B301B: MAKING SENSE OF STRATEGY Block 3: UNITS Unit 6: section 6.2 pages ( ) Note: These slides will cover most of the main ideas discussed in the above mentioned sections, but it is the student’s responsibility to do the following activities (6.11, 6.12).

6.2: A psychological approach to decision Making  In this section you are going to consider how our psychological make- up affects decision making, to what extent we should trust our instincts, and what traps may exist for the unwary as they make strategic decisions. Intuition:  Gut decisions are made in moments of crisis when there is no time to weigh arguments and calculate the probability of every outcome.  They are made in situations where there is no precedent and consequently little evidence.  Sometimes they are made in defiance of the evidence, as when Howard Schultz [founder of Starbucks] bucked conventional wisdom about Americans’ thirst for a $3 cup of coffee.  The act of strategic decision making is both science and art; learning to trust a feeling, a hunch, an intuition, is an intrinsic part of decision making.

The cognitive approach:  With the exception of the sense-making model, so far our approach to information has generally treated it as neutral – it offers details from which we can select alternatives.  However, there is a significant body of research demonstrating that the way we interact, interpret and receive information is somewhat more complex than meets the eye.  It seems, therefore, that the way in which choices and information are presented alters the decision made.  Indeed, how we process information and make decisions depends upon the interaction between how the information presented frames the problem and how we process it in our minds. (activity 6.11)

Emotions and decision making:  There is, however, another approach that suggests that our emotional state at the time of a decision, along with our general emotional demeanour, affects the content of decisions.  We may explain poor decisions by reference to emotional states; we may say that we were tired under stress, angry.  Recent research has suggested that not only that emotions are part of the decision-making process but also their impact is not always negative.