The case for behavioral strategy

McKinsey Quarterly

Volumn , Issue 2, 2010, Pages 30-40

  Lovallo, D ^a   Sibony, Olivier ^b  

^a UNIVERSITY OF SYDNEY   (Australia)

^b MCKINSEY AND COMPANY   (United States)

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[No Author keywords available]

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EID: 77953333204     PISSN: 00475394     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (17)

1. See Charles Roxburgh, "Hidden flaws in strategy," mckinseyquarterly.com, May 2003; and
2. Dan P. Lovallo and Olivier Sibony, "Distortions and deceptions in strategic decisions," mckinseyquarterly.com, February 2006.
3. 2See "Flaws in strategic decision making: McKinsey Global Survey Results," mckinseyquarterly.com, January 2009.
4. 3See Dan Lovallo, Patrick Viguerie, Robert Uhlaner, and John Horn, "Deals without delusions," Harvard Business Review, December 2007, Volume 85, Number 12, pp. 92-99.
5. See John T. Horn, Dan P. Lovallo, and S. Patrick Viguerie, "Beating the odds in market entry," mckinseyquarterly.com, November 2005.
6. See Bent Flyvbjerg, Dan Lovallo, and Massimo Garbuio, "Delusion and deception in large infrastructure projects," California Management Review, 2009, Volume 52, Number 1, pp. 170-193
7. Research like this is challenging because of what International Institute for Management Development (IMD) professor Phil Rosenzweig calls the "halo effect": the tendency of people to believe that when their companies are successful or a decision turns out well, their actions were important contributors
8. (see Phil Rosenzweig, "The halo effect, and other managerial delusions," mckinseyquarterly.com, February 2007). We sought to mitigate the halo effect by asking respondents to focus on a typical decision process in their companies and to list several decisions before landing on one for detailed questioning. Next, we asked analytical and process questions about the specific decision for the bulk of the survey. Finally, at the very end of it, we asked about performance metrics.
9. We asked respondents to assess outcomes along four dimensions: revenue, profitability, market share, and productivity.
10. This analysis covers the subset of 673 (out of all 1,048) decisions for which ROI data were available.
11. Caroline E. Preston and Stanley Harris, "Psychology of drivers in traffic accidents," Journal of Applied Psychology, 1965, Volume 49, Number 4, pp. 284-288
12. For more on misleading experiences, see Sydney Finkelstein, Jo Whitehead, and Andrew Campbell, Think Again: Why Good Leaders Make Bad Decisions and How to Keep It from Happening to You, Boston: Harvard Business Press, 2008.
13. WebTV is now MSN TV.
14. Thomas E. Ricks, Fiasco: The American Military Adventure in Iraq, New York: Penguin Press, 2006, pp. 393-394
15. See John T. Horn, Dan P. Lovallo, and S. Patrick Viguerie, "Learning to let go: Making better exit decisions," mckinseyquarterly.com, May 2006.
16. For more on reviewing the growth opportunities available across different micromarkets ranging in size from $50 million to $200 million, rather than across business units as a whole, see Mehrdad Baghai, Sven Smit, and Patrick Viguerie, "Is your growth strategy flying blind?" Harvard Business Review, May 2009, Volume 87, Number 5, pp. 86-96.
17. The Asch conformity experiments, conducted during the 1950s, are a classic example of this dynamic. In the experiments, individuals gave clearly incorrect answers to simple questions after confederates of the experimenter gave the same incorrect answers aloud. See Solomon E. Asch, "Opinions and social pressure," Scientific American, 1955, Volume 193, Number 5, pp. 31-35.