When I first became interested in behavioural economics, I looked for a framework that classified all the cognitive biases – see “Searching for a framework ("grand unifying theory") to make sense of the cognitive biases”.
What I ideally wanted was something like a “periodic table of the biases”. There was no such framework. So, I tried to build my own. I called it the “six tendencies framework”. I’ll describe it shortly, but, more recently, I was exposed to the Strategic Decision Group’s (SDG) [1] “seven deadly sins of strategy” [2], [3]. In many ways it is similar to my original framework, but (a) neither are really frameworks 😊, and (b) SDG’s is far better, primarily because it offers a neat, practical set of counteractions.
Business executives make bad strategic decisions when they fall victim to one or more of these “six tendencies” or “seven deadly sins”. When I tested my six tendencies framework with some members of the LinkedIn Behavioral Economics Group I received feedback that my language might be insulting. I feel some reprieve in that SDG’s seven deadly sins framework uses similar language.
Here is my original six tendencies framework. It was intended as a checklist that the executive could ask when making a strategic decision. Am I being <fill in each tendency in turn>? If the answer to one or more of the tendencies is yes, then take that as a warning that your decision making quality is likely being impaired.
Delusional: tendency to create delusional stories / interpretations of the world
Innumerate: tendency to incorrectly compute the probability of events
Defensive: tendency to prefer things to remain as they are
Spineless: tendency to be overly influenced by others in our decisions
Egotistical: tendency to be ego-centric in our view of the world
Emotional: tendency to attach too much significance to that which is close
SDG has done a fantastic job in identifying what they have termed the “seven deadly sins of strategy”. They define a “deadly sin” as a failure mode that can destroy the value that could be derived from an effective strategy. There were many more candidates for the seven deadly sins, but these were the ones voted most deadly.
Delusion: crafting strategy without grounding in reality.
Pride: overconfidence, arrogant culture and strong disdain for competitors.
Groupthink: desire for conformity results in irrational or dysfunctional decisions.
Indolence: inactivity and lack of follow-through
Incognizance: lacking knowledge or inability to internalize external changes
Disassociation: state of separation, disunion.
Wimpiness: bland alternatives, overly risk-averse behaviours.
What I really like about SDG’s “seven deadly sins of strategy” is that they offer practical counteractions to each of the sins. Safe to say that if you are not deliberately applying these counteractions you are at high risk of falling victim to one or more of the sins.
Delusion: Ground strategy in external, validated data. Insist on actionable alternatives supported by real resources and commitment to action. Observe Andy Grove’s dictum: “only the paranoid survive”.
Pride: Cultivate a culture of humility, openness to learning, and respect for competitors.
Groupthink: Seek and build diversity at the board level and executive team level. Recognize and avoid social biases. Foster a culture and process that encourages diverse opinions, dissent, and the use of a “devil’s advocate”.
Indolence: Insist on true commitment to action for strategic decisions.
Incognizance: Select people who are big thinkers. Foster a culture and process that refreshes strategic perspective. Stay in a learning frame.
Disassociation: Use conflict as fuel before the decision. Foster a culture of inclusion and a process that involve the right people in the right way at the right time.
Wimpiness: Create incentives and a culture that rewards thinking big. Insist on alternatives that go from mild to wild. Make it safe to gore sacred cows.
So, let’s not pussyfoot on terminology. We should be suitably open-minded to take on board that being delusional or being a wimp is a sin and we are all susceptible to being so, and hence we should take deliberate action to improve the quality of our decision making.
References:
[1] https://www.sdg.com/
[2] https://www.sdg.com/webinars/seven-deadly-sins-strategy-part/
[3] https://www.sdg.com/webinars/seven-deadly-sins-strategy-part-ii/