Simple Decision Analysis (DA) can be used where there are clear options and clear organizational intention which leads to choices and actions – aleatoric problems where options are known (e.g. dice). To evaluate choices and actions, we use traditional DA with calculating NPV, evaluating tradeoffs and uncertainty, and constructing decision trees with probabilities and weights. These methods do not handle uncertainty well.
Strategic decisions are when there is interconnectedness, uncertainty, long-term implications and large impacts. Big decisions may have large impacts, but strategic decisions have network effects that are poorly defined and understood. Strategic decisions are epistemic and have a lack of knowledge – “unknown unknowns” as they are sometimes called.
Strategic Decision Making (SDM) accounts for both deliberate strategies and unrealized strategies where organizational culture plays an underlying part. This combination results in the realized strategy which combines both the intentional and unintentional so may have unintended consequences. SDM incorporates interpretive analysis so that the rationalization of prior actions can factor into the decision process. It helps to integrate the experience of the executive team, the “gut feeling” they get when making decisions so that the process is more discursive – combining choice, action and interpretation to make SDM a part of organizational discourse.
Blue Cairn 