Cognitive biases allow for fast decisions, with the least mental effort. They can be useful when making immediate, tactical decisions, yet are almost invariably a hindrance when making strategic decisions. Why?
Forming a good strategy involves answering four key questions:
- Where are we now?
- Where do we need to be and why?
- How will we get there?
- How will we know when we have arrived?
Strategic leaders set the direction by changing the organisation’s internal culture and systems, so that they match the external environment – now and in the future. Strategic leaders then make sense of what is emerging and steer the response.
Cognitive biases disrupt strategic leadership because:
- they cloud judgment of both the external environment and the internal culture and systems of the organisation.
- when making sense of what is emerging, they filter perceptions, so that some facts can be downplayed or even ignored, while assumptions may be mistaken for facts.
- when responding to what is emerging, they restrict the range of options considered.
This is where the downsides of cognitive biases become apparent. Experts who go with their gut feel to solve tactical problems quickly and well are often poor predictors of the future, even in their field of expertise, as Philip Tetlock shows in his book Superforecasting.
As the Pathways Model shows, the conscious biases which experts use to solve problems reinforce cognitive biases – and these restrict a realistic appraisal of future probabilities. The complex nature of strategic thinking makes an awareness of the cognitive biases involved, and a sound grasp of the techniques which can be used to mitigate them, essential to making good strategic decisions.