It might seem that when it comes to strategic thinking, the brain is your ally. Not always. Our brains aren’t always rational, and we are unaware of the extent to which the mind takes shortcuts and makes assumptions. Charles Roxburgh writes about the brain in Hidden Flaws in Strategy (McKinsey Quarterly):
“Over the millennia of its evolution, it has developed shortcuts, simplifications, biases, and basic bad habits. Some of them may have helped early humans survive on the savannas of Africa (“if it looks like a wildebeest and everyone else is chasing it, it must be lunch”), but they create problems for us today. Equally, some of the brain’s flaws may result from education and socialization rather than nature. But whatever the root cause, the brain can be a deceptive guide for rational decision making.”
Roxburgh points out eight flaws that every leader should be aware of as they solve problems and make decisions. For example, our brains are overconfident in our own abilities. We think we can estimate far more accurately than we can, and we believe that enterprises that we’re involved in are above average. Related to this overconfidence is being overly optimistic – skewing toward the most positive projections about factors that are uncertain.
You can compensate for your overconfident brain by:
- Testing strategies over a wider range of scenarios, and giving people a choice between an even (2, 4, 6…) number of options. If given an odd number of choices (e.g., 3), most will choose the safer middle option.
- Mitigating the risk of getting monetary projections wrong by reducing your most optimistic estimate by 20% to 25%. If you’re estimating revenues of $5 million, reduce that “best case” figure to around $4 million.
Read the full article on McKinsey’s website (registration required), so you can plan around your flawed brain. You’ll be way ahead of your competitors who think their brain is just fine the way it is!
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