Hidden Flaws in Strategy PDF Print E-mail
Thoughts - on Strategy

Very good article on McKinsey about hidden flaws in strategies.

Hidden Flaws in Strategy - The McKinsey Quarterly - business strategy - Strategy - Strategic Thinking

The article outlines several challenges in strategy work:

The basic assumption of modern economics—rationality—does not stack up against the evidence.

  1. Overconfidence:
    "Our brains are programmed to make us feel overconfident."
  2. Mental Accounting:
    "the inclination to categorize and treat money differently depending on where it comes from, where it is kept, and how it is spent."
  3. The Status Quo Bias:
    "One explanation for the status quo bias is aversion to loss—people are more concerned about the risk of loss than they are excited by the prospect of gain."
  4. Anchoring:
    "Present the brain with a number and then ask it to make an estimate of something completely unrelated, and it will anchor its estimate on that first number."
  5. The Sunk-Cost Effect:
    "...throwing good money after bad..."
  6. The Herding Instinct:
    "This desire to conform to the behavior and opinions of others is a fundamental human trait and an accepted principle of psychology."
  7. Misestimating Future Hedonic States:
    "...people are bad at estimating how much pleasure or pain they will feel if their circumstances change dramatically."
  8. False Consensus:
    "People tend to overestimate the extent to which others share their views, beliefs, and experiences."
 
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