His approach to categorizing decisions can be quite useful as a first step in the process. He recommends that when faced with a decision it is important to frame the decision using two dimensions:
- Control (your ability to influence the choices, terms of the decision and its eventual outcomes) and
- Performance (the degree to which your company’s performance needs to be absolute or relative to others/competition).
These two dimensions form axes, further defining decisions into 4 types:
- First Field – Making Judgments and Choices (Low control, Performance is absolute),
- Second Field – Influencing Outcomes (Control is higher, performance is absolute),
- Third Field – Placing Competitive Bets (Control is low, performance is relative, and
- Fourth Field – Managing for Strategic Success (control is high, performance is relative), which Rosenzweig feels these are the essence of strategic management. In regards to Fourth Field decisions, he states that they require “a degree of commitment and determination that is by some definitions excessive” to be in a “position to win”.
After framing the type of decision, he explains that you should then “develop the versatility to change approaches accordingly.” This is important, because your ability as a leader needs to be dynamic, like many of the strategic situations you face will be. He also alludes to concepts and constructs from other popular HBR articles about decision-making, ironically none of them particularly new in their thinking if you have ever read “Hidden Traps of Decision-Making” – a classic that precedes most of these other articles.
Furthermore, he explains that for these types of decisions there is a level of competitiveness that requires good tactical thinking, the ability to shape outcomes by inspiring and leading others, and the ability to read your opponents in order to gain advantage. This is important, because you really need to think beyond yourself in order to move forward and be confident in making winning decisions in strategically competitive situations.
He concludes by stating that complex decisions require executives to do more than “avoid common errors”, but have a “seemingly contradictory blend” of analytical skill and the “ability to take bold action.”
Here are some of our additional comments:
When faced with making strategic decisions, separate simple decisions from the more complex and strategic ones, spending sufficient time and depth on “Fourth Field”. Also remember from ASM in October that inthe MIT/Sloan Management Review article in Fall, 2010, How Data Analytics Drive Value, one of the key factors that distinguishes top performing companies from lower performing ones is “rapid decision making”.
- The use of data analytics should speed up, not slow down, the strategic analysis process.
- Start with an “environmental scan” as a great way to quickly be able to identify key market and business drivers and to focus on the biggest, most strategic opportunities first .
This author identifies competition and competition strategy/action as something that you cannot control. That may be true technically, but in healthcare, one can anticipate a lot about what the competition can and cannot do. One mistake I often see (what the author refers to as “common bias”) is what is referred to in decision-making as “anchoring”. In this case, wrong anchoring. For example, perhaps you have heard the phrase, “You cannot promote off label.” What a great insight! Most would react to learning about potential off-label use of one’s products by
Two of my favorite quotes from this article:
“In tough competitive situations where positive thinking can influence outcomes, only those who are willing to go beyond what seems reasonable will succeed;
“When it comes to the most complex decisions of all, those that drive the fortunes of organizations, executives need more than the ability to avoid common errors. They require a seemingly contradictory blend: A talent for clear-eyed analysis and the ability to take bold action”.
To me, these two statements resonate with fundamental competitive strategy: 1) Decide what should be your best practice(s), based upon what you can do better and/or different from competition and is extremely important to your customer driven value chain, continuously innovating these best practices in partnership with your customers, and 2) Be courageous. No one ever become or stayed market leader without being willing to challenge the status quo, to try new things, and create new rules for the market to have to play by and follow (i.e. to shape the market).
