Transcript (00:07): Hi there. Welcome this week's presentation, analyzing the strategic decision-making literature and pointing out some mistakes that businesses make, which can be easily rectified and have a huge upside on the way we make decisions and the returns we get out of it. So let's dive right in to making Calculative impact within strategic decision making. Traditionally, research earns strategic decision making has been divided into content research and process research. And as such three dimensions of strategy in real life strategic situations, our context, content and process context identifies the decision-making environment. Now this can be internal or external to the firm. Internal factors can be culture, resistance to change complexities, appetite for risk, intelligence, decision-making styles for decision makers, need for control of power, politics within a firm or even different education backgrounds and personal values of decision makers. External factors is the prevailing economic conditions or competitiveness under which the decision is taking place. (01:09) Broadly, the context can be understood as environmental, which is your external or competitive environment, organizational environment, which is the internal structure nature of the decision, which is the topic at hand and top management characteristics. That is the people who are taking decisions, their personalities, their backgrounds, their characteristics, and so on. Context is the conditions within which the decision is essentially taking place. The context is unique to every person of business and is guided by the attribute that is of prime importance within the time in which the decision is taking place. So where the decision taking place, what is the topic about? What is the environment? What are we sitting to? Debate is essentially referred to as the context. For example, it could be the current need for cash or deciding on a big picture or addressing an issue related to sales or production or something like that. (02:03) Or context is also guided by stakeholder pre predominance within that particular period of time. The stakeholders could be customers, shareholders, employees, et cetera, depending upon the issue that is at hand. Now, content. Content is the content of the decision that is what specific decision is being taken. For example, are these strategies to create new products, diversify, or at a business level to differentiate, achieve cost. Leadership process then refers to about how the decision will actually translate into action. That is selecting ideas, managing politics, evolving consensus, communicating the decision, allocating the resources, monitoring, control, evaluation, et cetera, and outcome. Outcome reference to the outcome of the decision. There should be the outcome in terms of effectiveness of the decision or measured in terms of performance, which is growth in profit or sales and numbers, or even in terms of public image or goodwill, that a decision may generate the triangulation of the STM process or the strategic decision-making process, which is the triangulation of context, content and process. (03:16) The context or problem formulation sets the boundary conditions for strategic decision making. That is economic, social, or competitive. Landscape context then influences the content that is, it gives direction to what the decision should explore. Could it be new assets or acquisitions as well as the process. That is how the decision is to be implemented. Similarly, content is dependent on context as well as on the process. That is what is achievable by the firm. And process on the other hand, is dependent on the content as well as the context. So it's triangulated in all three ways. The content of the decision to implement anything at all is driven within these realities and guides and is guided by the process in which the outcomes can be achieved. Decision makers are also guided by stakeholders, as we said. That is any group or individual who can affect or is affected by the achievements of the particular business. (04:17) Top managements and more specifically the CEO's. Entrepreneurs are compelled to align interests of different stakeholders while making strategic decisions and allocating strategic resources. The degree to which managers prioritize competing stakeholders claims is known as stakeholder, salience or preference the government communities, shareholders, employees, customers are all predominant stakeholders. The salience of the CEO or the top management teams to stakeholders that are part of the firm shareholders employs customers, is higher than of the external stakeholders in practice, which could be government or communities. Now in a study exploring the influence of the CEO on the decision-making process, it was noted that CEOs have more influence on the process than the top management teams, for example. And the context of the strategic decision has even a greater influence in the process than the CEO or the top management team themselves. From the above, it can be concluded that the strategic decision maker is the CEO or the top management teams. (05:22) Now, collectively or individually, they pay salience or preference to internal stakeholders and the guided by context in which the decision is occurring. Now, how does a decision unfold within a single organization? Multiple thought worlds may exist, all of which are required to collaborate in a way successfully. The four popular thought worlds prevalent within leadership teams may be, for example, the technical thought world of the specialist, the field thought world or client facing the planning thought world or marketing and the manufacturing thought world, which is the implementers. Or there can be many more in an entrepreneurial setting. These thought worlds may be in a singular mind Thought. Worlds are essentially different departments or different functions that are collaborating together to make a business happen. The different thought worlds are likely to lead to differences in creative suggestions made by each person, and this generally means a conflicting or an occurrence of conflict of some sort in their interest to larger organizational goals. (06:21) A negotiated order usually emerges the individual or collective perception of external context has a significant influence in these negotiations. Often the dominant creative idea that emerges is dependent on which frame or individual has more power. The negotiated content is what actually becomes the strategic decision, which guides the implementation process in terms of deciding goals, resource allocation, further activities, execution methods, distribution of tasks within a group or a team. And tactics related to individual tasks, goals, resources, tasks, execution methods, individual tactics have a positive impact on this process. This framework now is highly useful in direction setting when we are taking decisions if you want to take the right decision. So we are introducing you to three ways that you can actually apply this particular framework. If the intent is to take the right decision, then setting the context becomes paramount Importance. This means to specify exactly different goals to achieve different stakeholders that have value in order of their ranking and an order of preference state whether each is negotiable or non-negotiable. (07:41) This will make it easier to test the ultimate objective against which the decisions actually taking place. If your objective is to facilitate the thought worlds, because a lot of businesses can get stuck in different kind of negotiations, then thought worlds most respond to external demands. That is uncertainty, time constraints, competition, severity of challenge. So a discussion around these objectives is likely to make a job easier to facilitate a negotiated outcome. If you want to facilitate faster execution in your organization, then specifying exactly what the goals, resources, tasks, methods, or tactics for different people are, have the most positive impact on that particular process. Now here's the practical use of this particular framework. The mistake that most people make is they assume the context and never specify it. So advice to decision-making is to always document the context in front of you and it makes the job a whole lot easier. (08:42) They assume that the context does not need to be documented before taking a decision. Businesses don't think that a decision is possible as a win-win for all contexts. So the aim or objective usually in a particular group setting tends to be negotiate quickly, whereas it is possible if you spend enough time and if you have different contexts listed in front of you to be actually able to create a win-win for all contexts. Businesses don't pay attention to the needs of the thought world. One particular thought world can tend to get domineering over the other thought worlds. It's important to pay attention to the needs of different thought worlds and the whole implementation cycle then becomes faster. The compromise between different thought worlds rather than integrate views. So usually how we understand negotiation is a give or take, but there is another possibility which is an integration that it can become an and scenario rather than an OR scenario. (09:37) And they assume that the process of goals, resources, task, execution methods, individual tactics will automatically be figured out by implementers. So leaders have this great tendency to believe that managers are intelligent enough to figure this out. Sure they are, but people love direction that the clearer that the leadership team is able to direct goals, resources, task, execution, methods and tactics. The faster is the implementation. We hope that you've gotten value in it. There's a lot of information packed in here, but if you pay attention to the last slide in congruence with the framework, you will be able to get tips and decision-making tactics that can make the process a whole lot better.