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Before making a strategic decision, it is important to understand how activities within the organisation create value for customers. One way to do this is to conduct a value chain analysis. The three steps for conducting a value chain analysis are:1. Separate the organisation’s operations into primary and support activities. Primary activities are those that physically create a product, as well as market the product, deliver the product to the customer and provide after-sales support. Support activities are those that facilitate the primary activities.2. Allocate cost to each activity. Activity cost information provides managers with valuable insight into the internal capabilities of an organisation.3. Identify the activities that are critical to customer’s satisfaction and market success.
Experts agree that in any complex human endeavor we need to harness bias; that is, rather than trying to tune out bias, we might encourage it and attempt to balance it with effective decision making. A tool to further this notion is the balance sheet, whereby a leader might ask his direct reports to “Tell me what is good about this particular opportunity, tell me what is bad about it, do not tell me your judgment yet; I don’t want to know.” This starts the evaluation process without having to justify and, thereby, frees opinions. Internal leaders are allowed to give their best insights and fully consider the ideas of others. The balance sheet process “mitigates a lot of the friction that typically arises when people marshal the facts that support their case, while ignoring those that don’t.”
Another technique is creating a culture where failure is not a wrong answer. This process starts with an acknowledgement that Plan A “probably is based upon flawed assumptions and that certain leap-of-faith questions are fundamental to arriving at a better answer.” Even in moderate-sized organizations, there is often a sense that Plan A is going to succeed because it’s well analyzed, it’s vetted, it’s crisp, it looks great on the spreadsheet and it’s the one that everybody has to execute. The reality is that it may not work, and having a corporate culture that recognizes that Plan B might be pretty good gets people off the blame game and rewards those who are able to make a mid-course correction.
Yet another technique might be listening to the little voice. This is very difficult for leaders, because no matter how important these individuals are, they may find it difficult to grapple with diverse opinions, especially among their direct reports. Leaders who can change their opinion based on the strength of the arguments around the table are going to be more successful on average than those who cannot.
Facing tough people choices is another important skill set for improving strategic decision making. Often, leaders tend to compromise. “It’s very easy to close your eyes and say warm bodies are better then no bodies,” but it turns out that it’s best to be unyielding regarding the hiring decision. One should always look for good listeners who are capable of adapting. This is the single most important leadership trait outside of pure competence in one’s field.
Another important tool is knowing when to let go, which could mean shutting down a particular drug development program or outsourcing part of another. These are often the hardest decisions to make and the ones that don’t get nearly enough focus. The most difficult decisions are the legacy ones — “the historical investments, the things that are just easier to chip away at rather than make a tough decision.” It’s best to have no preconceived commitment to a legacy business.
Lastly, a leader’s ability to strike the right balance between decisiveness and timeliness is critical. The best management brains believe that timeliness trumps perfection; to translate, sometimes “the most damaging decisions are the missed opportunities, the decisions that didn’t get made in time. If you are creating a category of bad decisions you’ve made, you need to include all the decisions you didn’t get to make because you missed the window of time that existed to take advantage of an opportunity.” This is a skill that can be developed over time.
Cultivating internal critics, facing tough people choices, and knowing when to let go are important components of the toolkit that comprises strategic decision making. Healthcare is no different than any other complex business. We can all improve our strategic decision making as we seek to utilize resources parsimoniously and derive the greatest benefit from the people power that our organizations represent.
