The decision making processes of business and government have changed little over the past 200 years, but technology has advanced, the world got connected, businesses are now networked, and everything is moving faster. Making decisions in a ‘slow environment’ is far easier and far simple than a fast one, and today the ‘starting conditions’ and assumptions are highly unlikely to be fixed or stable for long. It is no longer sufficient to identify the 3 most important parameters to work as a close approximation to the truth. It is also insufficient to rely on past experience and intuition. We have moved into the non-linear domain with 10s or even 100s of variables to consider. Not only do the old way and methods not work, they are downright dangerous, and often with disastrous consequences. No military commander would plan a battle without attention to detail, comprehensive modeling, and gaming the situation to assess risk. But in government and business managers do just that, they still rely upon the knee jerk reaction, intuition, and past experiences!

1. Why Strategic Decision
Making Goes Wrong
in 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

2. * 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
* + + + + + + + + +
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3. C O M P A N I E S A R E
AWASH WITH DATA
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4. C O M P A N I E S A R E
AWASH WITH DATA
...thas is
stored..
...and may be
examined
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5. ...and
specific
features
extracted
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6. ...to be discussed
at length
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7. ...and identifiable
parameters
classified
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8. . . . t o c re a t e
reasonable
& sensible
options
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9. ...and by far the most
popular method
or technique
for choosing ?
I n t u i t i o n !
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10. ...This often seems to work well
in the short term, but then turns
into a long term failure - often
with dire consequences!
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11. And worse, the impact
then spreads across
the entire
company !
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12. C O M P A N I E S A R E
AWASH WITH DATA
How
come
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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 av e d a n d w e l l
understood place
It all got complex, dynamic
and non-linear !
Monday, 26 August 13

14. 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 ?
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15. An effective
model of the
company and
market is a
m i n i m u m
requirement
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16. F I N D I N G T H E
RIGHT DATA
IS VITAL
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17. Take into account the stochastic nature of
business and the rate of informational change
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18. Build a computer
model - conduct
Monte Carlo
simulations for
all scenarios
many many
times to
reduce the
variance &
the overall
risk to some
level of acceptability
σ
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19. ...thereby reducing
risk and chance
even further
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20. W A R G A M E
Every aspect and area of
doubt around the core
values identified by the
computer model.....
.test and check...
..test and check...
...test and check...
Monday, 26 August 13

21. 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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22. GO
Starting
Conditions
Output/
Change
Continuous
output/change
feedback to
m o d i f y t h e
initial/starting
conditions of
the model
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23. Complexity dictates that
we ‘navigate’ our way
through a rapidly changing
environment....
...continual mid
course corrections
are the new norm
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24. As of today this is the best the
military and business can do!
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25. The
future
will be
different
ca-global.biz
cochrane.org.uk
COCHRANE
a s s o c i a t e s
Our machine
dependence
will grow as
our intuition
increasingly
fails to account
for complexity...
Monday, 26 August 13