Critical business decisions turn out badly with depressing frequency. New products fail in the marketplace. Botched mergers destroy shareholder value. Flawed downsizing programs erode employee morale, trust, and productivity.  Why do companies fail so often and what can you do to improve your business’s decision making processes and outcomes?

 

This book explores these crucial questions through the lens of the Law of Unintended Consequences (LUC).  LUC asserts that critical decisions produce unanticipated and often undesirable results. LUC has two main causes, both rooted in cognitive psychology. On the one hand, the snap judgments and choices that we make intuitively as we navigate everyday life prove to be unreliable in more complex situations. On the other hand, our efforts to make critical decisions more deliberately are hampered by innate constraints on human reasoning capacity. These two factors, called cognitive biases and bounded rationality, are congenital, making it impossible to defeat or “break” LUC.

 

But this book explains how you can “bend” the Law in your favor, and reduce the frequency and severity of unanticipated outcomes for your decisions. Our approach defends against both causes of LUC. We describe simple reasoning exercises that you can employ to compensate for distortions in your judgments and choices caused by cognitive biases. And we present a novel method for “test driving” your critical decisions to mitigate the effects of bounded rationality. Our method combines two previously separate analytic techniques. Scenario planning enables you to extrapolate plausible futures from your current situation more systematically. Simulations are “what-if” exercises that use powerful computer programs to dynamically project the outcomes of decisions. Thus, the test drive method helps you explore the likely outcomes of your decision options across a range of likely futures. This inoculates you against more potential surprises than trying to predict and prepare for “the” future.

 

Bending the Law of Unintended Consequences complements theory with practice, by describing test drives for four critical business decisions: disruptive business models, competitive marketing strategy, managing enterprise risk, and minimizing turbulence created by organizational change. These case studies illustrate how test driving decisions enables you to better anticipate potential consequences before you commit to a choice. You can then refine that option to improve its projected outcome, or avoid painful consequences by selecting a better alternative. Our method also helps you implement decisions. In this mode, the method alerts you to emerging problems and threats, so that you can adjust your plans mid-course to ensure success. In both cases, the test drive method allows you to make virtual rather than real mistakes, so that you can learn safely, improve your decisions and their outcomes, and blunt the harm caused by LUC.

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Forthcoming from Springer February, 2020.