The Strategic Benefits of Randomized Decision-Making

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In highly ambiguous and challenging contexts, a random approach to decision-making confers a number of advantages. Operations managers have been using randomized decision-making since World War II (randomized search was used to locate enemy submarines in the open ocean), but it has not yet been seriously applied to strategic decision-making, which remains focused on hypothesis formulation and testing. In this article the authors explain the strategic benefits of randomized decision making — early advantage, faster learning, less predictability, and reduced biases — and offer advice on how to incorporate randomness in the strategy-making process.

The Naskapi, a nomadic people indigenous to Quebec and Labrador, hunted most of their food.

This seemingly implausible link between the Naskapis’ divination practices and their ability to thrive in a harsh environment can be extended into a business context. We’ll look at how people are currently leveraging randomization to make operational decisions and discuss how applying this approach to strategy might enable businesses to thrive much as the Naskapi did. We’ll conclude by offering tips on how companies can introduce randomness into their strategic decision-making process.

Today, randomization is often employed to enhance the efficiency and accuracy of machine learning techniques. For example, the initial parameters of a neural network are often chosen at random to avoid the network getting trapped in a particular configuration. Broadening the search space increases the chance of finding superior configurations.

But this belief ignores the fact the very same piece of data can be used to argue for different, even opposing, courses of action. For example, Kodak’s response to observing a rising demand for digital photography was to double down on the traditional film business to ensure it would not cannibalize its sales. Meanwhile, competitors, such as Sony and Canon, reacted to the same information by investing heavily in R&D to improve digital camera technology.

 

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