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How To Improve Your Strategic Planning Through A Premortem Analysis

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Strategic planning is difficult and its track record is notoriously bad. According to estimates, only 10-30 percent of all strategic plans get implemented as intended. One key reason is that people are generally bad at planning, especially when it concerns complex and long-term matters—such as strategy. Various biases and blindpots get in the way and lead to overestimating what can be achieved.

I spoke to Beirem Ben Barrah and Philip Jordanov of Neurofied to talk about this important issue in strategy and learn how they counter it with their insights from behavioral psychology and neuroscience.

The Planning Fallacy Problem

With respect to the strategic planning problem, Ben Barrah and Jordanov point out that there’s not just one, but many cognitive biases that cause people to be far less rational than they think they are. Examples are “overconfidence bias” (the tendency to be more confident than accurate about our own answers to questions), “ambiguity aversion” (the tendency to dismiss or avoid strategic options with unknown probabilities), and “planning fallacy” (the tendency to structurally underestimate the time and budget needed to get something done).

All are important barriers to effective strategic planning, but especially the last one, planning fallacy, is getting in the way. Ben Barrah, “The planning fallacy is a bias that leads individuals and organizations to underestimate the time, resources, and difficulty required to complete a project. This results in unrealistic timelines, inadequate resource allocation, and a lack of contingency planning.” As a result, Jordanov adds, “managers may fail to anticipate and plan for potential roadblocks and delays, which can lead to project failure or significant cost overruns.”

In countering this bias, the common answer is more data, more analysis, and more quantification—with long lead times for strategy development projects and extensive strategic plans as a result. However, as Jordanov explains, “this rational approach to planning and risk management, even with all its tools and technology, still leaves room for human error. And quite a lot of it.”

So, if more data, analysis, and quantification is not the answer, what is?

The ‘Premortem’ as Solution

Neurofied has developed an extensive toolbox to deal with a broad range of biases in business. One of these tools is the “premortem,” a technique invented by Gary Klein (research psychologist and Fellow of the American Psychological Association) for identifying flaws in a plan that may otherwise go unnoticed. As such, it is particularly suited to counter the planning fallacy.

Ben Barrah, “The premise of the premortem is simple: before a decision is made, the team collectively imagines a future in which the project has failed and conducts a post-mortem analysis to determine the reasons for this failure.” So, instead of trying to find out after the fact why a strategy has failed (post-mortem), the analysis is done pre-mortem, before the implementation of the strategy has started and even before the strategy has been finalized.

The premortem differs from traditional risk assessment and scenario planning methods in an important and interesting way. It takes advantage of the tendency for individuals to better explain past events than imagine future events. This is known as hindsight bias, the tendency to know things better afterwards. By imagining a future failure and looking back, the premortem allows for “prospective hindsight.” In other words, it uses one bias (the hindsight bias) to beat another bias (the planning fallacy).

How a Premortem Works in Practice

So, it takes a bias to beat a bias. But how does this work in practice? This is what Neurofied specialises on. Rather than sticking to the theory, they turn insights from behavioural psychology and neuroscience into actionable methods and tools. These are the ten steps they recommend:

  1. Schedule a meeting with a diverse as possible team before finalizing your strategy or strategic plan.
  2. Explain the purpose of the meeting as a premortem analysis and the objective of identifying potential risks and challenges before implementing the strategy.
  3. Begin the meeting by stating a hypothetical scenario in which the strategy has failed, for example "We are X months ahead, and our new strategy has led us to the edge of bankruptcy. Why did it turn out to be so catastrophic?"
  4. Ask each team member to individually write down their potential reasons for the failure and keep them anonymous.
  5. Once all team members have finished writing, ask them to share their reasons with the group. Go around the room, one reason at the time, and start with the most junior person.
  6. Encourage open discussion and debate among the team members to further analyze and understand the potential reasons for failure.
  7. Take note of any recurring or common reasons for failure that were identified by the team members.
  8. Use these reasons to identify and address potential risks and challenges before implementing the plan.
  9. Identify measures to mitigate or minimize these risks and challenges, either during the same meeting, or as a follow-up.
  10. Adjust the strategic plan accordingly by incorporating the identified measures as part of the new strategy.

By conducting a premortem analysis along the lines of these ten steps you create more awareness of the risks and challenges associated with a new strategy. Through that awareness, and adjusting the strategy accordingly, you should be better able to estimate the time, resources and difficulty it really takes to implement your strategy.

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