How To Deal With Biases in Strategic Thinking

To remain competitive in a disruptive and uncertain marketplace, today’s business leaders face increasing pressure to make more informed, long-term strategic decisions. Olivier Sibony, Guest Expert on the Oxford Executive Strategy Programme from Saïd Business School, University of Oxford, explains how collaboration can help avoid bias in decision-making and steer a business in the correct strategic position. 

Transcript

Cognitive biases are not the sorts of biases that you hear about when you read the news about bad cops or when you read about gender biases, right? Those biases, those prejudices about certain groups, are of course, a very important kind of biases. But cognitive biases, specifically, are ways in which our cognition, our understanding of reality, is distorted in predictable ways.

Typically, the mental models that we apply to a situation, when we’re thinking about strategy, are grounded in our experience, which often is in the same company, but not always; in our experience of an industry and the way that industry behaves. And we find it difficult to think about it the way an outsider thinks about it. So, the way another player thinks about our industry is very difficult for us to imagine. There are ways to force ourselves, but typically we underestimate the threats from other players.

The typical example of this would be when some years ago you would interview the heads of the big airlines and ask them about the newcomers like Ryanair and easyJet. And their answer, unanimously, was, “They’re not a threat. They are not in our business. They are from another world. They are addressing a different audience. They are flying to different airports. They are serving different needs.” Now, that’s the sort of mental model that prevents you from seeing reality.

Obviously, one question about these biases is, what can we do about that? So, if I’ve got this mental model, and the only way I’m thinking is “airlines are big airlines” and, you know, “a small company with an orange logo cannot be a threat”, how do I change my view about that? And what my experience as a consultant has shown me is that, you know, even the very, very, very best executives that I was running into, even myself, even my colleagues, you know, we’re all stuck in our mental models. It’s impossible to know what we don’t know. It’s impossible to see the world with somebody else’s eyes.

So, the only way you can do this is by literally bringing someone else into the decision, so that you are going to have someone else’s eyes along with yours. So, you need more than one opinion. You need collaboration. So, the fact that different people will bring a different pair of eyes and bring a different lens to look at reality and bring a different mental model, that’s very important when crafting strategy.

But of course, once you have around the table a number of people with a number of different views, hopefully they are all going to be different. What do you do then? How do you reconcile that? How do you make a decision? So, that’s where the second ingredient comes into play, and that’s process. You need to have some sort of method to make sure that those divergent views express themselves, but also to make sure that you actually reach a decision and, if at all possible, the best possible decision at the end of that process. And those two ingredients, the collaboration, the team, and the process, the method, are the two things that you need to try to overcome your biases.