Hanyang Se

SPotlight on THe ART of Decision MAking

Spotlight

Artwork Matt Phillips, Prop 2012, oil on canvas, 20" x 24"

88 Harvard Business Review November 2013

hbr.org

You have to know what kind of decision you’re making in order to make it well. by Phil Rosenzweig

What Makes Strategic Decisions Different

he past decade has seen a wealth of research on decision making, much of it not only useful but also fascinating to read. At the same time, a growing chorus has noted that business executives, in particular, are largely impervious to its lessons. They seem unable to apply those lessons, or perhaps uninterested in doing so. Advances in our understanding of decision making have not been matched by improvements in practice. Having thought about this puzzle for some time, I suggest that there is a good explanation for the disconnect. It’s not that executives lack the desire to make better decisions or that they’re in denial about their propensity for error. The problem lies elsewhere. It’s that the bulk of the decision-making research published to date applies to one type of decision, and it’s not the type that’s most challenging for managers. Their most important and most difficult decisions—strategic decisions with consequences for the performance of the company—call for a very different approach. The fact is that people need to make up their minds in a great variety of circumstances, and it’s a source of confusion that the same word, “decision,” is used for all of them. When a grocery store customer encounters an entire aisle of breakfast cereals, we say he has a decision to make. When a high school senior considers which college to attend, we say she is facing a decision. When a poker player weighs whether to raise or fold, that’s a decision, too. And when a company faces an opportunity—to enter a new market, acquire another company, or launch a new product—what is required of its management? A decision. The same term is applied to routine as well as...