fail anyway.

Avoiding the Trap:

  • • Get views of people who weren’t involved in the original decisions.
  • • Remind yourself that even the best managers make mistakes.
  • • Don’t encourage failure-fearing.

Confirming evidence:

Seeking information that supports your existing point of view

Example:

A CEO considering canceling a plant expansion asks an acquaintance, who canceled such an expansion, for advice. She, of course, says to cancel.

Avoiding the Trap:

  • • Check whether you’re examining all evidence with equal rigor.
  • • Ask a respected colleague to argue against your potential decision.
  • • Avoid “yes-men.”

Estimating and forecasting:

Being overly influenced by vivid memories when estimating

Example:

Lawyers overestimate probability of large awards because the media aggressively publicizes massive awards. Lawyers then offer too large settlements.

Avoiding the Trap:

  • • Be very disciplined in forecasting.
  • • Start by considering extremes, and then challenge those extremes.
  • • Get actual statistics, not just impressions. 

ARTICLE


Click the visual for downloading the article

QUIZ Tips

Next weeks quiz will be at the beginning of our first hour

Question(s) might be similar to following

Q: What is satisfycing DECISION MAKING Strategy please explain and give an example.

Q : What is (are) Anchoring (or sunk cost investment, or status quo) trap(s), how it might effect our decisions (our thinking)

Class 3 Decision Making Traps Part 2 & Marketing Myopia (15/10/2019)

Marketing Myopia

Marketing myopia‘ is a term coined by Theodore Levitt. A business suffers from marketing myopia when a company views marketing strictly from the standpoint of selling a specific product rather than from the standpoint of fulfilling customer needs

Class 4 (22/10/2019)

Conformity

Conformity is a type of social influence involving a change in belief or behavior in order to fit in with a group.

This change is in response to real (involving the physical presence of others) or imagined (involving the pressure of social norms / expectations) group pressure.

Conformity can also be simply defined as “yielding to group pressures” (Crutchfield, 1955).  Group pressure may take different forms, for example bullying, persuasion, teasing, criticism, etc.  Conformity is also known as majority influence (or group pressure).

The term conformity is often used to indicate an agreement to the majority position, brought about either by a desire to ‘fit in’ or be liked (normative) or because of a desire to be correct (informational), or simply to conform to a social role (identification).

Quiz Tip for 5th Nov 2019

Class 5 (No Class)(29/10/2019)

Class 6 (05/11/2019)

Strategic Dissonance

Operating in a world where the competitive landscape is ever more ephemeral, challenges to the status quo ever more profound, and the life of a successful business model ever shorter, aligning a corporation’s strategic intent and strategic action becomes ever more critical. 

The more dynamic the industry, the shorter the duration such alignment is likely to be.  As intent and action become misaligned, that divergence creates what Andy Grove termed “strategic dissonance” in a California Management Review article he co-authored as well as his 1996 book Only the Paranoid Survive.

Arriving at a point of strategic dissonance suggests that the incumbent strategy no longer works as the underlying market and competitive dynamics have shifted enough to require a new strategy.  Grove termed these “strategic inflection points” to describe the giving way of one type of industry dynamics for another.  Strategic inflection points signal fundamental change in a business and require a new strategy, a modified business model, and a change in the way business is conducted.  The driver might be new technology, new regulations, emergent competition, or any structural dynamic that obviates the current environment.

The challenge for anyone, management or otherwise, is to recognize the strategic dissonance and, more importantly, to perceive the opportunity being created by the strategic inflection point and requisite new strategy.

resource:”https://www.nonlinearthinkingblog.com/nonlinear_thinking/2013/08/recognizing-strategic-dissonance.html

Strategic inflection points (SIPs) are caused by changes in fundamental industry dynamics, winning strategies, and dominant technologies.

Robert A. Burgelman
Robert A. Burgelman Professor, Organizational Behavior

SIPs generate strategic dissonance in the organization because they are associated with divergences between the basis of competition and the firm’s distinctive competence, and between top management’s strategic intent and strategic action.

Top management can take advantage of the information generated by strategic dissonance to develop new strategic intent and lead the organization through the turbulence and uncertainty associated with SIPs.

This requires a capacity for strategic recognition on the part of top and senior management. Strategic recognition is facilitated by an internal selection environment that allocates resources based on competitive reality and values dissent and debate.

Strategic recognition is the foundation for exerting strategic leadership: encouraging debate and bring debate to a conclusion that realigns the basis of competition and distinctive competence, and strategy and action.Related

https://www.gsb.stanford.edu/faculty-research/working-papers/strategic-dissonance

This image has an empty alt attribute; its file name is stratejik-çark-noktası-SIP-1024x581.png

9 indicators to detect strategic dissonance

1 ) Listen to front line members who are facing the customers

2) Be sensitive towards the change that your competition are going through

3) Be sensitive towards the products and services that are supporting your products and services

4) are your team members focussed on their own performance or are they aware of whats going on around them (market place, competition)

5) Pay attention to the canary in the coal mine

6) Don’t shoot the messenger

7) Allow an open and democratic culture

8) Encourage debates and discucssions

9) Don’t rely on to data too much

Class 7 (Silo Thinking) (05/11/2019)

How a Silo Mentality Works

The word silo originally referred to storage containers for grain or missiles, but it is now used as a metaphor for separate entities that stockpile information and effectively seal it in. In business, it refers to an organization that is made up of divisions that operate independently and avoid sharing information.

Managers of successful firms generally encourage the free flow of information between departments so that all aspects of the company can function effectively.

The silo mentality is generally seen as a top-down issue arising from competition between senior managers. The protective attitude towards information begins with management and is passed down to individual employees.

It also may be seen between individual employees, who may hoard information for their own benefit. It is often found between employees of competing departments, such as marketing and sales, where some assigned duties overlap.

It’s not always a matter of clashing egos. A silo mentality can reflect a narrow vision. The employees are so bogged down in their own daily chores that they never see the bigger picture or see themselves as having a critical role in that bigger picture. Or they may be utterly unaware of the value to others of the information they’re sitting on.

No matter what the reasons for it are, a silo mentality exists because senior management allows it to exist. Managers of successful firms generally encourage the free flow of information between departments so that all aspects of the company can function effectively.

The lack of cross-departmental communication can negatively impact workflow, as information is not passed freely across the organization. This can leave some departments working with inaccurate or out-of-date information.

A silo mentality inevitably damages morale, especially when employees become aware of the problem and are unable to do anything to change it.

WHAT CAN BE DONE?

Attitudes are difficult to change, especially when self-interest is at stake. Dismantling silos are “cooperation, communication, and collaboration.” Some of the specific suggestions for management changes include:

  • Create and communicate a unified vision that is shared across departments to encourage collaborative sharing of information.
  • Install company-wide software that records and tracks progress towards the company’s goals, and give all employees access to it.
  • Hold interdepartmental events such as training seminars that allow employees to get to know and respect each other.
  • Consider altering the employee compensation structure so that it rewards progress towards company-wide goals.
Silo Busting -Original Article
Türkçe çeviri makale

Selim Geçit

Have a good week