Consider, for example, the 2002 dock strike on the West Coast of the U.S., which disrupted normal shipping in ports from San Diego to the border with Canada for a couple of weeks. A survey conducted by the Institute for Supply Management shortly afterward found that 41 percent of the respondents had experienced supply chain problems because of the strike — but only 25 percent were developing contingency plans to deal with future dock strikes.
We can train our intuition to offer a better guide in decision making. To do so, we must be aware of our biases and remember that all models start with assumptions. Engaging a diverse set of parties, including relatively naive ones, forces us to articulate and challenge those assumptions by seeking empirical data. No model is objective, reflecting some universal truth. Instead, business models represent highly subjective views of an uncertain world. Rather than seeking the ultimate model or expert, managers should adopt the axiom cited by General Dwight D. Eisenhower regarding the successful but highly uncertain D-day invasion in World War II. He asserted that “plans are nothing; planning is everything.” A good forecast informs decisions today, but equally important, forces us to consider and plan for other possibilities.
Reprint No. 10202
- Tim Laseter holds teaching appointments at an evolving mix of leading business schools, currently including the Darden School at the University of Virginia and the Tuck School at Dartmouth College. He is the author of Balanced Sourcing (Jossey-Bass, 1998) and Strategic Product Creation (with Ronald Kerber; McGraw-Hill, 2007), and is an author of the newest edition of The Portable MBA (Wiley, 2010). Formerly a partner with Booz & Company, he has more than 20 years of experience in operations strategy.
- Casey Lichtendahl is an assistant professor of business administration at the University of Virginia’s Darden Graduate School of Business. His research focuses on forecasting and decision analysis.
- Yael Grushka-Cockayne is an assistant professor of business administration at the University of Virginia’s Darden Graduate School of Business. Her research focuses on project management, strategic and behavioral decision making, and new product development.