rational strategic thinking: an unnatural act

7/29/2019 rational Strategic Thinking: An Unnatural Act

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Rational Strategic Reasoning: An Unnatural Act?Author(s): Joel E. Urbany and David B. MontgomeryReviewed work(s):Source: Marketing Letters, Vol. 9, No. 3, Competitive Decision Making (Aug., 1998), pp. 285-299Published by: SpringerStable URL: http://www.jstor.org/stable/40216170 .

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&rV Marketingetters:3 1998): 85-299rV 1998Kluwercademicublishers,anufacturednTheNetherlands

Rational trategic easoning: nUnnaturalct?JOEL . URBANYUniversityfNotreame, ollege fBusinessdministration,niversityfNotreame,Notreame,N,46617oe.urbany.l@nd.edu.DAVIDB.MONTGOMERYStanfordniversityAbstractWe reviewecentiteraturencompetitiveeactionsndstrategichinkingndoffereveralbservations.Evidencesmountinghattrategichinkingsanunnaturalct,made ifficultynaturalndividualiases ndorganizationaloadblocks.n ddition,t spossiblehatncertaintyboutompetitiveehaviors causedy ndcontributeso nformalnd ncompleteompetitiventelligence.eproposesimplemodel hichuggestspotentialath ependencyn firm'sntelligenceathering,riveny henertiaf ts ast ecision-making.Such path ependencyan ebroken,owever,s evidencedy everalxamplesffirms ho ave vercomebarrierso trategichinkingncreativeays. aradoxically,hough,herere ircumstancesnwhichompe-titionsoveremphasizedndecision-making.esearchrioritiesrediscussed.Keywords: ompetitiveeactions,onjecture,trategichinking

Rationalstrategic easoning: n unnatural ct?Although ame theorymodelshave been criticized vertheyearsfor heir implisticassumptions,everalmportantrinciplesfstrategyave mergedromhegame heoryframeworkDixitandNalebuff 991; Ho andWeigelt 997; Porter 980).Two suchgeneral rinciplesre PI) Strategicoresight;.e., ook ahead ndreason ack, nd P2)Adopt hecompetitor's indset opredictheir ehavior.heseprinciplesavebecomeincreasinglyompellings thepace of competitionas acceleratedo thepoint hatD'Aveni 1994), for ne,argues hat heconcept f sustainabledvantages no longerrelevantsee also Peters 994,1997).Managers ppear obe snappingp theemergingpopular ametheoryiteratureBrandenburgerndNalebuff 996;Dixitand Nalebuff1991;Poundstone992),which s ironicn ight fthe conomists' onventional isdomthat he trategichinkingkills eflectedn PI andP2 arenaturallyndowed:

". no businessmanssumes ither hat is rival's utputrpricewillremain onstantanymore han chessplayer ssumes hathisopponent illnot nterfere ithhiseffortocapture knight.n the ontrary,is whole houghts to forecast hatmovetherivalwill make nresponseo hisown."

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286 J.URBANYAND D. MONTGOMERY

Fisher fferedhiscritique f the classicCournotmodel n 1898. Cournot' brand fcompetitiveonjectureoes seem bitnaive:he assumed hat firm ould imply xpectits rival o continue ith ts most ecent ecisions nto he future.et, ven f Cournotwasn't xactlyorrect, e know nehundredearsater hat isherwaswrong.Whilenottaking nythingway rom he urrenttars fhypercompetitivetrategyIntel,Microsoft,etc.),firms ftenppear ogive ittle onsiderationo thefutureehaviorfcompetitorsintheir ecision-making.ational trategiceasoningas definedyprinciplesI andP2above) s discouraged ya number f ndividualndorganizationalarrierse.g.,Desh-pande ndGatignon 994;Meyer ndBanks1997;MooreandUrbany 994;Zajac andBazerman 991),whichmay ead to a natural evaluingfthese rinciples. eproposea simplemodel oexplain his ndthen onsider ow omefirms ave mprovedecision-making ycreatively otivatingfocus n competitive oves.We also discussrecentworkwhich eads to thecontraryonclusion hat here re also circumstancesnwhichfirmerformances superior hen hefirmocuses ess on the ompetition.

Observation : Much competitiveecision-makingoesn'tappear to be"strategic"An ncreasingmount fanecdotal videnceuggestshatmanagerial ecision-makingsoriented eitheroward looking head" (PI) nortoward adoptinghecompetitor'smindset"P2):

"Usually,managersnly hinknemove nadvance,fthat."Reibsteinnd Chussil1997)"... manymoves o increase hare r sales/profiteverwouldbe made f one wereaware fthe mmediateountermove."Ramaswamy,atignon,nd Reibstein 994)"Ingeneral.. there s a tendencyor ompetitorsoignore r nsufficientlyonsiderthedecisions fcompetitivethers."Zajac and Bazerman 991)

In fact, orter1980) himself as one of thefirsto observe his, otinghat irmseryoften eemtoneglect heprobable eactionsfexistingirmsoentry ecisions.Otherexamples reprovidednCamerer1991) and MooreandUrbany1994).

Observation : Strategic hinkings an unnatural ctWhilesimple n theabstract,pplying rinciplesf strategichinkingn competitivedecision-makings impeded y numberfnaturalarriers,hich re ummarizednthefollowingubsections.



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RATIONAL STRATEGICREASONING 287

Myopia.Meyer ndBanks(1997) provide very nterestingiscussion f empiricalevidence egardingurnatural aive nclinationsi.e.,biases, hortcuts)nstrategichink-ing.OfmostdirectnterestoPI is thefindinghatndividualsend o be near-sightedthats,moreikelyo focus n the hort-termhanongererm when tcomes ovaluingchoice utcomes hich reexperiencedt differentointsn time.HutchinsonndMeyer(1994) suggest hat mphasis n theshort- ver he ong-termndecision-making ayhavemultiple xplanations,ncludinghenatural endencieso place moreweight nconcretehort-termonsequencesratherhanmore bstractonger-termutcomes),othinkthisperiod orward"atherhan end-gameack," nd tobe poor ntuitiverith-meticians hen umming p outcomes ver everal eriods.Moore andUrbany1994)alsodiscuss everal elf-enhancing,eeds-basedllusionswhichmightxplain focus nshort-termutcomesand,possibly,otconjecturingtall).Difficultyteppingntotherival's shoes.Twotendenciesncompetitivetrategyeci-sions re thatwemaynever tep nto he hoesoftherival, rwemaymistakenlyhinkwe've steppednto herival's shoes.Researchnnegotiationsnd behavioral ecisiontheory uggestshat most ndividualsack sufficienterspective-takingbility"Bazer-man1994).Studies fthewinner'surse, verconfidence,nd escalationf commitmentsuggesthat ften ecisions remadewithimitedrnoattentiono how herivalmakesdecisions nd/ors influencedyourdecision-makingZajac and Bazerman 991).Thesecond roblemasbeenreferredoas the wronghoes"bias Moore ndUrbany 994),andsuggestshat teppingnto nother'shoes s cognitivelyifficult,rone oerrors ffalseconsensusnd"introspectiveheorizing"KadaneandLarkey 983).To theextentthat ryingnnew shoes s cognitivelyaxing, ecision-makersaynot ventry.Learning imitations.t is commonlyrgued hat, vermany epetitions,hedecision-makerwill earnbetter owtoeffectivelytep nto herival's hoes.Tverskynd Kah-neman1986) point utthepotential roblems ith his rgument,otinghata) out-comesmaybe delayedndnot asily ttributableo a particularction,b) variabilitynthe environmentanmakefeedback nreliable,c) importantecisionse.g., strategicdecisions) re made nfrequentlyndmayprovideessopportunityor earning,nd d)decision-makersever eally ave chance o view he utcomesfdecisionshatmighthavebeenmade"toprovide eedback. hesepoints eemespeciallymportantn a tur-bulent, omplex ompetitivenvironmenthere ompetitors'ctions ndreactions renot lways isibleClark ndMontgomery996)andstrategicecisionsrenotrepeatedvery ften. inally,irmsmay earn noughbout ompetitors'endenciesor hemarketto settle own oa steadytaten the ong un, ut uch earningakes ime enoughimethat quilibrium ayoccuronly ftermostof the ndustry'srofit as beencompetedaway JohnsonndRusso 1997).Organizational arriers.Althoughmanagersmaymake onjecturesbout ompetitorsspontaneouslyndbased uponsubjectivereaction unctions"tored n memory, eexpect hat uchconjecturesre more ikely o emergewhen nformationboutthecompetitions gatheredndanalyzed ystematically.ecent vidence uggestshat uch



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systematicesearchs rare.TheConference oard Sutton 990)found hat nly bouthalfof 205 respondentseportedhat hey ncluded ompetitiventelligencen theirmarketinglans. n a morerecent urveyMurphy 997),only27 percent f servicemarketersampled eportedonductingompetitivenalysis n evaluatingtrategy.a-worskind Wee 1993) concludedhat Less than ne third f theSBUs indicate itherspending lot of time ollecting I (Competitorntelligence)r engagingn a lotofcompetitoresearch." he dominantrganizationalorm fcompetitiventelligencec-tivityound yJaworskind Wee 1993) was ad-hoc,nwhich ompetitiventelligenceflowwasdescribed s "incompletend rregular."ay (1991) similarlyescribeseveralorganizationalisabilitieswhich nhibitearning,whileMontgomerynd Weinberg(1979) suggest process ormore ormalnalysis.Decisionweights.To theextent hat oncerns bout nternalonstraintsnd demanddominateiscussionfanynewstrategic ove, hebehavior fcompetitorsaybe lessinfluentialn thedecision-makingrocess.Forexample, he decision o enter newmarketmaybe driven n large partby an evaluation f whether hefirm's xistingcapabilitiesrovide match o thenewmarketndwhetherhemove an be implementedprofitablye.g.,with ufficientlyighdemand nd owcosts).AnevolutionaryiasFrom heperspectivefgametheory,heobservationhat ew firmsngage n activestrategiceasonings hard ounderstand,ince tseems ike an untenablequilibrium.Onemightuppose hatwhile irmstart ff ailingoreason trategicallyecauseof thepsychologicalndorganizationalarriers oted bove, ntime irmshat ngagenactivestrategiclanning illberewardedtthe xpense f hosewhodonot, ventuallyeadingto a normwhere llfirms o so.However, eargue hat volutionaryorcesmay ctuallywork he ppositeway thats,theremaybe anequilibriumnwhich trategiceasoningis limited.Themodel nFigure helps xplainhowsuchan equilibriumouldoccur, rivennpart ywell-knownnertialendenciesndecision-makingcf.Samuelson ndZeckhauser1988; Schneier 997). In themodel, he value of strategichinkingeflectshe firm'sassessmentftheutilityfmaking ecisions aseduponprinciplesfstrategiceasoning(e.g.,PI, P2). Firms lacing higher alue on decision-makingaseduponsuchprin-cipleshave a greaterikelihoodfconductingompetitiventelligence,ince an under-standingfcompetitorehaviors anessentialnput.More ffortllocatedocompetitiveintelligence illgenerallyeduce ncertaintyboutrivals'currentnd futureehavior,i.e., mprovehefirm's nderstandingf rivals nd mprovetsabilityo forecast uturemoves.All else equal,the apabilityopredict ival ehaviorhould einforcehefirm'spracticefapplyingrinciplesfstrategiceasoningn tsdecision-making.he model sconsistent ith herecent ork fCohen ndLevinthal1990),whocontendhat firm'sinvestmentsn"absorptiveapacity"itsabilityo search or,nterpret,nduse informa-tion in decision-making)nables and encourages uturenformationatheringnd



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RATIONALTRATEGICEASONING 289

Figure.Uncertaintynd trategicecision-Making

/'Value ofStrategicX^ - Decision-Making )-^^

\ UncertaintyN\ ^ - -^^^ aboutRival's ^J ^ Competitive >\^ Current/FutureS, I Intelligence >f Behavior^^_y ^^^_ ^^y

* PI = Strategicoresight;hinkhead nd eason ack.P2=Adopthemindsetf ompetitors;redictheirctionsnd eactions.

decision-makinghich ses that nformation.urmodel ddsthenotion hat hevalueofexternalntelligences a functionfthe rinciplesywhich hefirmmakes tsdecisions.However,hebarrierso strategichinkingeviewedarlier uggest spiral, rpathdependencycf.Dickson1996)workingn theopposite irection.irst,onsider ncer-taintybout ivals.Wehave een bove hat here remany easons oexpecthat irmsreoften ncertainboutthelikelybehavior f competitors,n light f thedifficultyfsteppingnto ivals' hoes, hedifficultyfobservingnd earningncomplex nviron-ments,ndpossibleorganizationalarrierso competitiventelligence. iventhis, hepathdependencymaydevelopas follows:higher ncertaintybout rivals owers heprobabilityhat rinciplesfstrategiceasoning illbeused ndecision-makingsimplybecausetheunpredictabilityf thecompetitor akes tmoredifficulto integrateom-petitors'ehaviorntodecisions). his, hen,reates ess motivationo conductompeti-tive ntelligencehich,nturn,ontributesurtherouncertaintybout ivals. rom hissequence merges spiral nto self-reinforcingevaluation f strategiceasoningndecision-making.1ohenand Levinthal1990) describe similar athdependencynwhich firm,aving ailed o makepast nvestmentsnabsorptiveapacity,ocks tselfoutoffuturepportunitiesalso,seethe competencyrap" iscussed yLevittndMarch1988).

A numberf researchuestionsmerge rom hisdiscussion:A.Decision-making:owhat egree omanagersttempto reason bout ompetitorsntheirtrategicecisions?What rethe eaturesfthis easoning rocess? or xample,rethere ertain imensionsfcompetitors'trategieshich re more bservablerpredict-able and more ikely o be accounted or n decisions?n general, o what xtentre



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290 J- RBANY AND D. MONTGOMERY

decisionsprimarilyeactive r proactivend is thisrelated o the firm'sntelligencegatheringctivities?cf.Cohen nd Levinthal 990).To what egree re decisionsmadeindependentlyfcompetitorehavior?B. Informationcquisition:How do firmsather ompetitiventelligence?pecifically,whatnformationsgatheredndbywhom?How much ariancei.e.,uncertainty)s therein beliefs boutcompetitorscrossmanagerswithin ross-ftmctionaleams?To whatdegreedoes uncertaintyboutrivals'behavior educe heperceived alueof strategicdecision-makingndcompetitiventelligences. increase hemotivationo conductn-telligencend mprove ecision-making?C. Dissemination,hared nterpretation:ow is informationbout ompetitiveehav-iordisseminatedithinrganizationsndhow smeaning lacedonthe nformation?orexample, owhat xtent o teams onfrontifferencesf nterpretation/factoobtainconsensus,r doessubstantialariance nbeliefs inger?Whatdetermines hosevisionofthe ompetitionrevails?D. Learning:To what xtent omanagersave he pportunityoobservend earn boutchangesncompetitors'trategiesnd reactions fcompetitorso eventsnthe nviron-ment ndpatternsnthosebehaviors ver ime?

Observation : Outcomes ften an be improved y payingmore ttention ocompetitiveehavior nd reactionsThe barriersostrategichinkingescribedbove uggesthatherexist pportunitiesorimprovingecision-making.herehavealready een a number f stridesmade,both nresearch ncompetitiveeactionstocontributeo our bilityopredict owcompetitorswillreact) nd ntheuse of simulations hich orce longererm erspectivendplacemanagers irectlynto ompetitors'hoes.

Understandingdrivers:"nsightsrom esearchncompetitiveeactionsSome essonswhichmanagersmightxtract romhe iteraturencompetitiveeactions2include: Stealth s good Chenand Miller1994; MacMillan,McCaffery,nd VanWijk1985;Venkataraman,hen, nd MacMillan1997).Moves which re notobserved annot ereactedo.Whilepricemoves requitevisible, onpricections ike ervicemprove-ments r newdeals withdistributorsre less visibleand, therefore,ess likely oproduce eactions.



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RATIONAL STRATEGICREASONING 29 1

Don't hit rivalswherethey ive (Robinson 988;Chen,Smith,nd Grimm 992).Attackswhich itrivals nstrategicallymportantarkets illsurely rovoke reac-tion. Moves which re costly or he rivalto follow rovokeweakerreactionsat leastinitially)ChenandMiller1994;Chenet al. 1992,LeeflangndWittink992;Mac-Millan t al. 1985). Competitors ay aybacktoobserve he uccess fa firm'smove,learningoth boutmarketesponsendtechnologynpreparationor decision boutwhetheroreact, articularlyhere eavy pfrontnvestmentsre nvolved.There s generallyseful dvicecapturedn this iteraturehichmight elp managerssteel hemselvesor ompetitiveeactionsr, lternatively,oavoid hem.nfact,videncesuggestshatmoveswhich re less provocativere associatedwithbetter erformance(Chenand Miller1994).The case studieswhichfollow urtherllustratehevalueofthinkingystematicallybout ompetitoreactions.

Methodsoraiding trategichinkingA varietyfsuccess toriesan be foundn which irmsaveovercomet east omeofthebarriersostrategichinkingescribedarlier. omeexamplesnclude:Forcing "look ahead." Reibsteinnd Chussil 1997) describe heexperiencef Ad-vancedCompetitivetrategiesACS) inhelpingeveral ompaniessee into he uture"via simulation.orexample, simulationxercise orShell Oil helped hecompanyrealizenot nly hat ompetitorsould e almost ure ocopy n nnovation,ut lso thatcompetitiveeactions ould owerprofitxpectationsy$133 million verfiveyears,producingprofitelow hatwhich hey ould xpect o obtainwithoutmplementinghenewconcept.TVyingnnew shoes. t is saidthat ele,thegreat razilian occer corer,ften layedgoalie in practice o he coulddevelop n understandingf rivalgoalies' reactions odifferentffensive oves. imilarly,all of Fame defensive ackMichaelHaynesfre-quentlyat nonmeetings ithwidereceivers. s wehavediscussed,here s a similarvalueforbusinesspeopleo step nto he shoes of thecompetition,s reflectedn thefollowingxamples:(a) One forward-thinkingigh-tech anager,oncernedbouthowa largecompetitorwould eact o the ossof a major ustomero hisfirm,layed tricknhisstaffy

announcinghat hecompetitoradtaken n one oftheirmajor ustomers.fterpanic-strickeneries fmeetingsn which numberfresponseso the ompetitor'sconquestweredevelopedndevaluated,hemanager inallyeteveryonenow bouttheruse.Althoughot n approachwe wouldrecommendthemanagerwas nearlyfired!),hemanagereportedhathis xercise nabled im o dentifyndbepreparedfor ll the ountermoveshe ompetition ade.



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(b) Anotherirm,trugglingith he ompetitiveidding rocess, eveloped simulationwhich equiredmanagersoconsider n detailhowcompetitors ight e evaluatingthebidding ecisions.After evelopinghesimulation,he firm'smanagersweresuccessful n 12 ofthenext14bids MontgomeryndWeinberg973).(c) Similarly,WarGames"placedifferenteams fmanagersfromhe amecompany)indifferentoles somefor he irm,omefor he ompetition.war ollegeheldforSterling ealthLatinaproduced pre-emptivetrategyhat ffectivelyhwartedcompetitor'sewstrategy.hestrategyreamedp byoneofthe ompetitiveeamsinthe imulationurnedobe exactlyhe nethe ompetitorasactually lanningouse (Carbona1997;ReibsteinndChussil1997).Upping organizationalttention o competitiventelligence.t appears hat rganiza-tional upportor ompetitiventelligenceCI) isextremelymportantndeterminingowaggressivehe firms in conductingI. Organizationalupport enerallyomeseitherfromop managementr from heemergencefa CI "champion"JaworskindWee1993).A structuredrocess nd shared xperiencesrewaysto enhance ompetitiveintelligencettentiony enhancingtsperceived alue andhopefullyoweringtsper-ceivedcost MontgomeryndWeinberg979).Moreproactive ompanies dopt om-petitorsmuch s IBM andHewlett ackardhavehistoricallydopted ustomers.hismeans hat team f executivess assigned o attend o and know given orpotential)competitornd to assist the firm n understandinghe threats nd opportunitieshatcompetitor ayoffer.Whereverheseexecutivesre promotedn thecompany,heycontinueo serve nthe doptionommitteef that ompetitor,herebyrovidingon-tinual nddynamicnsightsnto he ompetitor'sikely ehavior. omecompanies avefoundhat tangiblenemy nspires reaterffortrommployeeshan ome ntangiblecalltomaximizehareholderrofits.orexample,hemotto osted hroughoutomatsuinOsaka is "CATMARU" (encircle at).These case studies resentnecdotal videncewhich llustrateshat ncouragingtra-tegicreasoningbout ompetitorsften equiresxtraordinaryeasureswhich emovedecision-makersromheusualmanagerialoutines.et,we are a longwayfrom ullyunderstandingompetitiveeaction atternsnd howsimulationsndother echniquesimprove ecisionperformance.esearch uestionswhich merge romhisdiscussioninclude:A. Issues in competitiveeactions.A more omplete eview f the iteratureuggestsseveralnterestingontroversiesi.e.,opposing ypotheses/findings)egardinghefactorsaffectingompetitiveeactions. orexample, leadingmarkethare irm homakes naggressivemovemayeither vokeswift eactions rom ivals becausethey eargreatlosses orbecause the eader'smoves rehighly isible;Clark ndMontgomery997;Venkataramantal. 1997) ormaydiscourage eactionsbecauserivals ear etaliation;Bowman ndGatignon 995). Similarly,esearch s inconclusiven whetherndustrygrowthncreasesRamaswamy,atignon,nd Reibstein 994;Robinson 988) or de-creases Porter 980)theprobabilityfcompetitiveeactions.



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RATIONALSTRATEGICREASONING 293

B. Improving ecision-makingerformance:What re differentethods or ncour-agingmanagersoconceptualizeutureutcomes ndthedynamicehavior f others?nparticular,hould hefocus e ontraininge.g.,seminars,imulations)rdevelopingndimplementingtrategicrinciple-basedlanningnddecision-makingoutineshroughouttheorganization?hatmethods elpmanagersostep nto herival's hoes? e.g.,Whatcan welearn romhe iteraturennegotiatorrole-reversal?"f.Pruitt981)Finally,rethereways o measure trategiceasoningkills ndempathyohelp dentifyndividualswho are ntuitivelyffectivetrategichinkers?C.Value of imulations.What re he oundaryonditionsn earningromimulations?Specifically,rethey elpfuln situationsnwhich here s no obvious estmovefor hedifferentlayersnd where ayoffunctionsan be estimatednlywith ubstantialn-certainty?o whatdegree s a simulation'saluecapturednprecise orecasts f com-petitive ehavior s. whatmanagersearn bout heir wnstrengthsnd weaknesses ndecision-making?Observation : In somecircumstances,irms houldpayless attentionocompetitiveehavior nd reactionsA contrastingositions that irmsften veremphasizeompetitionn their ecision-makingcf.DeshpandendGatignon994).There ppear obe three asic dimensionsfthis rgument.Overemphasis n incrementalroductmprovement.o the xtent hat xistingom-petitiveroductsre used as benchmarksnproduct evelopment,heres a strong os-sibilityfanchoringffects hich an imit reativity.hmae 1988)made compellingargumenthatproduct evelopmentften uffers henfirms ocus on incrementallyimprovingponcompetitors'xisting roductsatherhan eeking ew sources f valuefor ustomers.im andMauborgne1997) haverecentlychoed his entiment,indingthatgrowths strongestmongfirms ho"seek to maketheir ompetitorsrrelevant"throughstrategyhey all value nnovation.alue nnovatorsmonitorompetitors,utdo notuse them s benchmarks.. because they) o not focus n competing,hey andistinguishhefactorshat eliveruperioraluefrom ll (other) actors."heemphasisin thevalue nnovationtrategysdevelopingreative ew ources fvaluefor ustomerswith ig deasunconstrainedythe ndustry'sonventionalisdom rexistingompeti-tive apabilities.n aninterestingtudyf nnovationerformance,atignonnd Xuereb(1997) identifyeveralmoderatingactors hich nfluencehen competitor-,ustomer-,or technology-orientationaybe mosteffective.heyconclude, orexample, hatcompetitor-orientations superiorn markets ith essuncertaintyboutdemand, hilecustomer-orientationecomesmore ffectivehendemands moreuncertain.Overemphasisn relative erformance.nsome ndustries,nformationbout ompeti-torperformancee.g.,markethare)hasbecomemorewidely vailable hann thepast,



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potentiallyreating focus n relativeharendecision-making,hichmayharm rofitperformance.rmstrongndCollopy1996)reviewarly ame heorytudieswhich indsubjects redominantlyaking ecisions omaximize hedifferenceetween heir er-formancend their ival'sperformance,venwhen tmeant urtingheir verall erfor-mance i.e.,the lassic"pyrrhicictory").Overstrategizing. hilecarefultrategiceasoningan improveheoutcomes f com-petitive ecision-makings we discussedbove, heres a dangerwhich ests n thefactthatyou maybe playing rivalwho s notof the ame mindset. o theextenthat heopponent lays n naivefashionwhichmaybe thenorm!) rationallayermayperformpoorly ince his/heruccessdepends argely n that ival's bility o readsignals ndfollow hegame MeyerndBanks1997).Being verly trategican be detrimentalhentheother artys following differentetof rules.Coincidentally,xelrod1984)notesthat heproblemf some of themore ophisticatedecision ules nterednhis classicprisoner'silemmaournamentsasthat,nattemptingosense ndadapt otheplayofthe ival,hey ftenrovided confusingatternfpriceswhich ther layersooking orcooperativeatternsould notrecognize.n fact, here re situationsn whichnaivedecision-makingppears oproduce atisfactoryifnot uperior)esults. bservationsand 4 seem to be in complete onflict,utmaybe reconciled ythepossibilityhatmanagersveremphasizeompetitors'urrentehavioragain, speciallyhemost isibleaspects ikeprice ndproduct),etunderemphasizer gnore utureehaviornstrategicdecision-making.t does seem a mistake o achieve omemargin fvictoryverthecompetitionfthat ictorys notsomehow irected t creating uperior alue for us-tomers n a waythatwill contributeo largermarkethare n the futurecf. Day andWensley 988).Several esearch irectionsollow rom hisdiscussion:A. Competitor-s. customer-orientation:s there way oconceptualizen"optimal"balance of customer-ndcompetitor-orientation?ddressinghisquestion mpiricallyfirstequiresmetrics or eterminingompetitor-s. customer-orientation,nd dentify-ingthe ndividual,rganizational,nd environmentalactorswhichmakesome firmsmore/lessompetitor-orientedndmoderate he effect f such"orientation"n perfor-mance.Given hese ata, tmay epossible o dentifyonditionsnderwhich irmsendto over- runder-emphasizeompetition.atignonndXuereb1997)make n excellentinitial oraynto hisdomain, utmany uestions emain. orexample, hey ind hatcompetitor-orientations superiorwhendemand s less uncertain,et s worsewhenmarket rowthate s low.Giventhesepotentiallyonflictingesults,o whatdegreeshould firme competitor-orientedn a maturemarket?B. Competitor enchmarking: nderwhat onditionsandhow)does benchmarkingcompetitors'trategyndperformancectually arm hefirm's erformance?cf.Ohmae1988)Arefirmsess innovativenindustriesn which enchmarkings more ommon?C. Simplervs. morecomplex onjectures:f itis observed hatmanagers o tend omakesimple ssumptionsboutcompetitors'ehavioror ignore hecompetitorslto-



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RATIONALSTRATEGIC REASONING 295

gether),s itbecauseofthecognitive/effortosts ofmore ophisticatedonjecturesrbecausethe impleronjecturesre"good enough?" nderwhat onditionse.g.,underwhatgameor institutionharacteristics;reps1990) do simpler onjecturesrnaivestrategieswork?"

DirectionsHutchinsonndMeyer's 1994) analysis fdecision-makingn sequentialhoiceprob-lemsprovidesn importantmpetus or esearch hich xamines owactualdecision-makingndynamicontextsiffersromhat onsistent ith ormativeheory.ere,weaddtotheir ork onsiderationfother iases ndproblems hichmake ationaltrategicreasoningifficult;nparticular,iases nperspective-takingndorganizationalarriers.We believe hesebarriersiscourage ecision-makingasedon strategiceasoningndcan create path ependencyhich educeshe robabilityffollowingtrategichinkingprinciplesn thefuture.n addition, e providetleastanecdotal vidence fpotentialsolutionsotheseproblemse.g.,simulation,ole-playing),lthoughhefield s a longwayfrom nowingow hose olutions orknd,more ignificantly,hen heyre ikelytowork.

FieldresearchWe supporthesuggestionyHutchinsonndMeyer 1994) thatbuilding positivetheoryfstrategicecision-makingequirestudiesn thefield o extendxistingnowl-edgefromaboratoryork nd to confirmnecdotal vidence. hismay npart nvolvemore raditionalurveytudies fmanagers.he fieldhasseena recent rendnstudiesobtainingmanagers' eactionso case scenarioswhichmanipulateeytheoreticalon-structsBoulding,Morgan, nd Staelin1997;Mullins ndWalker 996; Urbany ndDickson 994).Thedownsidef hismethodology,owever,sthatt sdifficultocapturedynamicsnlearning hich anbe more eadilyxaminednlaboratoryxperimentsnwhichdecisions rerepeated vermanyperiodsMeyer nd Banks 1997;Moore andMoore1989)or n studies fteam ompetitiveimulationsClark ndMontgomery996,1998;Glazer, teckel, ndWiner1990).Theseconcernsmerit erious onsiderationfusing ualitative ethodologiesn thefieldBonoma1985;Miles andHuberman994),which anprovidemore n-depthand perhapsongitudinal)nsightntomanagerialn-formationearch, easoning,nddecision-making.orequalitativeesearchromisesricher escriptionfboth he ndividualecision-makerndthe nvironmentalndorga-nizationalontextn which /he ives.



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Exploringndexplaining eterogeneityWe also believe hat n importantesearch irections to determinehetherhere xistssignificanteterogeneitynstrategiceasoningkill cross ndividualsndorganizations.Althoughtrategiceasoningppears obe an unnaturalctformost eople, t sclear hatsomefirmsnd ndividualsre betterstrategichinkers"han thers. orexample,omesubjects how a systematicallyigher oncern orfutureonsquences hando others(Strathmant al. 1994).Similarly,ndecision roblems hich equireomewhatonin-tuitivenferencesbout notherarty's ayoffs,here s a certain roportionfsubjects(thoughmall),whogetsthecorrect nswerBazerman1994).At thesametime, nalternativeiew s that ifferencesnperceived ecisionwisdom/skillaybe spurious(Deutsch ndMadow1961).A relevant irection f researchnthis reais to explorewhetherhere xist eliable ifferencesmong ecision-makersnstrategichinkingkillsand, fso,what eparateshemore romhe ess strategic.Wediscusshereboth hemountingvidence egardingndividualndorganizationalbarriersostrategicecision-makingndthefact hat hose arriersan be overcomensomesituations.notherituations,owever,irmspparentlyaytoo much ttentionothe ompetition.hechallenges notonly ohelp mprovemanagers' bilityothinkndynamicerms ndto think ith viewfromnother'serspective;ut lso to determinehow to design rainingrograms,rganizationaltructures,rocesses,nd informationsystems hich an accommodaterpushus beyond urnaturalnclinations.here svalue ntheprinciplesfstrategiceasoning;heprimaryssuetoday s when nd howfirms/managershould ry o extractt.

AcknowledgmentThe authors ould ike o thank obMeyer or is excellentuidancendthe articipantsat theCharlstononference or heir omments,speciallyKimCorftnannd MarianMoore.

Notes1. Although e arenot ware fany iteraturenthis ointnthe iteraturencompetitiveecision-making,

an analogous ssue s whether ncertaineliefs bout onsumerehaviornfluence anagers' ecisions.Dickson tal. (1997)reportubstantial ithin-firmariationuncertainty)mong etail roceryxecutivesregardingeliefs bout onsumerrice earch ehavior.n related tudies,t was found hatnformationaboutconsumerearchbehavior ad a relativelyow impact n thepricing ehavior f retailgroceryexecutivesntheir esponseso a pricingase studyUrbanyt al. 1998).2. A larger ersion f thepaper s availablefrom heauthorswhich ontains ablessummarizingecentempiricalesearchncompetitiveeactions.



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rational strategic thinking: an unnatural act

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