From the second you walk through a retail door, you are being massively manipulated.

Why is the fresh fruit placed at the entrance in market style – could it be that this is priming your assessment of quality for the whole store, although you obviously cannot tell, since most is packaged?

Why do you have to walk all the way to the back to get the d… milk every time – could it be – shocker – that they want you to go through the whole store?

And why, oh why, would they put the candy right at the end, when you are the most weakest after fighting with your kids on an empty stomach for a solid hour?

Everything is organized to get you to buy more. The size of your cart drives the size of your purchase, the speed bumps gets you to stay longer in the right places and every sense is bombarded:

• Music is designed for the behavior wanted like French music to get you to buy French wine
• Tastings may entice you to buy something new but it never quite tastes the same at home
• Products you touch increases the purchase likelihood dramatically
• The store smells like fresh bakery, although they do not sell fresh bread
• And the visuals – oh dont get me started!

But dont take my word for it: Check this short video on behavioural economics in retail with Martin Lindstrom, who is a global branding guru within neuromarketing.

In the next four blogs we will explore the exciting, fun and yeah quite manipulative world of marketing – buckle up!

If you cannot wait contact brian@behaviouralstrategygroup or +45-23103206 to learn how you find the perfect balance between manipulating for a better experience and manipulating for over consumption.

Perhaps you are already convinced and ready to draw behavioral economic insights into the critical decision-making processes of your organization. Or maybe you’re still a little skeptical and need more arguments; if so, think about the last big business decision that your company threw itself into.

It can be a major acquisition, large investment, a new IT system, the change of your strategy or the launch of a new product. In all likelihood, three things were part of that decision: A certain degree of data collection and analysis; the judgment and insight of one or more senior executives; and a – formal or informal – process in which a lot of data and assessments were translated into a decision.

When it comes to big decisions of this caliber, like most people, you’re likely to insist on thorough analysis and data to ensure you’re making the best and most informed decision. But here’s the problem: contrary to what most of us think, a thorough analysis in the hands of leaders with good judgment do not automatically turn into good decisions. The third factor, namely the decision-making process itself, is crucial for the quality of the decision, and this is where the behavioural economics comes in.

Not too long ago, two Harvard professors teamed up with McKinsey to examine the outcome of critical decisions in 1,048 global companies between 2004-2009. They were interested in investigating the factors that had led to the best results in a variety of decisions such as investments in new products, M&A and large capital investments.

Specifically, leaders were asked to answer the extent to which they had used 17 different practices to reach their decision. Eight of these practices had to do with the volume and level of detail of analysis, e.g. whether they had developed a detailed financial model or performed sensitivity analyses. The remaining nine practices dealt with the decision-making process, e.g. whether they had explicitly explored, raised and discussed significant uncertainties or views that contradicted those of the senior leader. The way the process practices were selected was by identifying some of the process properties that had been shown to be effective in overcoming biases through experiments and academic studies.

What was the conclusion? The companies with the best results had statistically fewer biases in their decision-making processes. In fact, the study showed that in widely different strategic decisions, the decision-making process meant significantly more than the nature and type of analysis – companies with good decision-making processes outperformed analysis-focused companies by a factor of 6, i.e. 500 percent better!

This was because by eliminating or reducing biases, companies managed to improve their ability to verify their ideas, assess the data base, incorporate the right views at the right times and make a more realistic assessment of the company’s capacity.

This is not the same as saying that the analysis was unimportant, since a closer view of the study showed that almost no decisions made through a good and debiased process were supported by a bad analysis phase. That’s because one of the factors that a debiased decision-making process will sniff out is poor analytical work. The reverse is not the case, as a superb analysis is useless in a bad decision-making process.

Are you ready to improve your results by 500%? Contact brian@behaviouralstrategygroup.com or +45-23103206.

25 years. Always international (Except a stint in a Danish focused company that paid for the most international MBA in the world – go figure). Cofounding a strategy consulting business of course starts at home, but where it ends…?

First role managing oil rigs in Australia, Venezuela and Qatar. I know. Not to fanciful these days. But back then it was the s…

Then expatriation to New York. Still pretty cool. If you can make it there…

On to Latin America. Love the life, the music, the drinks, the food… Well not all the food – it did turn me green for the duration of a 36 hour travel. No, I do not recommend it.

Philippines. Palm trees and white beaches. Most friendly and smiling people in the world. They sing in the supermarket! And not because they have an easy life – rather the opposite.

Total of 50 countries across 6 continents. But what about that consulting business in Denmark?

In the past year we have been asked to:

• manage a global omnichannel strategy for a US clothing brand
• run a global procurement conference in Spain
• develop a growth strategy for a regional logistics company in Honduras
• manage a two day seminar on advanced decision making in Mexico
• …(you fill in the dots with something exotic)…

Not everything has or will materialize. Yet, I can feel it in the air tonight – we are going global!

If you also want to go global together, contact brian@behaviouralstrategygroup.com or +45-23103206.

Jane was was exhausted. The last three months had flown by at warp speed. Ever since that fateful board meeting, where they had launched the new strategy approach, she had not had much sleep – let alone any spare time. Not only was their normal schedule pretty tight, but now they were behind the game with this recent process change – and all that was before they were a man short.

John had handed in his resignation. It all seemed pretty innocent. John was happy most days and he still met up regularly with their CEO, Jack. But in confidence he admitted that this whole change of strategy approach had shook him a bit. He had been doing strategy for more than 20 years, religiously following the classic 7 steps and he felt he needed a time out. Maybe it was time for board roles or his passion of helping sustainable scale ups succeed.

Despite the loss of her long time mentor, Jane was excited about the new approach and her new role as head of both strategy and transformation. She had now worked intensely with the partner from the consultancy that introduced this broader way of viewing strategy, and they had already reaped several benefits. The different approach had both killed a few key initiatives and proposed a number of bolder moves of which they had agreed to experiment with two this year. If things went well, they were looking at high double digit bottom-line growth the next three years.

Experiment. That was new too. It was part of last step before more direct implementation work took over. The external consultancy called it: “Prepare to be wrong”. What kind of consultancy would sell you the idea that they had the right solution and then ask you to prepare to be wrong?!? But the logic was solid enough. The whole thing was based on two key insights: Firstly, strategy is about maximizing the odds of winning, but it is no guarantee and thus it makes sense not to bet the whole house. Secondly, once we do have a successful strategy, we are very reluctant to let it go, even when the world around us changes. It also means that the safest way to predict the strategy of a competitor is to look at what they did last year. To avoid making the same mistake, Jane had implemented an early warning system, where key assumptions in the strategy were kept track off automatically.

They had really gone all in on the implementation work. They had worked simultaneously on changing the organization AND transitioning the individuals as well as dug deep in the behavioural change toolbox, but truth be told she was not sure what to expect. Implementation had never been big on her agenda. She appreciated the point about strategy without implementation had no value, but she had just never seen it as her job – nor expected there to be anything but push back. It was only natural right? Well, some of the reactions from the organization were different. Very different. In some of the workshops they held with the organization they had been asked why they had not done this sooner!

She was tired now though. But things were also looking brighter. They were through the first round of the transformation, and right now it seemed they may not need a second round. And with the broader tee up in the beginning of the strategy process, she had noticed that discussions in management and the board were becoming easier, as many decisions were already given or at least heavily supported by clear directional pillars. She opened the door to the outside. It felt like spring was on the way.

If you also want your strategy to be faster and more solid, contact brian@behaviouralstrategygroup.com or +45-23103206.

100… 100… 100! Easter marked a milestone – we have now trained Executive MBA number 100 in the seven steps of strategic problem solving at Copenhagen Business School.

At raving reviews.

That means 100 senior leaders will now crush difficult problems much faster and much better around the world in every function and deliver a whole new level of returns.

But what is so special about this approach besides being the cornerstone of the three most powerful strategy consultancies in the world?

Well each step is actually deceptively simple. And put together all you got to do is follow the process. So why did my mentor at Bain – one of the giants, who taught everyone else – say this on our first meeting: “I have been doing this for 25 years and I will never be good enough”?

Firstly, it is not like riding a bike – break the balancing code and you are ready to go – because each step is fueled by your experience from a hundred other projects to sharpen and customize it. Take the first step – define the problem. I use a template that anybody can copy and fill out. But understanding how to design a problem statement, so you get the value, the full value and nothing but the value may from the outside seem like an arcane artform, but there are very specific tricks to it.

Secondly, the thinking needed is anything but system 1 – you know that automatic intuition that runs +95% of your decisions? This is hardcore system 2 work. For example in step 2, you need to break down the problem in logical parts, because as Einstein famously (and somewhat adjusted here) said you cannot solve a problem at the level it was created. And yes it looks beautiful when a master breaks problems down in front of you and is a bit like watching Pablo Picasso paint Visage: Head of a Faun (look up the video – pretty amazing).

Thirdly, the step by step picture is betrayed by it’s iterative nature and extreme coherence between the steps. Every single step depends perfectly on the one that preceded it and perfectly dominates the next one. So when you have defined the problem, broken it down, prioritized the key areas, built the work plan and analyzed everything, you need to build everything back up in the same order it was broken down to conclude on your recommendation. On paper it is a strict military march, but in reality it is more like a salsa dancing festival in Trinidad in Cuba (ask me sometime about that story:).

Once you do nail it though you have joined one of the most exclusive clubs in the world.

More exclusive than Harvard.

And more powerful. As one colleague once told me after teaching this: “This is worth more than five years at university”.

If you also want to join the club, then contact brian@behaviouralstrategygroup or +45-23103206.

Jack breathed out slowly. Julie had reluctantly agreed to adjust the strategy process, although she was clearly not happy about it – or him for that matter at that moment. But she had enough management and board experience to have been around the block a few times, and he had never had a better collaboration with a chairman. Still, he could tell that it was not advisable to do this again in the near future. And after all this, he would make damn sure it did not happen again. He called up John to pass on the decision. There was now less than three hours left before what might become a fatal board meeting.

John and Jane had been working non stop with the strategy team since their first meeting around the strategy article that set everything in motion. They had even managed to get ahold of a partner from the consultancy that had pioneered the new approach. They had feared disdain for the short timeline, but he had surprised them. Apparently it was not the first time, the consultancy had been asked to help out in the 11th hour. Together they quickly managed to create the skeleton of a solution and the team was filling it out, when the decision came down from the CEO to indeed pursue the strategy process change. They had of course been working on exactly that, but now it suddenly became very, very real.

They had three problems to fix. They would not be able to undo the mistakes completely, but they could make improvements. The first was the whole process. They had done their usual seven steps and started by identifying the problem to solve. What they were now realizing was that the seven steps were only the right parts for the analytical side. Important but research showed that process was 6 times more critical to final results. 6 times! And the first thing to ensure was that participants had the broadest possible view of the world to avoid the human tunnel vision bias. By identifying the problem as the first step, they had kept the participants within their tunnels – they would now bust them wide open with a megatrend analysis to really show where the industry was heading and what the potential positions were. Exciting – but also more than a little bit scary as their prior decisions may seem antiquated after this, John thought.

Secondly, they would have to move todays closing workshop and extend it a bit. They needed the megatrend analysis first, but they had also in previous sessions managed to unwittingly invite in confirmation bias by making clear recommendations and often letting the powerful chairman speak first. They had practically asked everyone to look for reasons they agreed rather than invite different ideas and let the best ones win. Not only that – with 8 months passing, the participants had been jumping in and out of the strategy process so many times, that they would not be able to identify the inevitable incoherence that was paramount to a powerful strategy. It could not be undone, but they decided as part of the workshop to decide on the full strategy all the way from lofty aspirations to management systems – and as part of the preparation deck to include a summary of the decisions and their interlinks. It was not perfect, but it would have to make do, John said to himself, as his mind was starting to blur from the many long nights of work recently.

Finally, they had prepared a high level implementation deck. Some of the changes seemed deceptively simple, so John expected this part to get accepted easily. The key points that they were radically changing was the idea of starting implementation communication today to prime the organisation. They would also ask key personnel in the organisation to participate in selected parts of the process from here on to have role models supporting the strategy – the idea was that when people are in doubt about a decision – and they always are – they would look to the role models, who were already onboarded. They would need to help the organisation preplan for the changes, so when they met the different obstacles, they were prepared. Lastly, they would spend significant time on making sure the strategy was attractive to the organisation – whatever that meant. It had seemed some logical when the partner explained it, but he would have to look into that more. All small steps – but big impact. He could only hope the board would embrace the last minute changes. He entered the board meeting and looked at the powerful people, he was about to piss off. He was going to need something stronger than coffee after this.

If you cannot wait for… well, by now you probably know the drill – contact brian@behaviouralstrategygroup.com or +45-23103206.

Jack was about to blow up. As long time CEO of several companies he had seen a bit of everything, but nothing pissed him off as much as a human mistake in the 11th hour. He had hired John himself after they had worked together for several years, when John was his favorite partner at his favorite consultancy, and this was the first time, he had done anything remotely like this. Still, he had folded like a cheap suitcase.

On the other hand Johns number 2 had really stepped up. He had seen Jane present a few times in the past at board and management meetings. She was extremely smart, quick on her feet and as it turned out now also not one to buckle under pressure. Maybe… Well, it he would have to look into this later. Regardless of their relative merits, they had dumped a serious problem in his lap. Their carefully constructed strategy process turned out to have major flaws. Too long and poor tee up risked a bad strategy – and a classic change management approach would likely draw out or even worse distort implementation. In all fairness though this is how it had been done for years – decades even. The question was – could they save it and their careers at the same time?

They had briefly discussed their options. Even if they were going to change the process now, they would not be able to fix everything. The time they had spent could not come back – they could not take the 8 months they had spent on the process so far and magically turn that into 2 or 3. And the implementation could never start on day 1 – that was 8 months ago! But they could maybe try to tee it up better and use that as a test of their previous decisions. And they could do a decent implementation. But they would need help – and he would need to get his chairman on board.

Jack had been in this job for almost five years and worked with his chairman for most of that time with great success. Of course he now had to wonder how their past success would stack up against their potential success with the right strategy. Regardless he had the confidence of his chairman and he believed in doing the right thing for the company – he had always loved the Warren Buffett quote about it taking 20 years to build a reputation and five minutes to ruin it. It was time to make a call.

Yet another cliffhanger – wonder how the chapters in this story always ends in such a place…? Well, if you cannot wait for the next part, read some of the other articles or contact brian@behaviouralstrategygroup.com or +45-23103206.

“John, we got to talk – now!”. Jane’s manager had asked her review some LinkedIn articles from a young strategy consultancy right before their big board meeting delivery and it was immediately clear that they were in trouble.

She had graduated top of her class in one of the best business schools in the world and had proceeded to wow every single partner in the top tier consultancy she joined immediately after. One of the partners, John, had left for a national treasure consumer brand and enticed her with the promise of more direct impact, fewer hours and a fast track leadership career. She had always had an almost sixth sense in recognizing powerful knowledge and the time honed problem solving method, they were deploying had no flaws. No flaws inside the method that is. Her spirit was sinking.

Around the method was a whole other story. That was crystal clear now after reading the articles. They needed much more process thinking – to bring down the time to build strategy, to prepare the leadership for strategic thinking and to start implementation much, much, much earlier. But what to do with only hours to go before the board meeting and John about to come down with a serious case of man flu?

It was clear that it would be career suicide to change everything now. But could they somehow take some of these brand new logics and insert them in their current approach in a suboptimal but not too obvious way? She proposed her idea to John, who looked like he was ready for a drinking bender. The idea cheered him up a bit: “So we start communicating now and only announce instead of actually holding the town hall in a month – that could work without anybody noticing the change. And then do a strategy follow up in 4-5 months, where we also insert some of the new methods and only then adjust the final strategy. You are brilliant, Jane!”. All they had to do now was to get the CEO on board.

“What!” Presenting their challenge and solution to Jack, their CEO, went slightly differently than they had hoped: “Are you saying that we may have the wrong strategy?!?” Jane and John looked at each other. Nobody wanted to answer the uncomfortable and unfortunately also pretty obvious question.

Eventually, Jane took charge: “Look Jack, I am sorry, but every field of expertise is always in a flux. Most of the time there are only minor updates, but once in a while a game changer comes along – and they are rarely convenient. We have three options: We can do nothing, we can do these critical but less obvious adjustments for damage control or we can come clean with a new approach – either way we are running out of time. You know what we are recommending. Which one do you want?”

Learn what Jack decides by reading on next week, read some of the other articles here or contact brian@behaviouralstrategygroup.com or +45-23103206, if you cannot wait…

John was running late for the board meeting and had a bad feeling about the whole thing. He had completed hundreds of strategies over the years as part of the prestigious big 3 strategy consultancies, and this was no different.

So why the stomachache? He mentally ticked off the seven steps in his battle tested strategy approach, but it did not help his sinking feeling. True, they had spent almost 8 months on getting this right, but he had done every analysis, the board had asked, and if they signed off today, the town hall announcement would go ahead in just a month. What could possibly go wrong?

Maybe it was that annoying article on LinkedIn with some less than 10-year-old company combining strategy and behavioral economics. Sure, it made sense to remove our systematic irrationality from big decisions. Sure, they had the same top tier background as himself. Sure, the big 3 did recognize the problem themselves almost 15 years ago and the solution was a matter of process, but how bad could it be? Well devastating according to them.

Despite his already stressed day he decided to revisit the article and the company together with his team. He asked his second in command Jane – a top consultant from his own former company and probably on a faster track than himself – to review the material right away and present her findings an hour later to the whole team. There was no room for error in the board presentation!

Half an hour later Jane wild eyed grabbed him from a meeting: “John, we got to talk – now.” She quickly went through her findings and confirmed his worst suspicions. His stomach went all cold. What could they do? Was there time?

Then his analytical brain kicked in. They had made three major mistakes. Nothing different from all the other strategy projects, but he had to focus on today’s one.

Firstly, they had focused on the analytical part of the process only. He felt confident about their analyses and conclusions, but they had not gone beyond the immediate albeit many ideas from the board and the strategy team. If the article was right, they were highly likely to have missed out on several potential roads – and probably killed quite a few more in the process, because the board were not focused on them. He could think of a least two areas, where he would have liked to explore more. Damn!

Secondly, they had spent almost 8 months on this. Yes, that was a couple months more than normal, but nothing crazy. But the article was arguing 2-3 months. 2-3 months! Impossible! Yet, their argument was that without that speed, people zip in and out of the process forgetting the exact issues and how they relate to each other. And because a strategy process is a set of closely interrelated decisions, then without coherence they fall apart. He had noticed this many times in the past and always considered it an unavoidable casualty. He was not sure, that he could get the work down to even 3 months in general – let alone in this project!

Finally, they had separated strategy from implementation. Pretty obvious right? Wrong if you read the article. Implementation starts on day 1. Fancy catch phrase he thought, but some of the points were pretty intriguing. For example, if you start telling the story about your strategy journey alongside it happening with frequent updates, then you will remove a lot of the irrational resistance by the time, you are ready to launch. Or involving role models from the departments, that would have to change. He was never a big fan of that, but the idea that when people are in doubt, they look to their role models, was compelling. A whole bag full of new tools. His head was spinning.

So, all good points but what should he do with his career on the line here in the 11^th hour before the board meeting…?

Catch the rest of the cliffhanger next week, read the other articles to learn what John can do or contact brian@behaviouralstrategygroup.com or +45-23103206 for a fast track to the end…

Last week I had a meeting with the CFO of a large B2B company around strategy, transformation, behavioral economics – and M&A. They were considering a latch-on acquisition, which had dropped into their lap and could be the answer to all their questions, but they had some reservations. I had a lot!

Generally, I am a fan of M&A done right. For many years pretty much everything was done wrong. Tom Peters summarized the research on M&A in 2002 as 50-90% value destroying depending on the study focus in his provocative book Reimagine. But companies regularly engaged in M&A activities have since built strong playbooks on both Deal Generation and Due Diligence. The problem? That is only half the story. There are still the steps of Negotiation, Post Merger Integration and for some Exit.

But let’s say you are relatively inexperienced in the M&A game. You have tried it a few times from various chairs over the years. But it is hardly your everyday work. What problems would you then risk, when even the experts only manage +10% success?

Deal Generation: The most pressing problem in deal generation is our availability bias. We tend to look too narrowly and miss the greatest opportunities. To transcend your tunnel vision, there are several tools depending on the problem:

1) You need a decent scouting process, so you know the relevant players, their market position and assets as well as what an acquisition would mean to you – this process alone will remove a lot of the tunnel vision

2) You must never – ever – only look at a target in isolation. No difficult decision scores top marks on all criteria, so when there is only one option on the table, the decision becomes subjective and the providence of the person at the end of the table. Comparisons tend to minimize that.

3) Use stretch targets – that is targets that cannot be reached by just improving everything a little. In this context it is about only looking for deals that will have an outsized return on investment. And no – that almost never come from administrative synergies only

Due Diligence: Once you move from Deal Generation to Due Diligence something special happens. You commit USD 1-5m depending on the deal size – and you personally commit your career. So, you are powerfully motivated to identify evidence that it is a good idea – or put differently you are at high risk of confirmation bias. There are several tricks to get around this, but here are a few of my favorites:

1) You can use wisdom of crowds here – that is experts are excellent at explaining the past, but they are slightly worse than a chimpanzee with a dart at predicting the future. But the average prediction of 20 average people will get you pretty close

2) You need to predefine your core priorities or decision-making criteria, so you can easily identify characteristics in deals that are positives, negatives and irrelevant. Without this done up front, it is so easy to suddenly see data in a positive light or downplay the negative

3) You may use an external to facilitate a debiased decision – with an iterative and coherent decision making process many errors will be caught – and by ensuring an open dialogue on the data with key decision makers keeping quiet until the end, you avoid everyone stepping into confirmation bias

Negotiation: Now you have finished your Due Diligence and you enter the final negotiations. Needless to say, your confirmation bias is now at maximum speed. But there are actually a bunch of other things you might fall for here like these three:

1) Commitment: When you have already started walking down a certain path, changing course shows the tribe, that you cannot be trusted to do what you say. This is a powerful force to keep you on the path to a deal whether it makes sense or not

2) Social proof: When we are in doubt about a decision, we tend to look around for role models, people we like and the general mood. If everyone else wants to move on to the next discussion point, then we will typically also – even if you have serious doubts about the current topic

3) Reciprocation: When someone offers you something, you feel obliged to return the favor. In negotiations you might even be exposed to “reject – then retreat” – when they have a big ask, you reject and then feel obliged to accept their later smaller ask

Post Merger Integration: Obviously this is a huge area and all your bias groups are at risk. But two issues are almost given: Overconfidence and Emotional bias. You have just been through Deal Generation, Due Diligence and Negotiation, so you are exhausted and nothing can surprise you – you now know everything that is worth knowing about this company and you have a brilliant strategy. Or do you?

1) There is often a major shift from the previous three steps of careful analysis to more day to day execution in Post Merger Integration – or from the analytical system 2 to the more automatic system 1. But Post Merger Integration deserves just as much attention to detail and analytical rigor as the previous steps, if you want your strategy to survive meeting reality

2) Overconfidence comes easily with even a minimum of knowledge, but the good news is that it is also easily dispensed. We tend to estimate costs and customer retention far too positively, so base rates from similar cases can do it – or simply estimate best AND worst case, aiming for somewhere between average and worst case

3) Emotional bias is a lot more difficult – particularly if you are exhausted from months of hard work. Basically, your energy level and your attitude on that day will drive your decisions. If your energy is depleted and you had a bad morning, you are likely going to reject all requests – particularly if they do not fit with your well laid strategy

Exit: Exit in the form of selling the entity again to a new player is not relevant to everyone. But some of the challenges that come with Exits actually also affects everyone else. First and foremost, Loss Aversion risks that you sell winners too early and losers too late. For the companies not exiting, this means that you may stick to your losing strategy too long or declare a winner too early:

1) Pre-committing ideally publicly and in writing to sell-by-prices or close-by-dates is a powerful way to keep you from getting caught up in the moment – whether during a positive or negative development

2) Ask yourself or your management team whether you would reinvest in that business and at what price to test your Sunk Cost bias in case either the sales options or strategy are starting to look sour

3) Run a premortem test on your business or strategy to prepare to be wrong -to assess what are the areas that can go wrong and how can you mitigate them up front

There are many more exciting tricks and tools in the behavioral toolbox, but this should get you started – and if not you are welcome to contact me at brian@behaviouralstrategygroup.com or +45-23103206.