Today, there is an almost unlimited amount of information available to us. I can do a Google search on a topic of interest, and dozens or hundreds of links from the media, blogs and encyclopaedias will instantaneously appear on my computer screen. Through my university connection, I can remotely access a huge collection of scientific articles and books, which I can download to read whenever I need to. People’s level of education has increased. Most young people obtain a tertiary education. The amount of people with PhD degrees has multiplied in recent decades. People travel, study abroad, and know the world better than previous generations.
Nevertheless, we still make stupid decisions. Leaders are unable to read the signs of change or to ponder the background to the solutions. Researchers cannot predict imminent upheavals and crises. Ministers are involved in politics with a short attention span. The wider audience believes what it is told on social media. General education is shallow. Let us consider some of the recent events:
The Financial Crisis
In 2008, the global financial system ended up in a serious crisis. As a consequence, there was a global economic recession, which progressed from a bank crisis to the real economy and then to a government debt crisis in Europe. Economists could not foresee this massive, systemic crisis. Only a few marginal researchers (Foster & Magdoff, 2009) warned about the instabilities of financial capitalism, but nobody took any notice. The world’s leading organisations specialising in fiscal policy were completely unaware of the approaching problems. During 2005–2007, the Chairman of the US Federal Reserve, Ben Bernanke, repeatedly assured the public that the housing market was stable (https://mises.org/library/ben-bernanke-was-incredibly-uncannily-wrong). International Monetary Fund (IMF) economists were blissfully unaware of the fragility of the financial situation in Europe before the eruption of the euro crisis in 2010 (Blustein, 2015).
The Arab Spring
In 2011, a series of uprisings shook the Arab countries. Dictators were toppled in many places. In Syria, the uprising escalated into a civil war, which in turn caused a massive influx of refugees into Europe. The chaotic nature of the security situation in Arab countries, together with the power vacuum in Iraq caused by the withdrawal of US troops, contributed to the rise of Islamist movements such as Islamic State of Iraq and Syria (ISIS). However, the sudden collapse of authoritarian regimes was a surprise to researchers studying Middle Eastern politics (Gause, 2011). Top-level academicians and analysts assumed that the decades-long tenacious rule of dictators in the region implied that these countries naturally reject democratic change. They could not even imagine that this kind of long-term authoritarian regime could collapse in a matter of months.
The Collapse of Nokia’s Mobile Phone Operations
In 2007, Nokia was the global market leader for mobile phones. It had a strong financial position, and extensive financial and research resources. During the same year, Apple launched the iPhone, which became the world’s most coveted phone model in only a few years, thanks to its user-friendly design and openness to various applications. Nokia did not initially consider the new competing product to be a threat. When it became evident that a new type of smartphone would be the product of the future in the mobile phone market, Nokia aimed to develop its operations to strengthen the software and applications in their phones, ultimately without much success in the matter (Ollila & Saukkomaa, 2013). The company sold its mobile phone operations to Microsoft in 2011. Microsoft in turn let the mobile phone operations take a turn for the worse in 2016. The collapse of Nokia’s mobile phone operations is one of the most dramatic falloffs in modern corporate history.
Brexit and Trump
In 2016, there were two unexpected turns in politics. The UK voted in favour of leaving the European Union (EU), and Donald Trump was elected as the 45th US President. During both elections, the media and research institutions predicted the end result incorrectly. The traditional elite and the media sector were blind to the public dissatisfaction with the current system. Social media played a big role as a construer of reality. The voting behaviour of the people was a surprise, and the election results turned out to be something that was previously considered mostly impossible. Political experts were wrong.
What is common to all of the upheavals described above is that (a) they have had a vast impact: an established political order or the market structure of an industry has changed radically; and on the other hand, (b) they have been previously perceived as highly unlikely or even impossible.
These observations are essential because to begin with: (a) not all unpredictable or presumably unlucky upheavals are necessarily disruptions for the operating fields of organisations or societies. In organisations, there constantly occur surprising events that are difficult to evaluate simply as successes or failures. A move that is seemingly erroneous at the time it occurs may well turn out to be a successful business decision when viewed from a longer strategic perspective. Companies may find success as a consequence of their own wise solutions, but also due to the bad decisions of their competitors. The structure of a field of business may collapse suddenly, as a consequence of various factors.
There can be changes within an established order also in politics, or upheavals that break the prevalent rules of the game. The election victory of a particular party is not surprising in itself, but the breakthrough of a completely new political movement or a candidate far removed from mainstream politics can be seen as an actual cataclysm. An economic recession that occurs during a normal economic cycle does not constitute a breakdown of familiar structures, while a full-scale financial crisis with banks declaring bankruptcy and foreign currency issues must be viewed as a disruption of the established order.
On the other hand, upheavals breaking up the dominant structures and order are not necessarily in every case (b) unpredictable, or outside of the frame of reference for analysing the future, the so-called black swans (Taleb, 2007). To begin with, let us consider digitalisation, which has broken up traditional business structures and professional associations. For example, the retail industry has recently had to re-examine the fundamental principles of its business model. On the other hand, the forms of digitalisation—such as commerce moving into the digital world, and the emergence of new communication methods and business operations that are based on smartphone applications—have not been particularly surprising. The direction of technological development has been rather clear for about 5–10 years before the wider spread of new applications within society and the economy. Another example could be the weakening dependency ratio of certain Western countries. It has also been known for some time that without a radical increase in immigration or births, the proportion of the elderly will rapidly expand in the 2020s in countries like Finland, causing pressure on the national economy (e.g. Rechel et al., 2013). This change in the dependency ratio has been accepted in the public consciousness.
The same distinction can also be outlined with the help of more established concepts. Typically, literature on management distinguishes between strategic and other, more operative decisions (Nutt & Wilson, 2010). Strategic decisions are associated with the general guidelines related to long-term operations, with extensive impact on the other parts of systems. On the other hand, operative decisions refer to solving smaller-scale problems within a limited context. Here, we will be focusing namely on strategic-level decision-making. It is also customary to make a distinction between routine, repetitive decisions to which a formulaic approach can be applied, and which can largely be mechanised with analytical tools; and decisions made in changing, uncertain situations, which cannot be “programmed” but which need situational contemplation and more extensive reflexive analysis than routine decisions (Simon, 1977). This book focuses more clearly on non-programmable decisions, which take place in surprising, unique situations, and require the decision-maker to struggle with uncertainty, a lack of previous similar cases, and quick reactions. In other words, the subject of this book includes strategic decisions or turns with wider consequences, which take place in such new or unique situations where previous habits and assumptions are no longer applicable.
If we compare the explosion of the available information and the rising levels of formal education with the frequent occurrence of failed predictions and decisions, the picture inevitably becomes contradictory. How is it possible that in the age of information, made possible by advances in information technology (IT) and communication networks, people are unable to analyse features of social and economic development? Why are noteworthy groups o...