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Market-Based Solutions to Vital Economic Issues

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Market-Based Solutions to Vital Economic Issues
Research
Apr 10, 2018

Strategy Formation as Solving a Complex and Novel Problem

Abstract

In this paper, we seek to better understand how executives can intelligently combine modular and integrated problem solving processes to form the best possible strategy in entrepreneurial environments. To do so, we compare the efficacy of strategies formed via different processes under various market conditions, exploring the sources of significant performance differences. We address this question using NK simulation methods. We show that the ‘decision weaving’ strategy formation process leads to more effective strategies than either local or ‘chunky search’ processes across a variety of problem specifications. We also offer insight into two key concepts of the decision weaving framework; stepping stones and learning plateaus, which allow executives to balance the tradeoff between quality and the speed of the strategy formation process. This provides practical points for executives forming strategy to overcome their own bounded rationality and contributes to literature on strategy processes and complex problem solving within organizations.


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