Hidden flaws in strategy

Hidden flaws in strategy is a well written article by Charles Roxburgh in the McKinsey Quartely. The article lists some of the reasons of why do top managers, steeped in theories of good business strategy, still make bad decisions.

The hidden flaws in strategy:

  • overconfidence
  • mental accounting
  • status quo bias
  • anchoring
  • the sunk cost effect
  • herding instinct
  • misestimating future hedonic states
  • false consensus

In the herding section, there is one nice citation of Warren Buffet. In one of his famous letters to the shareholders of Berkshire Hathaway (annual report 1984), he writes:

Failing conventionally is the route to go; as a group, lemmings may have a rotten image, but no individual lemming has ever received bad press.

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