Advancing Strategy through Behavioural Psychology

Create Competitive Advantage in Relentlessly Changing Markets

Pontus Wadström

• Publisher: Kogan Page
• Year: 2022
• ISBN:
  9781398604865
• Edition: 1
• Topic: Commerce
• Subtopic: Stratégie commerciale

Accelerate strategy and achieve desired results with this guide to understanding and influencing employee behaviour, based on the theory and practice of strategic management, behavioural psychology and change. The realisation of strategy is entirely dependent on employee behaviour, so in order to achieve business results it is vital that managers and leaders develop an understanding of human behaviour. Advancing Strategy through Behavioural Psychology shows that by identifying which behaviours should be measured and encouraged, organizations can succeed in implementing strategies for continuous adaptation in a rapidly changing business environment.Grounded in practitioner experience and academic research, this book argues that to achieve set goals organizations should spend less time planning and sending out instructions and more time on providing feedback on implementation and drawing out key points to be learned. By focusing on behaviour in this way, organizations can create a culture where innovation is encouraged and employees want to contribute to the company's future. Ensure long-term success and seize competitive advantage with this essential guide to identifying the key behaviours which will create business results and what influences them.

Part One

A theory of everything

Every truth has relation to some other. And we should try to write the facts of our knowledge so as to see them in their several bearings. This we do when we frame them into a system. To do so legitimately, we must begin by analysis and end with synthesis.

WILLIAM FLEMING

In order to understand strategy from a behavioural perspective, we need to have a common understanding of certain concepts and promote an overall comprehension of how people actually work.

IN THIS PART

This part will discuss the following issues:

• What is behavioural strategizing?
• What are the basic assumptions of behavioural strategizing?
• How can we view the science of behaviour as a truly important part of managing a business?
• What is meant by ‘a theory of everything’ in this context?

01

Introduction to strategy and behaviour

A quote often attributed to Charles Darwin is about the survival of the fittest. It reads: ‘It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.’ Although it is a great synopsis of Darwin’s thoughts on evolution, he never actually said this. Instead, an American management professor called Leon C Megginson allegedly said this in a speech at Louisiana State University in 1953. His main reason for using natural selection as an example was arguably that he believed change is a natural law and adaptation by individuals, institutions and societies is a must if we want to escape a quick demise.

How do organizations become successful in both the short term and the long term? How do companies seize competitive advantage? What principles can organizations apply in order to increase the degree of goal achievement? How can an organization ensure that every truly good and viable idea that is born, is also realized? How can organizations work in order to develop and realize strategies and achieve set goals in a systematic way? How do organizations become successful by drawing on: size – big; tailoring customer unique solutions – best; gaining temporary monopoly – fast; and exploiting the strength of their brand – beautiful? How do they become successful by continuously learning how to improve – being adaptable?

The truth is that there is scope for nearly all organizations to function better. Strategy is about considerably more than just formulating a plan. Above all, it’s about realizing an idea or ambition and achieving set goals. Far too many companies fail to live up to their full potential. Far too many organizations fail to utilize their resources in an optimal, or even near optimal, way. Most organizations have the potential to function better, make more money and have more satisfied customers and more satisfied employees. They have the potential to be quicker to adapt.

By applying principles to strategizing that have been drawn from behavioural psychology, organizations can get considerably better at achieving their goals and fulfilling their purpose – at realizing strategy. In these simplified, concise terms, this is hardly news. It’s about shifting the focus of strategizing from talking about how something should be done to focusing on how it was actually done, learning from it, and making adjustments to find a better way forward.

The brain has a number of functions that have developed over the course of human evolution and that make it impossible to lead organizations using the customary, established models that are taught in, e.g., business schools and that many rely on when managing an organization. The human survival instinct makes us prone to getting stuck in a rut. It’s built into our DNA. The orbital cortex – the ‘scaredy brain’ – is always warning us of potential dangers. This has been a benefit to mankind through all the stages of what we call evolution. But the dangers were easier to recognize and predict during early human development – such as a dangerous animal or a cold winter ahead.

In a world that is changing ever faster and with a business environment that is becoming harder and harder to anticipate, ingrained ways of thinking pose problems for organizations that want to be at the forefront. To avoid getting stuck in a rut, they need to learn to develop their own future while at the same time delivering in today’s market. Organizations need to make an effort to question and change the existing structures and ideas more often, continuously and in a systematic way. This requires both courage and competence.

There are more than 100 years of research findings about what affects human behaviour and how people learn, that can help organizations get better at adapting and developing – results that extremely few companies harness in their organizations. There is often a lack of understanding of the principles that govern human behaviour in organizations. And hence, those that understand and apply them stand a good chance of taking up an attractive position in the market of the future.

There are various ways to create sustainable, high-performance organizations. All organizations can perform better, achieve their goals and reach their full potential – whether this is a matter of creating a better capital base by increasing the return on invested capital, reducing workplace accidents, building a stronger brand, creating a more innovative product development process or providing better service at the same cost.

Besides these options, the organization’s way of strategizing can become a lasting competitive advantage in and of itself. A good way of starting such a journey is to become behaviour-oriented.

02

A common language for strategy and behaviour

Through its strategy, every organization can map out a direction and create a competitive advantage for itself. The strategy, however, cannot be written in stone but should adapt to circumstances in the outside world. The outside world is changing, societies and technologies develop, branches of industry flourish and fade, and customers’ needs change. This means that the strategy and the organization need to change with it. Change is thus necessary if we are to make sure that we will achieve our goals. Employee behaviour is what produces results in an organization. So, in order to realize strategy, we need to understand what behaviour is, how we learn new behaviour and what makes us behave in a certain way. We need proper words.

Author Mark Twain was a master with words. Allegedly, he wrote: ‘The difference between the almost right word and the right word is really a large matter – ’tis the difference between the lightning-bug and the lightning.’¹ Naturally, Twain’s ingenious explanation is transferable to the context of organizations.

Organizations need to deliver today while at the same time ensuring that they will remain competitive tomorrow. To do this, change is a prerequisite. This means that the organization needs to bridge the gap between strategy and change – it needs to bring about a more change-inclined or innovative climate to achieve the goals, present and future. More precisely, this has to do with behaviour as a lever in strategy, with how we can utilize the principles of behavioural psychology in order to realize strategies for continuous change and adaptation.

Consequently, theoretically this book is at the crossroads of two major knowledge domains: management and behavioural psychology. Within management the emphasis lies in strategic management, but a critical component for evaluating success is also performance measurement and management. In addition, if organizations are to be successful, changing continuously is a must, and therefore ideas from change management and innovation are also drawn upon. Since embracing new principles and methods for managing an organization includes changing the existing ways of how the organization is led, management innovation is also a discipline where I have found inspiration. Regarding behavioural psychology, that focus is narrower: the absolute main point of reference is applied behaviour analysis and, as applied to organizations, organizational behaviour management.

What I get at the nexus of these domains is an interdisciplinary way of managing an organization’s way of strategizing to continuously learn and adapt to become more successful, regardless of how success is defined. I call this behavioural strategizing. Behavioural strategizing is thus a way of managing an organization to ensure long-term success through continuous learning, change and adaptation. Two of its characteristic features are that the whole organization’s way of ‘behaving managerially’ is based on principles drawn from behavioural psychology, and that the focus of attention in strategizing is on behaviour.

In many aspects, this reasoning is similar to the foundation of behavioural economics, which studies the effects of psychological and social factors on decision-making, rather than traditional economic factors. Or, even closer, the field of behavioural strategy that argues for the incorporation of strategic management with behavioural economics. However, while both of these streams’ emphasis is on the behavioural theory of the firm, or possibly psychology in a wide sense in relation to economics and strategic management, my foundation is behaviourism and my focus is behavioural psychology, principles of learning and applied behaviour analysis.

What we share, though, is a conviction that by combining traditionally separated areas of expertise, we can view things from new perspectives, and hopefully learn something new about how long-term organizational success can be achieved. My ambition with this book is to provide a broader approach, with more perspectives considered important to matters of organizational performance and success than in traditional strategic management. Simultaneously, I also hope it provides more precision about what creates such performance and success, what strategy in its essence is about – doing ‘things’, as behaviour is always the focal point.

Organizations that strategize behaviourally focus on driving continuous learning and adaptation by drawing on the laws of human behaviour. They become successful by getting better at learning and adapting their behaviour to changing c...

Table of contents

• List of figures
• About the author
• Preface
• Acknowledgements
• Prologue: Realizing strategy
• Part One A theory of everything
• 01 Introduction to strategy and behaviour
• 02 A common language for strategy and behaviour
• 03 Behaviour as the least common denominator
• Part Two Arbitrariness is over
• 04 Old management principles are no longer good enough
• 05 The organization, its development and lack of development
• 06 Evidence and measurement
• Part Three Unexpected simplicity
• 07 Behaviour: The foundation of everything
• 08 Activators: The igniting spark
• 09 Consequences: No feedback is also feedback
• Part Four Strategy is behavioural change
• 10 A behavioural view of strategy
• 11 To realize strategy is to change
• 12 Exploiting competitive advantages: Big, best, fast and beautiful
• Part Five Smart as a competitive advantage
• 13 From individual insight to competitive edge
• 14 Smart and behavioural strategizing
• 15 The future of competitive advantage
• Inspiration and pointers to further reading
• Index