In strategy, it is
necessary to develop not only the action but also the feedback loop to ensure
effectiveness. Research by Newell, et. al (2013) using dice rolls indicates
that top-down strategies are quickly developed while the changing of poor
strategic choices through bottom-up discoveries in feedback is much slower. It
helps decision makers understand they may be quick to accept optimizing
strategies but slow in adjusting course once those strategies are enacted. An
unyielding strategy could potentially lead to poor results.
People often use probability
matching when determining a strategy which is based on the probability of
outcome. In essence, if people believe
they will have a payoff 70% of the time they are likely to choose that option
70% of the time even it could be chosen 100% of the time for more effectiveness.
Optimization requires the ability to understand the factors within the game.
When people are
provided feedback of outcomes it is believed they would optimize at a greater
level than those who did not receive feedback. It is also believed that
optimization for maximum results are ingrained into strategic decision making
with feedback being a key factor that fosters effective behavior. Likewise, it
is also logical that people should be open to feedback for improvement.
When participants were
provided with hints, they were much more likely to find an optimizing strategy.
They did this by focusing on the payoffs of each dice role. Even when
information is available without hints a large portion of people were unable to
come to an awareness of a proper strategy. Strategy is then seen as a function
of awareness of information within the environment.
The researchers Newell,
et. al (2011) used two dice games with 7 greens and 3 red sides. Some participants were provided with hints
while others were not. Likewise, some were provided with feedback and others
were not. They designed the games to ensure that both the maximization and the
matching strategies were available as potential choices to determine what
method participants used.
Despite having all of
the information available from the beginning of the game, it was the feedback
with a hint that helped participants maximize their strategies. A majority of
participants didn’t appear to make meaning from the feedback information
without a hint. Participants that did
formulate strategies sought and tested new strategies over subsequent
trials. A large percentage of
participants thought of a quick strategy and used it throughout the game
without changing their behavior. A small group of individuals were found with
superior cognitive abilities that optimized their strategies without feedback
or hints.
The study does relate to business strategy
development. Executives may use a particular strategy and continue with that
strategy (top down) and ignore feedback (bottom up) that would help them adjust
and improve their strategy. These strategic choices are often made in the
earliest part of the game before information is readily available making them
likely inaccurate. This can lead to
disastrous results when an environmental scan and feedback loop are not
included to ensure direction adjusts to increase strategic accuracy. Even
worse, if a poor strategy is used to its natural conclusion it may be far off
of the mark. A small percentage of
people may be able to look at the factors involved, and develop their own strategies
and have the cognitive flexibility to continue the adjustment of their approaches
as information becomes available. Openness
to information equates to success in strategic management.
Newell, B, et. al.
(2013). Probability matching in risky choice: the interplay of feedback and
strategy availability. Memory and
Cognition, 41 (3).
No comments:
Post a Comment