Distortions and deceptions impact technology strategy

A high quality, objective technology strategy is essential, otherwise a company may find itself going in the wrong direction, or re-organizing its R&D around a misguided strategy that will impact the future value of the company.

However all too often cognitive bias – a phenomenon where a decision maker actively seeks out and assigns more weight to evidence that confirms their hypothesis, and ignores or underweights evidence that could disconfirm their hypothesis – creeps in.

This phenomenon can be seen in many companies and a recent post in the McKinsey Quarterly provoked an interesting discussion with my fellow trustees at RADMA (Research and Development Management Association).

As the type of bias explored in the article, “Distortions and deceptions in strategic decisions”, can also hinder the development of a sound technology strategy.

To maintain objectivity the development of a technology strategy should follow a well structured process. This aims to create a prioritized list of ‘business important technologies’ using input from internal and external experts to stress-test the list. However it is not uncommon in many organisations for self-interest, politics and bias to creep in and disrupt the process.

Impact of cognitive bias on technology strategy creation

The two areas as described by McKinsey:

  • Distortion – a ‘perceived’ loss of power in the R&D program or partnership can result in decisions going astray. A wrong judgements about the likely outcome can influence the value placed on that outcome, for example, when a person thinks the outcome is going to be positive for them, they will be overoptimistic and score technologies higher thus ‘distorting’ the real strategic direction required. The reverse is also true, for example a statement may be: “I really don’t believe that this new micro-encapsulation technology will work and I suggest dropping it” even though six external experts have done a due-diligence. The real reason is that “it will leapfrog a new delivery development that I have been working on for three years”.
  • Deception – conflicts of interest and politics can arise between managers on issues such as time horizons which differ between research, product and technology strategies. Often unintended deception can also occur, for example when a trusted associate is the proponent of a new technology proposal being evaluated. Intended deception can occur when one manager aligns a set of similar stakeholders around his or her own belief system. This may even create a mass of information as an input to technology strategy process that is in line with their worldview but will distort it by deception. A good recent example is where people recruited by the client from another consumer goods company all had the same technology information about a new type of formulation that sounded objective but was not.

Technology Strategy tools can help to remove distortions and deceptions.

Tools include: using objective due-diligence frameworks, team scoring (including externals who can challenge) and technology portfolio analysis.

The technology strategy facilitator must be alert to bias at all stages of the process and it is not enough to run workshops. The facilitator has to become immersed in the whole team training, information and expert scouting process to keep track on the potential for distortions and deceptions.

Post originally provided by Dr Steve Bone for R&D Today

McKinsey Quarterly February 2006, Distortions and deceptions in strategic decisions By Dan P. Lovallo and Olivier Sibony