Beruflich Dokumente
Kultur Dokumente
Bhattacharya
15 February 2015
INDIAN INSTITUTE OF MANAGEMENT BANGALORE
Course: Strategic Thinking and Decision Making
Elective Course (Credit 3, 20 sessions), Academic Year: 2015-16
1. Background
Strategy is an imperative. If you wish to achieve an objective in business, the playing field, or life, you need
strategy. In business it is critical for growth, health and prosperity of the firm. Strategy has been defined as a
series of decisions to enable and sustain competitive advantage of the firm. That is why managers must learn to
think strategically.
Strategy is a product of mental models. Formulation of effective strategies requires abstract thinking as
opposed to thinking of specific actions. Socialisation process in modern times, the emphasis on analysis in
education and the pre-occupation with action in the corporate world has weakened our capacity for abstract
thinking and the willingness to reflect. This weakness makes success difficult and chancy.
Simply put, strategic thinking is goal directed thinking. We make judgements, weigh risks and evaluate costs
and benefits en route to making decisions and bearing their consequences. Strategic thinking is the process by
which we figure out the best way to achieve a given end in the context of our desires, values, risks, resources
and the environment. It is the result of both rational and non-rational intuitive, and emotional processes of
the mind.
Intuition is a powerful involuntary and spontaneous thinking process. Unfortunately it comes with inherent
biases that creep in unbeknown to us and affects judgements and decisions. Intuition helps us make life and
death decisions in the blink of an eye but it also sometimes betrays our larger self-interest.
There is much better understanding of intuitive processes of the mind today. It is possible now to apply
research findings and conceptual frameworks to achieve working knowledge of how the strategic mind
functions. Formal study can sharpen awareness and help us train our thinking to become more effective as
individuals and organisations.
This course has been designed to create an awareness of the way we think and introduce you to
methodologies by which you can train yourself to make good judgements and think like a seasoned strategist. It
will also help you explore processes, behavioural and cultural aspects of strategic thinking in organisations.
This outline provides you (students) a birds eye-view of the course, what you may gain from it, and the nature
and extent of effort that will be expected of you.
2. Objectives
This course aims to improve your awareness and knowledge of strategic thinking and decision-making by
helping you.
2.1. Achieve an appreciation of how we think. Become aware of the powers of the rational as well as the
non-rational processes of the mind.
2.2. Acquire working knowledge of principles, theoretical models and concepts that can make rational
thinking rigorous and effective.
2.3. Become aware of how we think intuitively and how emotions and biases help and hinder decisionmaking.
2.4. Learn to apply the principles to everyday life and business and make good decisions.
Villa # 300, Palm Meadows 2, Airport Whitefield Road, Bangalore 560 066, India.
Tel: +91-80-2539 2300; +91-98450 58034 (M); e-mail: vn@vnbhattacharya.com
Website: http://www.vnbhattacharya.com
V.N. Bhattacharya
What is strategic thinking? How creativity, innovation and strategic thinking are different.
Abstraction as a strategic thinking process.
Goal directed behaviour, defining the problem, search for abstract solutions as different from
reaching out for solutions. Strategy as different from action.
The process of strategic thinking: analysis, abstract thinking, grouping of ideas and formulating
solutions.
Introduction to game theory. Strategic Form, Extensive Form (Sequential), and combination games,
their solutions and applications. Games of conflict: zero-sum and non-zero-sum games and their
solutions. Repeated Prisoners' Dilemma, Nash Equilibrium and lessons for strategists.
Strategic moves: warning, threats, assurances and promises. Brinkmanship and other moves
aimed at creating strategic advantage.
Fostering co-operation. Overcoming the limitations of conflict games and how co-operation can be
engineered for better outcomes for players. Application in negotiation, organisational policy,
taxation, law and order, etc.
Concept of Added Value and its relationships with strategic advantage (power). Application in
negotiations and stakeholder management. Value Net and other strategies using added value,
their applications in business in everyday life.
3.2. Module 2: The non-rational mind intuition and emotion in decision-making. In this module we will
study intuitive thinking from the heuristics and biases tradition as well as decision making in naturalistic
settings. The approach will be to examine strengths and weaknesses of the non-rational mind and
explore ways in which individuals and organisations can make better choices.
Bounded rationality, heuristic thinking as opposed to traditional view that humans as economic
agents act rationally in self-interest. Intuition, how it helps and hinders decision-making.
Framing effects on decisions. Why and when people make risky or conservative choices. How to
avoid undue risk taking and risk averse behaviour.
Heuristics and cognitive bias. Important heuristics, associated biases and how they affect
perception of risk, judgement, and decisions. De-biasing strategies for individuals and groups, how
they work and where they dont.
Principal agent problems, morality, ethics and values in decision-making. Corruption in everyday
life and lessons on organisational policy.
Naturalistic Decision Making, Anticipatory thinking. Power of the intuitive mind in making split
second decisions. The role of expertise through experience and insight. Detecting weak signals,
anticipating future events and preparing for them. Applications.
The teaching method will be a mix of exercises, case discussions and lectures. You will greatly benefit by
reading extensively beyond the requirement of the course. Essential and supplementary reading materials have
been recommended in the Schedule of Lectures. Some are available on the Internet and can be freely
downloaded for individual consumption. Please observe appropriate intellectual property and copyright laws
while downloading them. Several Internet resources have been recommended in section titled Consolidated List
of Reading Material. Please read selectively as appropriate.
You will do well to prepare yourself for each lecture by reading the recommended material in advance. We will
then be able to devote more time during the class hours to discuss business problems and cases.
To opt for this course, it is mandatory to have completed the core course on business/competitive strategy.
V.N. Bhattacharya
4. Schedule of Lectures
Topics are arranged by lectures. Reading in this section means essential reading. Supplementary reading
material is prescribed where applicable. The prescribed textbook for the first module is Games of Strategy by
Avinash Dixit and Susan Skeath, and Thinking Fast and Slow by Daniel Kahneman for the second.
Session 1:
Introduction to the course. Decision dilemmas senior managers face. Learning how to decide
as different for what to decide. Strategic thinking as goal directed thinking and different from
creative and innovative thinking. Two systems of thinking: analytical and intuitive as part of the
strategic thinking process.
Case discussion: DHARNA by Prof. V.N. Bhattacharya (see section titled Cases below).
Framework based thinking: role of strategy models in strategic thinking.
Case discussion: Blue Skies 2 by Prof. V.N. Bhattacharya (see section titled Cases below).
Reading.
Session 2:
Text Book: Games of Strategy by Avinash Dixit and Susan Skeath, chapters 1 & 2.
Supplementary reading.
See Internet resources recommended in chapter titled Consolidated List of Reading Material.
Select and read resources relevant to lecture topics.
Session 3:
Simultaneous games. Zero-sum and non zero-sum games. Prisoners Dilemma, dominant,
dominated strategies and equilibrium. Solving simultaneous games by dominance method, best
response, and cell-by-cell inspection.
Case discussion: Practising Socialism in Class by Prof. V.N. Bhattacharya (see section titled
Cases).
Dominant strategy equilibrium, Nash Equilibrium and their business applications. Games with
more than one equilibrium. Games of co-ordination and the need for conventions or rules. Use
in formulation of policies for interaction within and outside the corporation.
Reading.
Textbook, chapter 4.
Supplementary reading.
Session 4:
Business game: Between a Rock and a Hard Place by Prof. V.N. Bhattacharya (see section
titled Cases)
Zero sum games, such as in wars and sports. Mixed strategy and its application in business.
Extensive Form Games, roll back equilibrium and negotiations. Bargaining games and the
impact of information, rules, assumptions, etc.
V.N. Bhattacharya
Reading.
Session 5:
Textbook, chapter 5.
Resolving Prisoners Dilemma, Prisoners Dilemma Tournament and lessons for fostering cooperation. Tit-for-Tat strategy: philosophy, applications, strengths and weaknesses. Basic cooperative and bilateral monopoly games.
Discussion: Prisoners Dilemma in business situations and how to resolve them.
Reading.
The Evolution of Co-operation, Robert Axelrod. Basic Books 1984, chapters 2, 6 & 7.
Supplementary reading:
The Evolution of Co-operation, Chapter 4.
Session 6:
Strategic moves: use of unconditional and conditional moves. Properties of promises, threats,
assurances and warnings. Brinkmanship in politics, war, negotiation and business. Reputation
and commitments.
Case Discussion: The Cuban Missile Crisis (see section titled Cases from Internet).
Reading.
Session 7:
Concept of Added Value, subjective rationality and allocentrism. Applications in bargaining and
creating strategic advantage. Use in competitive strategy and assessing relative power of
players in negotiations.
Reading.
Session 8:
The Right Game: Use Game Theory to Shape Strategy by Adam M. Brandenburger and
Barry J. Nalebluff, HBR July-August 1995.
Case Discussion: Hard Wired by Prof. V.N. Bhattacharya (see section titled Cases).
Value Net, the co-operative model of strategy. Use of complementors to create superior value
for customers and the firm.
Reading.
The Right Game: Use Game Theory to Shape Strategy by Adam M. Brandenburger and
Barry J. Nalebluff, HBR July-August 1995.
TEST
Session 9:
Case Discussion: Massive Inc. (A), HBR case (see section titled Cases).
Use of frameworks, strategy models in strategic decision-making. How they help. Why we are
not always able to discern points of strategic leverage and fail to craft effective strategies.
Session 10:
Perception and cognition. Intuition and reasoning, two systems of thinking, their characteristic
properties. Framing effects on decisions.
Reading.
How senior managers think, Daniel J. Isenberg, HBR Nov/Dec84, pp. 81-90.
Rational Choice and the Framing of Decisions by Amos Tversky and Daniel Kahneman ,
The Journal of Business, Vol. 59, No. 4, Part 2: The Behavioural Foundations of Economic
Theory. (Oct., 1986), pages S251S278.
V.N. Bhattacharya
Supplementary reading.
Session 11:
The empirical case for two systems of reasoning, Sloman, Steven A.; Psychological
Bulletin, Vol 119(1), Jan, 1996. Pages 3-22.
Rational Choice and the Framing of Decisions by Amos Tversky and Daniel Kahneman ,
The Journal of Business, Vol. 59, No. 4, Part 2: The Behavioural Foundations of Economic
Theory. (Oct., 1986), pages S251S278.
Supplementary reading.
Session 12:
Case discussion: The Space Shuttle Columbia Failure: insights from the accident to the
Space Shuttle Columbia. IIMB Case by Prof. S. Chandarshekar. (See section titled Cases).
Session 13:
The Affect Heuristic in Judgments of Risks and Benefits By Melissa Finucane, Ali
Alhakami, Paul Slovic, and Stephen Johnson, Journal of Behavioral Decision Making, 13,
pp 1-17.
The Somatic Marker Hypothesis and The Possible Functions of The Prefrontal Cortex By
Antonio R. Damasio. Phil. Trans. R. Soc. Lond. B (1996) 351, 1413-1420. Copyright 1996
The Royal Society.
http://www.iee.unibe.ch/unibe/philnat/biology/zoologie/content/e7493/e7854/e8920/e8926/
DamasioPhilTransRSocB96.pdf
Supplementary reading.
V.N. Bhattacharya
Session 14:
Analogies and assumptions. How they shape behaviour; advantages and pitfalls.
Case discussion: Customer is King by Prof. V.N. Bhattacharya (see section titled Cases).
Reading:
How strategists really think: tapping the power of analogy by Giovanni Gavetti & Jan W.
Rivkin. Harvard Business Review, April 2005.
Supplementary reading: When to trust your gut. By Alden M. Hayashi, HBR Feb 01.
Mid-term Examination
Session 15:
The principalagent problem. Moral hazard, ethics and values in decision-making, how they
guide strategy formulation and determine payoffs. Applications in negotiation, conflict resolution
and other problems.
Reading.
Dishonesty in Everyday Life and Its Policy Implications. Nina Mazar and Dan Ariely.
Journal of Public Policy and Marketing, Vol. 25 (1) Spring 2006, 1000.
Supplementary reading.
Session 16:
Why Can't We All Just Get Along? The Uncertain Biological Basis of Morality By Robert
Wright, The Atlantic, Oct 23, 2013. http://www.theatlantic.com/magazine/print/2013/11/whywe-fightand-can-we-stop/309525/
Case discussion 1: Rajat Gupta, the fall of an icon. This is not a formally written case study.
We will discuss the events that unfolded leading to Rajat Guptas conviction in the Galleon
insider trading case. Please read from other Internet resources in order to gain broader
perspective on the case. (See section 6.2: Cases from Internet).
http://en.wikipedia.org/wiki/Rajat_Gupta
http://www.nytimes.com/2013/05/19/magazine/rajat-guptas-lust-forzeros.html?pagewanted=all&_r=0
A dirty business http://www.newyorker.com/reporting/2011/06/27/110627fa_fact_packer
Supplementary reading.
Does money make you mean, TED Talk by Paul Piff
http://www.ted.com/talks/paul_piff_does_money_make_you_mean
Case discussion 2: The New Years Eve Crisis by William Naumes and Margaret Naumes,
University of New Hampshire, North American Case Research Association Inc. (See section
titled Cases).
Session 17:
Case discussion: Mt. Everest 1996, HBR Case (see section titled Cases).
Session 18:
Naturalistic decision-making. Power of intuitive thinking. Strategies for better individual and
organisational decision-making.
Reading:
Developing Expertise in Decision Making, Gary Klein, Thinking and Reasoning, 1997, 3(4),
337-352.
V.N. Bhattacharya
Conditions for intuitive expertise: a failure to disagree By Daniel Kahneman & Gary Klein,
American Psychologist, September 2009.
http://www.chrissnijders.com/eth2012/CaseFiles2012/Kahneman,%20Klein%20%202009%20%20Conditions%20for%20intuitive%20expertise%20a%20failure%20to%20disagree.pdf
Supplementary reading:
Textbook, chapter 22.
Session 19:
Session 20:
The Big Idea: Before You Make That Big Decision by Daniel Kahneman, Dan Lovallo,
and Olivier Sibony, HBR, June 2011.
Supplementary reading:
The Happiness Advantage by Shawn Achor
http://www.youtube.com/watch?v=GXy__kBVq1M&feature=em-share_video_user
Reading material and case studies for which Internet links have been provided are not included in the
course pack. Please download and save them.
5. Assessment
Test
Mid-term examination
Final Examination
Total
20%
30%
50%
100%
Tests and examinations will be on pre-appointed dates and shall be open book and open laptop but no Internet.
If you miss any test or examination, your marks will be extrapolated from your score of tests and examinations
you will have taken. Re-test or compensatory tests will not be possible.
All examinations will be aimed at assessing your ability to learn and apply the concepts. Questions will be
mostly on business and real life applications. You will do well to write succinct and precise answers in a lucid
manner. Quality of explanations and use of appropriate concepts will fetch higher marks. If you dont know the
answer or arent sure and try to apply a number of concepts in the hope one of them will be correct, you may
lose marks.
V.N. Bhattacharya
Session 3:
Session 4:
Business game: Between a Rock and a Hard Place by Prof. V.N. Bhattacharya
Session 8:
Session 9:
Session 11:
Case: Space Shuttle Columbia Failure: Insights from the Accident to the Space Shuttle
Columbia. IIMB Case by Prof. S. Chandarshekar.
Session 14:
Session 16:
Case: The New Years Eve Crisis by William Naumes and Margaret Naumes,
University of New Hampshire (North American Case Research Association Inc.)
Session 17:
Session 19:
http://library.thinkquest.org/11046/index.html
http://en.wikipedia.org/wiki/Cuban_Missile_Crisis
http://www.gwu.edu/~nsarchiv/nsa/cuba_mis_cri/annals.htm
Interesting documentary "The Cuban Missile Crisis: on the Brink of World's End"
http://www.youtube.com/watch?v=4A0fFRIEgQM
Session 16:
This is not a formally written case study. We will discuss the events that unfolded leading to Rajat
Guptas conviction in the Galleon insider trading case. Please read from other Internet resources in
order to gain broader perspective on the case.
http://en.wikipedia.org/wiki/Rajat_Gupta
http://www.nytimes.com/2013/05/19/magazine/rajat-guptas-lust-forzeros.html?pagewanted=all&_r=0
A dirty business http://www.newyorker.com/reporting/2011/06/27/110627fa_fact_packer
V.N. Bhattacharya
Prescribed textbooks for the course are Games of Strategy by Avinash Dixit and Susan Skeath, and Thinking
Fast and Slow by Daniel Kahneman. Additionally, the following books are now placed in the reference section
of the Library for easy access and sharing.
Heuristics and Biases: The Psychology of Intuitive Judgment, Ed. Thomas Gilovich, Dale Griffin, Daniel
Kahneman.
Other books may be added in course of the next few weeks. You will be informed immediately when they
become available.
All referred reading material from lecture 10 onwards are available on HBR, EBSCO, or Heuristics and Biases.
A rare article that may not be available on EBSCO can be accessed from the book Heuristics and Biases.
Please obtain all reading material from the Internet and the Library well ahead of the lectures in which
they will be discussed.
Session
In course pack
Case studies:
DHARNA
Blue Skies 2.
http://www.nobelprize.org/nobel_prizes/economi
cs/laureates/2002/kahnemann-lecture.pdf
Two systems of reasoning by Steven A. Sloman.
http://www.cog.brown.edu/courses/cg2000/Pape
rs/CG1952systemschapter.pdf.
2
Business game:
Between a Rock and a Hard Place. To be
distributed at the end of Lecture 2.
V.N. Bhattacharya
10
Supplementary reading:
The empirical case for two systems of
reasoning. Sloman, Steven A.; Psychological
Bulletin, Vol 119(1), Jan, 1996. pp. 3-22.
Paradox of choice by Barry
Schawrtz...http://www.youtube.com/watch?v=VO
6XEQIsCoM
10
V.N. Bhattacharya
11
12
13
Supplementary reading:
http://www.iee.unibe.ch/unibe/philnat/biology/zo
ologie/content/e7493/e7854/e8920/e8926/Dama
sioPhilTransRSocB96.pdf
Textbook, Ch 13.
Being Emotional During Decision Making-Good or Bad? An Empirical Investigation.
Myeong-Gu Seo & Barrett, Lisa Feldman.
Source: Academy of Management Journal;
Aug 2007, Vol. 50 Issue 4, p923-940.
14
Supplementary reading:
Iowa Gambling Task of Antonio Damasio.
http://en.wikipedia.org/wiki/Iowa_gambling_task
15
11
V.N. Bhattacharya
https://www.youtube.com/watch?v=4b7YFtiE5E
A
Supplementary reading:
Why Can't We All Just Get Along? The
Uncertain Biological Basis of Morality By Robert
Wright, The Atlantic, Oct 23, 2013.
http://www.theatlantic.com/magazine/print/2013/
11/why-we-fightand-can-we-stop/309525/
16
Case 2:
http://en.wikipedia.org/wiki/Rajat_Gupta
http://www.nytimes.com/2013/05/19/magazine/r
ajat-guptas-lust-forzeros.html?pagewanted=all&_r=0
A dirty business
http://www.newyorker.com/reporting/2011/06/27/
110627fa_fact_packer
Supplementary reading:
Does money make you mean, TED Talk
http://www.ted.com/talks/paul_piff_does_money
_make_you_mean
17
18
Supplementary reading:
Textbook, Ch. 22.
20
Supplementary reading:
The Happiness Advantage by Shawn Achor
http://www.youtube.com/watch?v=GXy__kBVq1
M&feature=em-share_video_user
Much of the reading material is based on academic research and papers; some of them will require effortful
application of mind to grasp. I recommend you access the reading material as soon as possible from the
Internet and Library and diligently prepare ahead of each lecture. Adequate preparation will greatly help you to
profit from this course.
V.N. Bhattacharya
Business & Corporate Strategy
Instructors profile appears below.
12
V.N. Bhattacharya
V.N. BHATTACHARYA
Mr Bhattacharya is a highly regarded business and corporate strategy
consultant. He advises and works with senior management teams to help
make firms competitive, grow rapidly and profitably in a sustained
manner. His work cuts across industry sectors ranging from electronics to
engineering, paints to pharmaceuticals, software to shipping, and
telecom to technology.
He is deeply involved in executive education. He conducts custom
management development programmes for senior managers.
He teaches Strategic Thinking and Decision Making in Indian Institutes of
Management (IIMs). He serves on the Editorial Advisory Board of
American Journal of Business. He writes regularly on management and is
a sought after speaker.
CAREER. Mr Bhattacharya is a seasoned business leader with a rare breadth of perspective and worldview. He has forty years experience in diverse industries in India and abroad. He has turned around
loss-making businesses, revitalised old ones and created new streams of revenue. He blends rich
experience with strong focus on execution.
During his corporate career he worked in large and medium sized Indian and multi-national
corporations. His breadth of perspective stems from experience in a variety of industries consumer
goods, automobiles, paints and chemicals, engineering, capital equipment, packaging, hospitality,
and telecom. He served as the Chief Executive of BPL Telecom Ltd. a telecom engineering,
manufacturing and networking company - before setting up his consulting practice.
CONSULTING. His consulting work is strongly anchored in research based management theory and
settled thinking. He involves himself deeply with clients to help them create and deliver superior
customer value. He guides managers to develop insight, broaden perspective and bring to bear
superior knowledge to address critical business issues. He often assists clients senior management
teams in strategy execution.
EXPERTISE. Formulating and guiding implementation of strategies for sustainable and profitable growth
is his special forte. He has advised firms on business portfolio selection, managing multi-business
corporations, and designed structures for complex organisations.
He is deeply interested in decision-making of senior managers and leadership teams. He guides them
on structural and process methodologies that foster curiosity, collaboration, and good decisions. He
has studied the subject extensively. It is one of his research interests.
He is one of the few practitioners of Game Theory. He uses its principles in his consulting work, in
establishing collaborative practices in firms, and to encourage anticipatory (strategic) thinking
among middle and senior managers.
EDUCATION. He earned a Bachelor of Technology in Chemical Engineering from Indian Institute of
Technology (IIT) Kanpur and MBA in Marketing and Finance from Indian Institute of Management (IIM)
Calcutta. He blends rich experience with strong academic credentials.
INTERESTS. VN, as he is better known, enjoys English fiction, science and astrophysics, behavioural
economics, and cognitive psychology. He is an avid golfer and played tennis. He loves mountains. For
a number of years he did high altitude trekking in the Himalayas. He lives in Bangalore, India with his
wife and their Bull Mastiff dog. There is more information on him on his website
www.vnbhattacharya.com. He can be reached at vn@vnbhattacharya.com.
13