Strategy and Innovation

Strategic Decision Making

  • Tom Lienhart
  • February 02, 2021

There are several things that set a company apart from its competition. At the core is the way that they navigate through the decisions, big and small, that shape their future. The most successful companies are those that can make faster and smarter decisions than those around them. In fact, research shows that agile organizations who are able to make nimble decisions experience 2.5x the growth, twice the profit, and a 30% higher ROI on their investments. How do they reach those decisions? It’s not luck, and it’s not osmosis. More effective decisions are the result of a better decision-making framework. The good news is that this framework can be learned and applied by any leader in every sector. Keep reading to learn how to approach strategic decision making in your organization — and why you should.

What is Strategic Decision Making?

Strategic decision making refers to the practice of understanding the interaction between decisions and their impact on the business in order to gain a competitive advantage. Savvy business leaders know that the wrong decision made at the wrong time can lead to the unraveling of departments or entire organizations. Strategic thinking happens at the intersection of the right decision and the right time.

In order to not only survive but thrive, organizations must make decisions that will maximize short-term results while also minimizing long-term risks. Strategic decision-making also involves uncovering future opportunities and different options that can be implemented to achieve success.

You’ve likely heard the term “data-driven decisions”. With the increasing availability of analytics, statistics, and insights, it makes sense that business leaders want to apply this crucial information to their decision-making process. Doing so always leads to better outcomes. Strategic decision-making comes into play by combining the typical steps of the basic decision-making process with the principles of opportunity, threat, countervailing factors, and risk. Essentially, this process is a cornerstone of helping your company to survive, grow, and thrive.

Why is Strategic Decision Making Important?

Is your organization prepared to operate and even expand in the future? Inevitably, your business will experience hurdles, and strategic decision making can ensure that you can overcome obstacles to your success. Additionally, strategic decision making:

  • Is an important step in organizations of all sizes. It’s a process that facilitates learning, improves performance and outcomes, and reduces the probability of failure or unexpected competition in the future.
  • Is a skill that should be learned and practiced. As more tools become available for making decisions, more executives and stakeholders will expect that a robust decision-making process takes place. Strategic decision-making isn’t a process that you go through once or twice, it’s a lifelong skill that can be honed to provide a competitive advantage over time.
  • Helps individuals make decisions that require a high degree of knowledge that’s new to them. Often, decisions that carry a lot of responsibility and direction for long-term objectives rely on various processes, systems, and policies. Going through this process ensures decision-makers are using the right tools and framework to make decisions that can bear the weight of their impact.
  • Includes implementation as part of the process. Even the best decisions aren’t very effective if you make the choice and then don’t do anything else. Strategic decision-making forces people to consider how implementation will actually work.
  • Can drive real business growth. Since it’s the best way to find out the ideal options for achieving business objectives, it can help drive those results faster. Additionally, as part of this process, organizations should have a decision-making process that includes a well-defined set of policies and rules which are adhered to by all. A variety of data discovery and data analytics tools are also an important part of the process.
  • Links immediate or short-term decisions with long-term, strategic objectives. Every company has (or should have) a long-term strategy with documented objectives and plans to innovate. However, they also need to respond quickly to current situations. Having a consistent strategy for decisions ensures that you can develop plans of action for any scenario.
  • Forces organizations to be more proactive. Strategic decisions should be translated into action to improve efficiencies. Having such a framework can ensure that you have considered options before they present themselves and everyone in the organization can feel good about upcoming initiatives.

Framework for Strategic Decision Making

Is there a dedicated process for strategic decision-making? We suggest implementing the following framework:

  1. Come up with a list of different decisions and the hypothetical outcome – Before you can make an effective decision, you need to know which strategies you can choose from. If you notice that your options are all similar without too much deviation, it may become easy to have a skewed vision. Try coming up with alternatives that are different from each other. Truly polarized options force you to think about where each option leads and how they will impact day-to-day activities. Remember that you are trying to look into the future to get a blueprint.
  2. Assess risk and find barriers for each – Hopefully, you’ve come up with several options that have positive outcomes. Now, you need more information to decide between them. You’re looking for the outcome that is easiest to get to. Think of it this way: all things being equal, do you want to do things the easier way, or the hard way? That’s why it’s important to list the barriers to each option. Are any of them short on time, resources, or support? Do any options require tools or personnel that you simply don’t have right now? Be realistic about resources and then narrow down options to which paths you are actually equipped to follow right now.
  3. Design tests for your theory – Just because you’ve done a great job of creating options in your head, doesn’t mean that’s how things will go. There are many conditions that may end up changing circumstances along the path. Try testing to prove or disprove the conditions on each specific path. It’s important to determine the viability of each path. Quantify these scenarios through case studies, precedent, and experiments.
  4. Use the data and make a decision – In this day and age, there is very little reason to “go with your gut” when making decisions. Don’t skip steps – ensure you’ve looked at multiple paths and gone through the testing process. Only after an appropriate number of steps should you make a decision. Remember that this process may be slow, but important decisions are worth it! After devising, consulting, and testing, commit to your decision fully. Often, the success of the path you’ve chosen depends on how much you believe in it and the passion you put into execution.

Decision-Making Tools

Every organization – no matter its size – will need to make strategic decisions at some point. Some companies base these on top-down opinions, while others allow bottom-up approaches where people ultimately decide the future of the organization. Regardless, decisions affect your business’s future. Decisions alter your organization’s vision, mission, and goals, and everything that guides your business into the next era. In addition to leveraging a strategic decision-making framework, what other tools are at your disposal?

Logic Tree – This is a good way to simplify probable courses and outcomes and map out multiple solutions. Users like this tool because it provides a visual way to see your strategy mapped out. A logic tree might be most effective when initiating a brand expansion with dated sales data, or when creating buyer profiles from demographics, or choosing which pressing business issue you need to tackle when all of them are a priority.

Decision Matrix – If you have a lot of choices and haven’t yet prioritized options, then a matrix may help. This tool is great for helping teams to make decisions without tension. It’s particularly effective for decisions with a lot of moving parts, and ones where you need to set emotion aside. It can help streamline decisions with a lot of shareholders and focus on logic, removing politics or passion.  For example, when hiring for a key role in your organization, you can use a matrix to have several decision-makers weigh-in while remaining practical.

OODA Loop – This tool is made for iterative processes that are made over and over. For looped procedures such as tweaking a certain model with upgrades in every cycle, this is a great decision-making platform. It’s helpful for speeding up processes without losing quality. OODA allows users to easily collect initial information and then tweak that information over time as new data becomes available. You can then fine-tune each step in the process over and over, which creates a system of continuous improvement for your organization. Its ideal use is advancing new information that is constantly flowing into your decision matrix.

Ladder of Inference – Some decisions require a lot of inference, and these choices are best made with a ladder of inference. This tool helps users gain awareness of how certain facts eventually become conclusions. It can help to reduce the number of wrongful assumptions that you make when quantifying and justifying those facts. The ladder starts with hard data but becomes more valuable as it helps companies to shape reality from that data. You will be able to comprehend how many scenarios can be created based on one set of data and the assumptions, beliefs, and actions that lead to a certain conclusion – providing decision-makers with a lot of power.

Strategic Radar – No doubt you’ve heard of the SWOT tool. This platform is an upgrade that offers a vetted fixed process for making strategic decisions so that you always know just what you’re getting into. The tool has eight essential questions and 29 disruption factors, which help to define needs and context rapidly. Plus, it provides a visual way of looking at challenges and opportunities along with surrounding context. Strategic Radar is more advanced than SWOT because it accounts for time. How long will your decisions take to bear fruit? When are future changes likely to occur and how long will you have to respond? Having this information forces decision-makers to prioritize and choose strategies that are more likely to be best for the company.

Great decisions are what set companies apart.

At the end of the day, every decision made within your organization drives your company closer to an ultimate outcome – success or failure. Effective decision-makers know that going with their gut sounds exciting, but won’t often yield the outcomes that forge a successful business. Instead, impactful leaders believe in strategic decision-making and concrete outcomes. They know that relying on trusted data and time-tested tools can help them to unlock the power that their competitors don’t have.

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