, ,

What Makes Strategic Decisions Different – from Rosenzweig’s article in HBR

How to Improve Decision Making

– The Idea

Decisions fall into 4 categories, with the “right” decision making approach depending on 2 key factors – a) How much control the decision maker has over the terms and outcomes of the decision b) How success will be judged, i.e., will it be on relative or absolute terms.

In order to make better strategic decisions individuals need to identify what type of decision they are facing and develop the versatility to change their approach accordingly. Sometimes it is best practice to shift our mindset between both fields. This approach is know as “deliberate practice” and can be a crucial element of high performance.

Four Types of Decisions

  • Routine choices and judgments: Here the goal is to do well but not necessarily to finish first in a competition. E.g., personal investment decisions – you cannot improve performance after you buy shares. Here well-known lessons about avoiding common biases e.g., unrealistic optimism, gamblers fallacy can be applied. Control = low, and Performance = Absolute
  • Influencing Outcomes:Yet with many of our others decisions we can use our energy and our talents to make things happen.  e.g., how long we need to complete a project.  With these types of decisions, optimism and positive thinking can be very important for shaping outcomes.  Control = high, and Performance = Absolute
  • Placing Competitive Bets: This type of decision introduces a third dimension (competition). Success now depends on how you perform relative to others. The best decisions need to anticipate the moves of rivals. Princeton professor Dixit and Yale professor Nalebuff define the essence of strategic thinking as “the art of outdoing an adversary knowing that the adversary is trying to do the same as you” Control = low, and Performance = Relative
  • Fourth Field Decisions- This category involves decisions that are often the most consequential decisions that executive face, (e.g., launch a new product, and acquire a new company). In this field executive can influence the outcomes of their decisions and their choices are only successful if they outperform their competition. This is the essence of strategic management.


When facing these decisions executives need both – careful, dispassionate analysis and a willingness to push the boundaries.  When we can influence outcomes or outperform someone it is essential to have high levels of self-belief. Only those with high levels of commitment and determination will be in a position to win.