5. Forecasting
The mere act of attempting to estimate or calculate something in advance should give you pause: amateurs—in some cases monkeys—routinely out-perform experts in meteorology and the stock market. There are several traps to be aware of when forecasting in business. One is over-confidence. As human beings, we’re prone to overestimating our talents, which you could argue is also the reason some people succeed in overwhelmingly difficult conditions. A study of one million students by the College Board in the 1970s asked them to rate themselves versus their peers on several measures. For leadership ability, 70 percent rated themselves above average, while only 2 percent rated themselves below average. For athletic ability, 60 percent rated themselves above the median, and only 6 percent rated them- selves below average.
Life Preserver: To avoid the danger of forecasting in strategic thinking, consider the following:
- Overconfidence: Use a range with the extremes as bookends to estimate a spectrum of values.
- Recollection: Identify the data or facts for the events to ground your thinking in an objective base.
6. Groupthink
Strategic thinking and strategic planning are often done in a group setting. Consequently, it is important to recognize the influence of groupthink. Groupthink occurs when there is a homogenous group of people with little influence from outside sources and a high level of pressure to conformity. Groupthink tends to directly and indirectly reduce the level of objective thinking, remove devil’s-advocate thinking, and punish those who attempt to do either. Symptoms of groupthink include an illusion of invulnerability, rationalizing warning signs, stereotyping competitors as inconsequential and only seeking information that supports group consensus. How many of these symptoms have you seen in your meetings this week?
Life Preserver: To avoid the danger of groupthink in strategic thinking, consider the following:
- Assign one person in the group to play devil’s advocate and take the opposite position of the majority.
- Utilize an external resource to ensure objectivity and divergent opinions.
7. Halo Effect
The halo effect is the habit of making specific conclusions based on a general overall impression. The halo effect describes how people tend to take a company’s positive or negative performance and apply it to the specific elements of the business without a direct correlation of cause. The halo effect can cause managers to try to emulate the components of a successful company (structure, leadership, strategy, innovation, etc.) without realizing those components may not have had a significant contribution to that organization’s success. Sound strategic thinking requires managers to not mindlessly follow a flavor-of-the-month formula for success.
Life Preserver: To avoid danger of the halo effect in strategic thinking, consider the following:
- Carefully assess the sources of data being used to understand their level of bias.
- Understand the context in which the event or issue is unfolding prior to suggesting actions. Recall the three disciplines of strategic thinking: acumen, allocation, and action.