Reprint: R1311F
The past decade has seen a wealth of research on decision making, yet business executives seem impervious to its lessons. The problem is not that they lack the desire to make better decisions. It’s that the bulk of the research does not apply to the kind of decision that’s most challenging for them.
Decisions vary along two dimensions. The first considers whether the decision maker can influence the terms and the outcome. The second addresses whether the aim is to do well or to do better than others. Before making any decision, the most important thing is to understand what kind it is.
Decision research has produced good advice for routine choices and judgments, such as personal investment decisions, where people are choosing among the products before them, have no ability to change them, and are not competing with anyone. For these decisions, research has shown, it’s important to avoid common biases.
But strategic decisions, such as entering a new market or acquiring another company, are completely different. Executives can actively influence outcomes. Furthermore, success means doing better than rivals. For these decisions, executives need more than an ability to avoid common biases. They require a talent for clear-eyed analysis and the ability to take bold action.
