Here is an excerpt from an article written by Mark Chussil for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.•
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When it comes to setting strategy, which is more effective: one great thinker or a wise crowd?
To find out, I turned to my ongoing Top Pricer Tournament, in which 884 people — managers, consultants, professors, students — make pricing strategy decisions for a generic business competing against other generic businesses. The decision options available to each person work out to 14,739 possible strategies in each of three generic industries.
About half of the 884 strategies entered in each industry were chosen by two or more people; some were picked by two dozen. We’ll call these the “popular strategies.” The other half were chosen by only one person. They are the “loner strategies.”
If the wisdom of crowds applies to strategic thinking, popular strategies should outperform the loners. If it doesn’t, the loners should outperform the crowd.
I ran a billion simulations and saw that the crowds’ strategies worked pretty well. In general, the more people who chose a strategy, the better the strategy performed. (The largest crowds, though, rated about average.) The simulations also showed that loner strategies usually performed below the crowds’ popular strategies.
But the strategies that performed the very best were also loners.
If you want to outperform the crowd, you’ve got to do something the crowd isn’t doing. That means learning two key skills:
o To do something the crowd isn’t doing, you must think something the crowd isn’t thinking. You can generate ideas by broadening your decision frame.
o No one proposes a strategy thinking it will fail, so you must be able to tell the difference between good and bad loner strategies. You can evaluate those ideas by embracing critical thinking.
I conducted a business war game for a company in the food industry. We had teams for their business, competitors, customers, and government regulators. I asked each team to list key changes they might make over the next few years, and then I calculated the number of possible scenarios. In 15 minutes they’d identified 3.9 million scenarios. That quashed the idea that they could plan for a definitive future.
We narrow our decision-making frame when we believe we know what the future will look like. We implicitly assert that everything is locked in except for what we will do, and so we ask this simple, efficient question: “What should we do?”
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Here is a direct link to the complete article.
Mark Chussil is the Founder and CEO of Advanced Competitive Strategies, Inc. He has conducted business war games, taught strategic thinking, and written strategy simulators for Fortune 500 companies around the world.