STRATEGOS CASE-BASED STRATEGY DECISION MAKING

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STRATEGOSCASE-BASED STRATEGY DECISION MAKING
dr Jerzy Surma Collegium of Business
AdministrationWarsaw School of Economics e-mail
jerzy.surma_at_sgh.waw.pl
Natura non facit saltus
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Herbert Alexander Simon behavioral approach

• decision-makers lack the ability and resources to
  arrive at the optimal solution, they instead
  apply their rationality only after having greatly
  simplified the choices available
• ILL-STRUCTURED PROBLEMS

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Challenge

• ILL-STRUCTURED PROBLEMS
• complex,
• unrepeatable,
• intuitive,
• made under uncertainty

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Challenge

• ILL-STRUCTURED PROBLEMS
• complex,
• unrepeatable,
• intuitive,
• made under uncertainty
• STRATEGIC DECISION MAKING

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STRATEGIC DECISION MAKING
SME CEO 1. Routine habitual and reactive
decision making 2. Intuitive decision making
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STRATEGIC DECISION MAKING
Reasoning by analogy is a common form of logic
among business strategists. Facing a novel
opportunity or predicament, strategists think
back to some similar situation they have faced
or heard about, and they apply the lessons from
that previous experience
SME CEO 1. Routine habitual and reactive
decision Making 2. Intuitive decision making
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STRATEGIC DECISION MAKING
Reasoning by analogy is a common form of logic
among business strategists. Facing a novel
opportunity or predicament, strategists think
back to some similar situation they have faced
or heard about, and they apply the lessons from
that previous experience
SME CEO 1. Routine habitual and reactive
decision making 2. Intuitive decision making
Case-Based Reasoning
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• Circut City

• Car Max

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Strategos, plural strategoi (Greek st?at????,
pl. st?at???? Doric Greek st?ata???, stratagos
literally meaning "army leader") is used in Greek
to mean "general". In the Hellenistic and
Byzantine Empires the term was also used to
describe a military governor. In the modern
Hellenic Army, it is the highest officer rank
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Theoretical framework A Theory of Case Based
Decisions - Bilboa
Let P - be a set of decisions problems (case
description), A a set of acts that may be
chosen at the current problem, R a set of
possible outcomes. Then a case is a triple
(q,a,r), where q (problem) ? P, a (act) ? A, r
(outcome) ? R
Formally, a decision maker with memory M,
similarity function s, and utility function u,
w ho now faces a new decision problem p, will
rank each act a ? A according to
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Case description (P)

• Company description market share, location,
  products/services,
• number of employees, sales volume (trends in at
  least two years period),
• sales volume (export), EBITDA (trends in at least
  two years period), B2B/B2C.
• Context description industry, industry life
  cycle phase, Porter five forces analysis
• (threat of substitute products, threat of the
  entry of new competitors,
• intensity of competitive rivalry, bargaining
  power of customers,
• bargaining power of suppliers).

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General Knowledge as a warning system

• Inappropriate case retrieval based on the rule
• if the new case company and the retrieved
  company
• are in the different industry life cycle phase
• then the proposed decisions might be wrong
• Inappropriate proposed solution based on the
  rule
• if the company has just started to penetrate the
  market
• with current products
• and proposed decision is intensive foreign
  market development
• then this is risky and unrealistic proposal

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The act which is chosen as a solution for the
current problem (A)
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Crucial phase - REVISE
Revise The solved case that was established in
the previous phase has a planned strategic
decision (act). This is a kind of proposal for a
strategic actions plan. The most important goal
of the revision phase is to recognize what has
actually happened with that company after
strategic decision was taken. It is crucial to
take into consideration the case utility value
(u) and user remarks concerning the reasons why
the proposed approach was successful or
unsuccessful. In reality, there are several
factors of different type such as economic trend,
customers behavior, organizational
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Evaluation by CEOs (1/2)
The test group was selected by the target
selection and it is composed of 44 CEOs from SMEs
Industry Percentage (quantity)
ICT 66 (29)
Media 14 (6)
Others 20 (9)
Summary 100 (44)
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Sources of the strategy decisions pointed by SME
CEOs
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Evaluation by CEOs (2/2)
Variable Explanation
Support Strategos is supporting me in the real strategy decision problems
Education Strategos is teaching me in strategy management
Decision making Strategos is generating a final solution for my strategy problems
Support Education Decision making
Definitely no (1) 0,0 0,0 42,7
No (2) 3,1 2,8 54,8
I do not know (3) 10,3 6,6 2,5
Yes (4) 42,4 51,5 0,0
Definitely yes (5) 44,2 39,1 0,0
Summary 100 100 100
Test case
Bankier
TravelPlanet
Macrologic
K2 Internet
PointGroup
Perfect Line
LSI Software
Procad
Power Media
Quantum Software
One-2-One
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Conclusions

1. acceptance of Strategos with a strong feeling of
   limitations
2. treated the system as an inspiration or
   verification for their actions

Suggested approach, together with methodological
guidelines how to avoid superficial analogies,
may be used in practice as a form of
popularization of strategic business consulting
in SMEs. The commercialization of suggested
approach will contribute to the significant
increase of knowledge and strategic awareness
in SMEs. www.strategos.pl
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