Strategic Biases, Frameworks and Organizational Design for Change

Cognitive and Strategic Biases

Biases appear in the strategic process because:

• They require higher levels of abstraction.
• They challenge the status quo of the organization.

Action biases

Action biases drive people to take action without the required levels of reflection.

Types:

• Excessive optimism
• Overconfidence
• Underestimating or neglecting competitors

How to address:

• Recognize uncertainty
• Encourage dissent and create a safe space for opinions
• Use tools that consider many potential outcomes (scenario modelling, SFA matrix)

Pattern recognition biases

Pattern recognition biases: team members see patterns where there are none or fail to recognize existing ones.

Types:

• Failing to see causal relationships
• Drawing wrong conclusions from observations
• Categorizing unproven facts

How to address:

• Change the angle of vision
• Test alternative hypotheses

Interest biases

Interest biases arise from incentives, including non-monetary incentives.

Types:

• Misaligned incentives
• Misaligned interpretation of corporate goals

How to address:

• Explicitly recognize diverging interests
• Reduce silo thinking

Stability biases

Stability biases: uncertainty creates inertia and resistance to change.

Types:

• Immobilism — negative reaction or block to change
• Barriers to any change

How to address:

• Create targets that are difficult to achieve without change
• Relocate resources according to the new strategy

Social biases

Social biases arise from a preference for harmony over conflict.

Types:

• Cognitive dissonance (what I say = what I do)
• Reluctance to share judgement

How to address:

• Foster diversity in teams and decision makers
• Create an environment of trust and depersonalize discussions

Methods to Evaluate Strategies

Decision trees enable managers to use available data to conceptualize and articulate possible paths of future events even when important pieces of information may still be missing.

Hierarchies allow comparison of different strategies in relation to a sorted list of key success factors.

Scenarios model possible action paths by projecting consequences and implications. They help avoid two common mistakes in strategic planning: overprediction and underprediction.

McKinsey 7S Framework

The McKinsey 7S framework:

1. Measures the ability of the company to change
2. Provides a deep dive into strengths and weaknesses of the organization
3. Identifies enablers and blockers to change
4. Is a systematic approach that allows identification of blind spots
5. Covers both hard and soft elements

Style (Culture)

Style, also known as culture, answers: "How do we do things here?" It results from shared values and is key to identifying what and how we have to change. It also refers to management style: how managers behave and what they focus on. Understanding style is critical for newcomers.

Skills

Skills refers to both individual and collective capabilities. The key question: Do we have the required skills to successfully make all the changes needed for the new strategy?

Staff

Staff refers to how we manage our people: what behaviours we promote and reward, how we develop internal talent, and the balance between internal promotion and external hiring.

Strategy

Strategy: What is the company trying to do to gain competitive advantage? Is the company adapting its current advantage to external changes, or building advantage in new spaces (expansion to new businesses or new markets)?

Structure

Structure: How do we organize our resources to get the best possible outcome? How flexible are we to adapt the organization to gain efficiency?

Systems

Systems: How work is done — the company's processes and how resources are organized to get work done.

Shared Values

Shared Values: What is the organization trying to achieve? What are the guiding principles that inspire our actions?

Goals Setting and Control

1. Mission

Mission: What we are today — our reason for being. Example: "To refresh the world and make a difference."

2. General Goals

General goals: What we want to achieve in the mid term. Examples: "Gain more consumers," "Gain market share, especially in new categories," "Strengthen stakeholder impact," "Equip the organisation to win."

3. Operational Goals

Operational goals: Specific results required to deliver the general goals. Examples:

• Effective campaigns
• Increase speed to market
• Ensure strong return on marketing spend
• Enter growing categories: coffee, juices, tea

SMART Goals

SMART goals:

• Specific: What and who
• Measurable: Easy to quantify
• Achievable: Ambitious but not impossible
• Relevant: Aligned to our general goals and mission
• Time-bound: Clear timeframe for achievement

Planning

Planning refers to determining the actions necessary to put the strategy into practice and the resources required for execution. It defines who, when, how, and by what means the strategy's actions should be executed.

Control

Control refers to activities necessary to verify that actions are taken according to plan and are delivering expected results. Control is a feedback process to ensure:

• The strategy is working as planned
• Targets are being achieved

Implementation control: during the rollout of a new strategy, when strategic changes are applied for the first time.

Strategic control: a permanent control to ensure the strategy remains valid. Control is not a lack of trust; it is necessary to manage uncertainty. Uncertainty arises during strategic change because the adequacy of the new strategy is expected but unknown. It also exists throughout the strategy's life as the environment can change. Control secures execution and achievement.

Governance and Project Roles

The governance of the project includes mechanisms of information and control:

Project Steering Committee

• Provides overall guidance and strategic direction
• Promotes project success
• Reviews the budget and project plans
• Reviews and approves project scope and scope changes
• Clears obstacles to progress
• Provides guidance to deal with risks and project constraints
• Represents senior management of the company

Project Sponsor

• Responsible for ensuring business objectives will be achieved
• Promotes and maintains focus on the desired project outcome from the end-user's point of view
• Ensures department commitment and communicates project progress to executive management
• Provides support to the Project Manager
• Enables project success by ensuring scope is managed effectively
• Chairs the Project Steering Committee (or assigns a delegate)
• Typically a member of senior management

Project Manager

• Responsible for the overall success of the project
• Monitors the project on an ongoing basis
• Leads the project team
• Communicates status and issues to the Project Steering Committee
• Ensures project milestones are on time and on budget
• Responsible for developing a detailed project plan in accordance with best practices
• Manages the budget, schedule, resources, etc.
• Responsible for project reporting (Project Status Report, Project Projections, Project Plan and Risk/Issues Log)
• Ensures all project documentation is sent to the SteerCo
• Responsible for effective project change management
• Ensure appropriate Test Plans are developed and executed (UAT, Stress Testing, Volume Testing) 46
• Manage transition to production

Project Team

• Subject matter experts from the different functions critical for project success
• Responsible for delivering all project tasks
• Dedicate a percentage of their time to project-related tasks
• Connect the project with the different functions
• During the project, have a dual reporting line: functional manager and project manager

Balanced Scorecard

The balanced scorecard is a business performance scorecard that combines financial and non-financial information. It helps build alignment toward the strategy and places vision and mission at the center.

Financial

How do we look to our shareholders? Metrics include:

• Revenue
• Expenses
• ROI
• NOPBT

Customers

How do we look to our customers? Metrics include:

• Customer retention
• Customer acquisition
• Revenue per customer
• Customer satisfaction

Processes

How can we be better? Focus on efficiency and quality:

• Quality control
• Lead time
• Inventory management
• New product development speed to market

Learning and Growth

How can we improve our teams? Focus on human capital and technology:

• Employee satisfaction
• Employee retention
• Team skills
• Talent attraction

Organizational Design Principles

Two key design principles to secure organization fit to strategy:

• Goal oriented: Focused on a specific purpose or goal like products, markets, geographies, or areas.
• Process oriented: Specialization by tasks or processes (R&D, commercial, marketing, manufacturing, etc.).

Contingency Factors

Contingency factors influence the most appropriate organizational design and strategic choices.

Types of Organization Structure

Hierarchical

Hierarchical: Top-down chain of command where superior levels decide and instruct. Decisions come from the higher level and flow downward. Example roles: shift manager, warehouse manager. Lower levels can suggest changes to higher levels but cannot decide by themselves.

Functional

Functional: Groups employees by specialty, skills, or role (e.g., Demand Planning Director, E‑Marketing Director). Applies to large organizations with multiple employees within each role. This is the most common model.

Divisional

Divisional: Groups employees by markets, products, or geographies. Examples:

• Markets: shaving, hair care, skin care, sun protection, make-up
• Products: SUVs, sedans, electric cars
• Geographies: North East, North West, Asia, Middle East & Africa, Western Europe, Eastern Europe

Flat

Flat: Few or no levels. Applies to organizations where profiles are similar (e.g., many tech companies) or to small organizations like startups operating in fast-moving industries.

Matrix

Matrix: A hybrid model used when, on top of a functional organization, the company manages projects regularly so staff work both for a function and for a project. People with similar skills are pooled for assignments, resulting in more than one manager to report to.

Description and specification of jobs: Every position needs to be described in detail, specifying expected deliverables, available resources, and the skills required to successfully do the job.