Super Deciders: The Science and Practice of Making Decisions in Dynamic and Uncertain Times

By Claudio Feser, Daniella Laureiro-Martinez, Karolin Frankenberger and Stefan Brusoni

Dramatically improve the decisions you make every day using insights from the latest neuroscience

We make hundreds of decisions daily, from small ones – such as what to wear today and how to drive to work – to big ones – such as the company strategy and whether to launch a restructuring program that may impact thousands of people. In business, studies suggest that company executives spend 40% of their time making decisions and that the effectiveness of their decisions largely drives the results of the companies that they lead.

In Super Deciders: The Science and Practice of Making Decisions in Dynamic and Uncertain Times, a team of renown researchers and business advisors deliver an application of the latest advances in neuroscience to effectively making the most difficult decisions, those we make in dynamic environments, in situations of uncertainty when we need to predict outcomes, we’re missing relevant information, time is scarce, and the environment is constantly changing.

The book is written in three parts. In the first part, the book offers a practical framework for making effective decisions under uncertainty. In the second part, the book discusses approaches to effectively implement those decisions, thus managing change at every level, from the individual to the organizational. Finally, the book develops suggestions on how leaders can diagnose and improve – in themselves and in the people they lead – the cognitive abilities relevant to decision-making.

You’ll also find:

• An enlightening business narrative detailing the journey of a fictional leader of an international travel operator named Inuk.
• Six cases that put you into real-life situations of making difficult decisions and that help you assess your decision-making effectiveness.
• An accessible and fun introduction to the neuroscience of decision-making.

Ideal for managers, executives, directors, and other business leaders, Super Deciders is a can’t-miss decision-making playbook that you’ve been waiting for.

• Language: English
• Publisher: Wiley
• Release date: Mar 13, 2024
• ISBN: 9781394238835

Book preview

Super Deciders

The Science and Practice of Making Decisions in Dynamic and Uncertain Times

Claudio Feser, Daniella Laureiro-Martinez, Karolin Frankenberger, and Stefano Brusoni

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Foreword

I have been Chief Executive Officer of insurance companies for more than ten years of my professional life. Decision-making is the constant and defining aspect of my daily routine and it is what colleagues expect from me. I have learned a lot during my career, from the intricacies of the products to the nuances of the markets and to the subjective preferences of very different individuals. Especially, I have learned how to make decisions in uncertain conditions, facing different emergency situations.

This knowledge and experience have equipped me with the ability to make – I believe – informed and sound decisions in today's industry.

However, the insurance industry – like many other industries – is now changing rapidly. What once was considered a mature, highly regulated, and relatively stable industry is now experiencing rapid and fundamental changes due to technology, changing customer needs, and changing stakeholder expectations.

The advent of emerging technologies, particularly digital connectivity, big data and artificial intelligence (AI) has brought forth innovative competitors and has created new opportunities for the leaders of the industry. For instance, digital connectivity is allowing us today to provide valuable, needed services to customers and is making access to insurance easy and fast. Big data are allowing us to carefully price risks, rewarding good risk customers and properly managing capital exposures. AI offers immense opportunities to improve services and can be harnessed to develop more accurate risk assessment models, among others.

The rapid shifts in customer preferences and expectations are not solely a result of technological advances but also of demographic changes. The rise of Gen Z, the generation born between the mid-1990s and the early 2010s, has brought forward a new set of expectations. Gen Z is characterized by their digital fluency, their desire for personalized and convenient services, and, importantly, for their environmental consciousness. Customers are increasingly interested in insurance products that align with their sustainability goals. For instance, they seek policies that provide coverage for eco-friendly initiatives, green technologies, and climate change-related risks.

Sustainability isn't changing the expectations of only customers, but also those of many other stakeholders. Stakeholders in the insurance sector encompass a broad spectrum, including investors, regulatory bodies, advocacy groups, and the general public. These stakeholders increasingly demand that insurance companies take an active role in addressing environmental and social issues. This includes the insurance industry's commitment to sustainable practices, such as reducing its carbon footprint, supporting renewable energy, and providing insurance products that promote sustainability, like policies for green businesses or renewable energy projects. It also includes a heightened emphasis on transparency and ethical conduct. Stakeholders expect insurance companies to disclose their environmental, social, and governance performance, that is, reporting on carbon emissions, diversity and inclusion efforts, and responsible investment practices, among others. Investors, in particular, are increasingly evaluating insurance companies based on their approach to sustainability. Firms that embrace sustainability are seen as more resilient in the face of environmental and social disruptions, making them attractive to investors seeking sustainable returns.

These changes demand agility and responsiveness from organ-izations and leaders alike.

But agility isn't only about dealing with those changes. It is also about dealing with heightened uncertainty. The unpredictability introduced by new technologies, shifting customer behaviors, and evolving stakeholder expectations is accentuated by geopolitical developments and by emerging new risks such as pandemic diseases. In a volatile environment characterized by wars, geopolitical crises, and new health crises, the insurance industry – like many other industries – faces uncertainty and risk. Geopolitical shifts can lead to economic instability, changing regulations, and increased concerns about security.

Nobody can really predict how all these changes will pan out, where this all will lead us, and how the insurance industry will look at the end of this decade.

While knowledge and experience worked well in the past, they may not be sufficient to lead large organizations in our industry into the future the same way we used to lead them a decade ago. On the contrary, knowledge and experience, while a cornerstone of effective decision-making, can today inadvertently blind us to new challenges and opportunities in this fast-paced, rapidly changing, and uncertain world.

This book, which I wholeheartedly recommend, serves as a guide to augmenting our knowledge and experience with a multi-faceted approach in uncertain scenarios. It highlights an approach that builds on team collaboration, critical thinking, data and facts, humility, and values.

Team collaboration means using teams across the organization to encourage diverse perspectives, ideas, and points of view, thus fostering a richer, more informed decision-making process.

Critical thinking means advocating for the practice of asking questions rather than asserting answers, emphasizing the importance of taking time and digging deeper with questions such as Why do I believe what I believe? What assumptions I am making? or Why do you believe what you believe? What are your hypotheses?

Data and facts suggest a shift in our approach from asserting beliefs to acknowledging hypotheses and assumptions that can be tested and validated. It is about changing the way we think and speak about what we believe. It is changing the narrative from I believe it is to my hypothesis is or my assumption is. Beliefs are personal, rigid, and are difficult to challenge. Challenging someone's beliefs often means challenging someone's identity or character. Hypotheses and assumptions are not personal. They are just what they are: hypotheses and assumptions that can be tested and validated. They are flexible and change as new facts emerge. This flexibility allows for learning as new evidence emerges, reducing rigidity in thinking and decision-making.

Humility means recognizing the importance of humility in leadership, acknowledging that we don't have all the answers and can learn from others.

Values means making decisions using an inner compass. Sometimes when making decisions in dynamic situations we face dilemmas, a situation in which no available option is desirable. Sometimes we can't or don't have the time to search for an optimal option to choose, and we need to make a decision that may turn out to be the wrong choice of option. In these situations, values – our inner compass – matter. In these situations, when the environment changes rapidly and not in our favor, we may end up having chosen the wrong option. But at least we made the right decision creating inspiration and followership that will help leaders when making the next decision. Making decisions based on values may differentiate great leaders from mediocre leaders.

The approach outlined in this book fosters a culture of continuous learning. It encourages organizations to experiment, study, learn, and adapt as they evolve.

But it's not solely about adaptation in a rapidly changing environment; it's about actively shaping the course of developments. Firms are often likened to living organisms, responsive to environmental changes. However, firms are not biological entities; they are shaped by the decisions and actions of their leaders.

This book champions the concept of super decisions, highlighting the power of effective leadership in shaping organizations. It's an invitation to embrace an approach to decision-making that can make a substantial difference in shaping the development of organizations, and because organizations are composed of people, in the development of people's lives and of society.

Making Super Decisions can help shape our future.

Mario Greco

Chief Executive Officer

Zurich Insurance Group

Introduction

Claudio Feser, Daniella Laureiro-Martinez, Karolin Frankenberger, and Stefano Brusoni

Should we improve our internal combustion engine or switch to electric engines? Should we upgrade our organization or change it? Should we optimize our branch network or launch a digital channel? Should we build our new business organically, or buy a competitor to accelerate our development?

These are all examples of either/or decisions that executives face day in, day out. Deciding on and resolving such dilemmas constitute much of what executives do. According to a recent study by the consultancy firm McKinsey & Company, executives spend nearly 40% of their time making decisions (De Smet et al., 2019). Management guru Peter Drucker wrote that whatever managers do, they do it through making decisions (Drucker, 1967).

The performance of executives is to a large extent the result of the quality of their decisions (Harrison, 1996). In fact, research suggests that, of all leadership skills, decision-making is the one most strongly associated with leadership effectiveness (Hoffman et al., 2011).

In business, making good decisions matters and making bad ones can be fatal.

In the late 2000s, major automotive companies largely overlooked the demand for fully electric cars and were reluctant to invest in electric vehicle technology. Tesla, a newcomer in the industry, seized upon this opportunity and disrupted the market to become the world’s most valuable automotive company in July 2020. In 2008, Yahoo rejected a takeover bid of nearly USD 45 billion from Microsoft. In 2012, the Instagram founders agreed to a USD 1 billion sale to Facebook. They may regret it. Instagram is now arguably one of the hottest social networks on the planet. As of 2023, it generated over USD 50 billion in revenues for Meta (formely the Facebook company) and analysts estimate it to be worth over USD 100 billion. Until late 2022, Google decided not to launch new services based on their LLM technology, paving the way for OpenAI’s ChatGPT to dominate the generative artificial intelligence market.

The importance of making good decisions isn't limited to the realm of important business decisions. It comes up in every walk of life. Who should I marry? Should I marry my current partner or continue searching for my perfect match? Should we stay as a couple, or should we have kids? What is the best next step in my career? Should I stay and build my career at my current company, or change company or even career?

Making good decisions isn't easy. We make most decisions in dynamic situations, and they are dynamic in two ways. First, externally, meaning that often, when we need to make decisions, we're missing relevant information. Time is tight, we're facing uncertainty, and the environment is constantly changing. Second, internally, our objectives, preferences, and inclinations are not stable, they evolve and depend on the context.

This book is about making great decisions – or what we call super-decisions – in dynamic, ambiguous, and uncertain envir-onments. No general rule or mathematical formula will tell you how to make such decisions exactly or perfectly. However, understanding what drives decisions under uncertainty can help leaders make better decisions.

This book explores the factors that drive effective decision-making as reported in research in neuroscience, psychology, and management. It explains the scientific foundations of decision-making and adaptation in volatile, fluid environments.

It introduces a model of decision-making, which we call the Decision Navigator. An evidence-based model, the Decision Navigator significantly improves decision-making performance in uncertain and dynamic situations. It improves the quality of decisions of both individuals and organizations as it helps creating learning environments and cultures where people perceive decisions as experiments and do not stigmatize failing initiatives, but rather understand them as steps on a journey toward new knowledge, insights, and progress.

Making great decisions does not depend solely on the situation. They are also a result from our objectives, our preferences, and our inclinations. Importantly, the model we put forward in this book fosters introspection and contributes to self-knowledge.

Structure of the Book

The book is divided into five Parts.

In Part I, Understanding Decisions Under Uncertainty, it discusses decisions under uncertainty as either/or dilemmas – specifically, as exploit/explore dilemmas. Our brain has the tendency to present decisions in complex situations as a challenge of choosing either stability (exploit) or change (explore). The choice is not obvious. Stability has many advantages. It builds on experience. But experience may not be sufficient when the environment changes, and when change might be the right approach.

Part II, Making Decisions Under Uncertainty, builds on advances in neuroscience, management, and psychology to outline the Decision Navigator model. The model transforms high stakes either/or decisions into a step-by-step process of developing options, testing assumptions, and refining decisions. The model combines the advantages of two alternative problem-solving approaches, the inductive and the deductive, and creates innovative, creative, and possibly less biased decisions. It also recognizes that cognition and emotions are not two separate entities, but always interact, and should do so to achieve good decisions.

We make most of our daily decisions efficiently and fast, leveraging intuition and experience. The Decision Navigator model is a slow approach to decision-making. It is a model of decision-making that fits high-stakes, important decisions in unfamiliar situations, where relying solely on intuition and experience may not be sufficient. The Decision Navigator model cultivates an experimentation-based, learning-oriented, and adaptive approach to decision-making that matches the complex, environment in which we operate.

In Part III, Managing the Tensions Created by Decisions Under Uncertainty, the book explores venues for managing tensions in organizations. Such tensions arise from addressing exploration/exploitation dilemmas of organizations and from pursuing several, often contradictory strategies simultaneously. While reviewing approaches to handling these tensions, the book discusses a framework for effectively managing corporate adaptation and change.

Part IV, Becoming Super Deciders, illustrates approaches leaders can use to become superior decision-makers. Some leaders may be better than others at making decisions, but everyone can become better at it. The book explores how leaders can work on themselves – managing their cognitive states, furthering their cognitive skills, and better knowing what they stand for and what drives them – to improve their decision-making under uncertainty, that is, to become Super Deciders.

Part V, Conclusions, summarizes the book's key concepts and derives implications for both individual decision-makers and organizations.

This book is intended for leaders and potential leaders in organizations, individuals who frequently make or will make far-reaching decisions in dynamic situations. But we hope it is not only for leaders.

Following the launch of ChatGPT, the public discussion about the opportunities and dangers of AI has gained considerable momentum. Historian Yuval Noah Harari, for instance, argues that AI has the potential to destroy democracy (The Economist, 2023). He argues that democracy is a conversation, and conversations rely on language. When AI can manipulate language, he argues, it could destroy our ability to have meaningful conversations, thereby destroying democracy. AI has developed a remarkable ability to manipulate and generate reality, whether with words, sounds or images. For instance, in June 2022, several mayors of European capitals were deceived by an AI-generated deepfake of Vitali Klitschko, the mayor of Kyiv. The deepfake argued against arming the Ukrainian army and highlighted the risk of migration in Europe of a prolonged war in the Ukraine.

The benefits of the proposed concepts of decision-making may go well beyond improving the effectiveness of decisions in organizations. By augmenting intuition and experience through a scientific experimentation approach, the concepts presented in this book may foster critical thinking and help people to effectively function in a world where AI can exploit our brain's predisposition to use experience and stereotypes, and where AI can distort our perceptions and influence our thinking. This book may prove to be useful for everyone.

To make the concept of Super Deciders specific and practical, the book illustrates it with a narrative that unfolds through the experiences of Isabelle Dubois, a fictional CEO of an equally fictional international travel operator. Unlike prior work of researchers who often think of decisions as discrete, isolated events, we describe making decisions as journeys of navigating an ever-changing environment. Decisions are path-dependent: all decisions we make are connected, each a step leading to another step. Also, we do not travel alone: we do not make decisions by isolating ourselves from everything and everyone. We need interactions to reflect and frame problems. The cases that we describe unfold as a journey and are meant to generate a reflection also about how Isabelle interacts with other people, and how these interactions help her make sense of the situation she finds herself in.

Isabelle will undertake a journey of discovering, step-by-step, the science of making decisions in uncertain and dynamic situations. She will also discover much about herself. We hope that this book will also spark some reflections about yourself.

The story is composed of six separate cases, Cases 1–6, which build on one another. The cases transport you into real-life situations of making difficult, high-stakes decisions. They include people-related decisions, decisions about company’s strategy and expansion, how to manage organizational change and work-life balance. We also discuss the so-called tough decisions, dilemmas for which there seems to exist no good solution. The six cases are currently in use as teaching cases in the Executive MBA programs of the Swiss Federal Institute of Technology (ETH Zurich) and the University of St. Gallen. The story also includes dialogues between Isabelle and Eve, an equally fictional young academic. These dialogues are intended to help the reader to connect the different decisions that Isabelle makes to relevant scientific research. The dialogues are intended to fill the gap between practice and research. They also provide, to those who are interested, additional material to explore selected topics more fully.

We would like to emphasize that the cases and the overall narrative are pure fiction. The cases are exemplary of situations that we have encountered many times in our consulting and research experience. While fictional, they capture – we believe – in a realistic way the fundamental features of many relevant decisions made under uncertainty.

Any resemblance to any existing persons, firms, or events is purely coincidental.

Now, let's meet the main character in our story, Isabelle Dubois, the CEO of ATG. Like you, she is