Behavioral economics was once deemed as off- limits for professional economists, but is now very much mainstream. It is being used in gauging investor behaviour and leveraging stock- price up- downs. A lot of decisions at the strategy level, though inadvertently allow cognitive biases to creep in. To tackle this, a behavioral strategy needs to be put in place. For drafting the corporate strategy, the company leaders need to weed out the biases inherent in themselves. This is in stark contrast to the fields of marketing and finance. To counter pattern- recognition biases, the angle of vision ofvision ought to be changed. Similarly, for action- oriented biases, one needs to embrace uncertainty. Stability biases need to be shaken up, while interest biases need be revealed openly to counter. Debates need to be depersonalized. In adopting this behavioral strategy, some steps need to be followed. Firstly, the company needs to decide, which decisions need this sort of close scrutiny. The biases need to be identified that will most affect decision- making. Tools and practices need to be taken into account which will best counter these relevant biases. These new practices now deemed appropriate must be incorporated into the formal processes.

Source:https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-case-for-behavioral-strategy

Uploaded Date:22 January 2019