Why Strategic Decision Making Goes Wrongin companies & government

Peter Cochrane

COCHRANE a s s o c i a t e s

cochrane.org.uk

ca-global.biz

Monday, 26 August 13

* An incomplete understanding* Dynamic data/information* Unappreciated complexity* Unintended consequences* Changing environment* Misplaced motivation* Management hubris* Personal reward* The unexpected* Novel situation* Short termism* Inexperience* Short termism* + + + + + + + + +

Monday, 26 August 13

C O M P A N I E S A R E

AWASH WITH DATA

Monday, 26 August 13

C O M P A N I E S A R E

AWASH WITH DATA

...thas is stored..

...and may beexamined

Monday, 26 August 13

...andspecific features

extractedMonday, 26 August 13

...to be discussed at length

Monday, 26 August 13

...and identifiableparameters

classified

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. . . t o c re a t ereasonable

& sensible options

Monday, 26 August 13

...and by far the most popular methodor techniquefor choosing ?

I n t u i t i o n !

Monday, 26 August 13

...This often seems to work well in the short term, but then turns

into a long term failure - oftenwith dire consequences!

Monday, 26 August 13

And worse, the impact then spreads across

the entirecompany !

Monday, 26 August 13

C O M P A N I E S A R E

AWASH WITH DATA

How come

Monday, 26 August 13

. . .and ancient m a n a g e m e n t m e t h o d s n o longer work

Everything and everyone is now connected

The world is no longer a simple, linear, well b e h a v e d a n d w e l l understood place

It all got complex, dynamic and non-linear !

Monday, 26 August 13

In a non-linear and chaotic world a minor error can result in a very big outcome....

So what is needed and what should we be doing ?

Monday, 26 August 13

An effectivemodel of thecompany andmarket is a m i n i m u mrequirement

Monday, 26 August 13

F I N D I N G T H E

RIGHT DATA

IS VITAL

Monday, 26 August 13

Take into account the stochastic nature of business and the rate of informational change

Monday, 26 August 13

Build a computermodel - conductMonte Carlosimulations forall scenariosmany manytimes toreduce thevariance &the overall risk to some level of acceptability

σ

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...thereby reducing risk and chance

even further

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W A R G A M EEvery aspect and area of doubt around the corevalues identified by the computer model.....

.test and check...

..test and check...

...test and check...

Monday, 26 August 13

Press GO and then mitigate the risk in real time by feeding actuality back into the model as decisions are enacted...

...the change you invoke will change the environment and the optima of the model.....which will dynamically move in near real time...

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GOStarting

Conditions

Output/ Change

Cont inuousoutput/changef e edba ck to m o d i f y t h e initial/starting conditions of the model

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Complexity dictates that we ‘navigate’ our way through a rapidly changing environment....

. . .continual mid course corrections are the new norm

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As of today this is the best the military and business can do!

Monday, 26 August 13

The

future

will be

different

ca-global.biz

cochrane.org.uk

COCHRANE a s s o c i a t e s

Our machinedependencewill grow asour intuitionincreasingly

fails to accountfor complexity...

Monday, 26 August 13