The Appropriate Frame

1. The Appropriate Frame

2. This section defines “frame” and illustrates tools to help establish the appropriate frame. • Introduction to Framing • What is a frame? • Why is it important? • Tools and Techniques • Sharing a common purpose • Adopting a conscious perspective • Scoping the problem • Summary 1.06 • The Appropriate Frame

3. Decision Board Alter-natives Plan EvaluatedAlternatives Project Team • • • • • • • • The first step in the Dialogue Decision Process sets the frame: the purpose, perspective, and scope. Frame Tools to Establish Purpose, Perspective, and Scope Business Situation Market Assessment Decision Hierarchy Issues Influence Diagram 1.06 • The Appropriate Frame

4. Bid $xxx To illustrate what we mean by “frame,” we will conduct a competitive bid for a $20 bill. • Rules • Anyone can bid. • Bids must exceed high bid by $1. • The highest bidder receives $20. • The top two bidders must pay their bids. • Bids cannot be withdrawn. • Who wants to start the bidding? 1.06 • The Appropriate Frame

5. What frames and strategies emerged during the bidding? Frames Strategies 1.06 • The Appropriate Frame

6. Frequent frames and strategies from “the frame game.” Frames Strategies Plunging in, or “why not?” Incremental bidding $21, “Holy expletive!” Cooperation or “cut the losses” Intimidation Bid 50¢ Add $1 Add $1 Negotiate with 2nd bidder Open at $19.50 Common Assumptions: “The bidding won’t exceed $2”, ... “or 10” ... “or 20!” 1.06 • The Appropriate Frame

7. The competitive bidding game shows the danger of getting caught in the “thrown frame.” • When a situation (problem or opportunity) presents itself, there is a tendency to accept a frame unconsciously. • As a result, people often start their decision-making on an ill-conceived foundation. • In the bidding example, people usually start with a frame of “I can’t lose by bidding a small sum relative to the $20.” • Then they shift to an “incremental” decision frame. • Then... 1.06 • The Appropriate Frame

8. What is a decision frame? The personal image we form of a situation, which consciously and unconsciously guides our decision-making. —Strategic Decisions Group The mental structures that people create to simplify and organize the world. —Russo & Schoemaker, Decision Traps We all have visions (frames). They are the silent shapers of our thoughts. —Thomas Sowell, A Conflict of Visions, 1987 1.06 • The Appropriate Frame

9. A frame is a limited description of a problem that filters out what is irrelevant or immaterial. 1.06 • The Appropriate Frame

10. Problem: Overwhelm Problem: Blindness Results: • Non-decisions • Oversight Results: • Errors of the third kind— right answer; wrong question • Unforeseen threats • Lost opportunities Inappropriate frames generally result in poor decision-making. 1.06 • The Appropriate Frame

11. What does a decision frame consist of? • Purpose—what we intend to achieve in this situation • Perspective—the context that sets the stage for a decision (e.g., how to view the problem, whom to involve, what conversations to have, what behaviors to expect) • Scope—the boundary that we use to distinguish what is included and excluded in considering the situation 1.06 • The Appropriate Frame

12. This section defines “frame” and illustrates tools to help establish the appropriate frame. • Introduction to Framing • What is a frame? • Why is it important? • Tools and Techniques • Sharing a common purpose • Adopting a conscious perspective • Scoping the problem • Summary 1.06 • The Appropriate Frame

13. Issues • • • • • • For Against NPVvs. ? Values, trade-offs, and influence diagrams are discussed later. The team selects from these tools to establish a common frame. • Sharing a Common Purpose • Vision Statement • Adopting a Conscious Perspective • Issue Raising • Force-Field Diagram • Scoping the Problem • Decision Hierarchy • Strategy Table • Values and Trade-offs • Influence Diagrams 1.06 • The Appropriate Frame

14. Agreement on a one-page vision statement helps ensure that team members share a common purpose. Vision Statement What are we going to do? “Eighty percent of Silicon Valley project disasters could have been avoided if the team had answered three simple questions before it started.” —Charles Golden The “Red Adair” of project managers Why are we doing this? How will we know if we are successful? 1.06 • The Appropriate Frame

15. This sample vision statement guided a successful strategy-development project. • Project Vision Statement • What are we going to do? • Develop a therapeutic area long-term strategic plan, including 10-year vision • Assess the chances of achieving the revenues goal for the Oncology Franchise ($2B) • Provide a platform for recommending R&D and commercial strategic projects to support the growth of the Oncology Franchise based on the assessment of value contribution, risk and investment required of both internal and external projects • Pilot the approach for other therapeutic teams • Why are we doing this? • To bring the organization together via a common long-term vision for the Oncology Franchise. • We need to ensure we optimize our resource allocation. • Sufficient information is now available to conduct the work. • How will we know if we are successful? • The Steering Committee accepts the recommended strategy and allocates the required resources. • The Steering Committee accepts the analytic approach we have taken. • How could we fail? • We will fail if we do not get all the right people (real decision-makers, all functions) involved, or don’t finish the project on time, or don’t reach any new insights. 1.06 • The Appropriate Frame

16. Issues • • • • • • For Against NPV vs ? Values, trade-offs, and influence diagrams are discussed later. The team selects from these tools to establish a common frame. • Sharing a Common Purpose • Vision Statement • Adopting a Conscious Perspective • Issue Raising • Force-Field Diagram • Scoping the Problem • Decision Hierarchy • Strategy Table • Values and Trade-offs • Influence Diagrams 1.06 • The Appropriate Frame

17. The Situation Solutions from Alternate Perspectives Engineer’s Proposal Psychologist’s Proposal Z Z Z Z Z Z One’s perspective is formed by personality, training, and experience. 1.06 • The Appropriate Frame

18. The key is to recognize and respect diverse perspectives ... ... and have the team adopt a “conscious” perspective. Once adopted, the perspective drives decisions about others to involve, conversations to have, behaviors to expect, etc. 1.06 • The Appropriate Frame

19. Objectives: Issues • • • • • • Project Team “Issue raising” starts a “conversation” about the decision, which exposes perspectives and major concerns. • To uncover issues that must be dealt with • To expose team members to others’ perspectives • To develop “ownership” of the problem by team members 1.06 • The Appropriate Frame

20. Sample Issues 1. Should we launch the Viking Project? 2. Our three top competitors may surpass our market share next year. 3. Shareholders objected to our stand on the environment. 4. All communication is top down, never bottom up. An “issue” is anything important to the decision problem. • Decisions: “What we can do” • Investments • Alliances • Uncertainties: “What we know and don’t know” • Competition • Regulation • Values: “What we want” • Profit • Jobs • Other:“Facts” or “process issues” • Last quarter’s profit • Organizational challenges 1.06 • The Appropriate Frame

21. An effective approach to issue raising is to: • Explain and reach agreement on the topic. • Give participants one or two minutes to create their own lists. • Go around the room, collecting one issue from each participant. • Open the floor for additional issues. • Combine duplicates into a single issue. • If appropriate, prioritize the issues. • Give each participant N/3 votes. • Sort so that high vote getters appear first. • Identify the natural break between high-and low-priority issues. Issues often suggest “challenges,” which form a basis for strategy (to be covered later). 1.06 • The Appropriate Frame

22. Refine the issues to assure breadth and quality. • Consider major functions, such as research and development, manufacturing, regulatory, reimbursement, marketing and sales. Are the issues for each included? • Assume different roles (e.g., customer, competition, outside director) and identify issues from their perspectives. • Use “backcasting” to help raise issues on sensitive topics. • Suppose we meet five years from now. • I tell you that results from our strategy were tremendous (miserable). • Tell me why. • Construct a force-field diagram to help identify arguments for and against “go/no go” decisions. 1.06 • The Appropriate Frame

23. O D U V U O D O O D U U U U U V D V D V Issues U O D O D D V O V O U O O V V O D V U D D V U D D O V V O V U U Other Values Decisions Uncertainties Categorizing the issues focuses attention on key decisions, uncertainties, and values. 1.06 • The Appropriate Frame

24. U D D D U U U D D D D D U U Decisions Uncertainties Actions controlled by the decision-maker – Launch product – Close plant – Acquire competitor – Increase spending Factors that can not be controlled – Customer demands – Competitor’s price – Court’s decision – Drug’s effectiveness O V O V V V O V O V O O O V V V O O Values Other Examples: – Facts – Process issues What we want or don’t want Direct values Indirect values – Profit – KPIs* – Now, not later – “Strategic fit” We use these definitions to categorize issues. *KPI: Key performance indicator 1.06 • The Appropriate Frame

25. U O O D V O D D O U V O O O V V U V U V D O O D D V V D D U V U Values Other Decisions Uncertainties Decision Hierarchy Influence Diagram Value Measure Facts + Process Issues $NPV + Other? Record Facts; Address Process Issues Separating decisions, uncertainties, and values adds clarity and sets up subsequent steps. 1.06 • The Appropriate Frame

26. Issues • • • • • • For Against NPV vs ? Values, trade-offs, and influence diagrams are discussed later. The team selects from these tools to establish a common frame. • Sharing a Common Purpose • Vision Statement • Adopting a Conscious Perspective • Issue Raising • Force-Field Diagram • Scoping the Problem • Decision Hierarchy • Strategy Table • Values and Trade-offs • Influence Diagrams 1.06 • The Appropriate Frame

27. Example: Manufacturing Plant Modernization Take as given Policy Decisions • Continue manufacturing • Plant configuration and location • Technological stretch • Product range • Quality and cost position • Marketing strategy Strategic Decisions Focus on in this analysis • Product design • Manufacturing operations • Marketing plans Tactical Decisions Decide Later A “decision hierarchy” specifies the scope of the decisions to be analyzed. 1.06 • The Appropriate Frame

28. • Policy decisions that unduly restrict creative alternatives • Policy decisions that have not been made—Should we work on them instead? Policy Decisions “Focus on” Decisions • Scope too broad or too narrow • Premature detailed analysis of tactics Tactical Decisions The decision hierarchy reveals potential impediments to decision quality. 1.06 • The Appropriate Frame

29. This section defines “frame” and illustrates tools to help establish the appropriate frame. • Introduction to Framing • What is a frame? • Why is it important? • Tools and Techniques • Sharing a common purpose • Adopting a conscious perspective • Scoping the problem • Summary 1.06 • The Appropriate Frame

30. 4 3 DecisionQuality 2 5 1 6 Setting the appropriate frame is a key—but often neglected—link toward achieving decision quality. • Appropriate Frame: • Clear purpose • Conscious perspective • Defined scope • Key tools: • Team balancing • Vision statement • Issues and challenges • Assumption surfacing • Decision hierarchy • Failure modes: • Wrong people • “Frame blindness” or “plunging in” • Scope too narrow • Unstated assumptions • Lack of conscious choice of frame 1.06 • The Appropriate Frame

31. Decision Board Alter-natives Plan EvaluatedAlternatives Project Team Tools to Establish Purpose, Perspective, and Scope Business Situation Market Assessment Decision Hierarchy Issues • • • • • • • • Influence Diagram In many projects, a decision board meeting is scheduled to agree on the frame. Frame 1.06 • The Appropriate Frame

32. Continue manu-facturing ? • Plant configuration • Technological stretch • Product range • Quality and cost position ? • Product design • Manufacturing operations • Marketing plans The decision board engages in dialogue to agree on the project’s purpose, perspective, and scope. • Purpose—what we intend to achieve in this situation Vision • Scope—the boundary that we use to distinguish what is included and excluded for this decision • Perspective—the context that sets the stage for a decision 1.06 • The Appropriate Frame

33. Experience Accumulated During Second Frame Experience Accumulated During First Frame Reexamine Frame Frame 1 Reexamine Frame Framing is an ongoing process; reexamining the frame lets you adapt to changing conditions. Frame 2 Frame 3 Have the decision board agree on the frame and then review it at subsequent board meetings. 1.06 • The Appropriate Frame

34. Although a frame is essential, remember that it is a limited description of the problem. • The map is not the territory. • —Gurdjieff 1.06 • The Appropriate Frame

35. Appendix 1.06 • The Appropriate Frame

36. When complete, the frame will guide the conduct of the decision-making project. Decision board & project team(s) Involvement ofothers inorganization Schedule of major meetings & conversations Corporateculture andstyle DDPProject Frame Geography, technology,markets, etc. Logistic (e.g., team room) Decisions andother business issues addressed Valuemeasures 1.06 • The Appropriate Frame

37. Forces Pushing for Plant Modernization Forces Pushing Against Plant Modernization A force-field diagram helps organize issues for and against “go/no go” decisions. Force-Field Diagram Increased flexibility to meet market demand Increased production volume Improved product quality Local and upper management support (high-profile project) Competitors’ with similar technology Capital costs for equipment and facilities May not substantially increase production rates or product quality Increased training operating costs associated with flexibility Possibility of customers remaining loyal to older product lines An “unbalanced” diagram may indicate biases or a decision that is clear now. 1.06 • The Appropriate Frame

38. Metrics must provide a clear “line of sight” to value—Total Shareholder Return. What’s that in dollars? 1.06 • The Appropriate Frame

39. A mix of tangibles and intangibles Equivalent Cash Flows • Cash flows over time Present Equivalent • Uncertain prospects Expected Value • Risk attitude Certain Equivalent Decision analysis provides the concepts and tools to value complex business decisions. Future decision opportunities need to be included. 1.06 • The Appropriate Frame

40. Decision Hierarchy Strategy Table Strategic Decisions (one column for each) Plant Technology Products Quality Marketing Alternative 1 Alternative 2 Alternative 3 • • • Alternative 1 Alternative 2 Alternative 3 • • • • • • • • • • • • Policies Strategic Decisions • Plant • Technology • Products • Quality • Marketing Tactics A strategy table helps develop specific alternatives for each strategic decision. Listing the alternatives in each column helps illustrate the scope chosen for decision-making; alternatives will be combined later into strategies. 1.06 • The Appropriate Frame

41. 4 Clear Values and Trade-offs 3 Meaningful, Reliable Information 5 Logically Correct Reasoning DecisionQuality 2 Creative, Doable Alternatives 0% 100% 6 Commitment to Action Judging the quality of the frame helps build confidence in the decision process. The Appropriate Frame 0% “Plunging in” or “frame blindness” No conscious perspective Scope unstated Assumptions unstated No conscious choice of frame 50% “Lists, but not fully structured” Identified issues Identified perspectivesand concerns 100% “Conscious, shared perspective” Clear statements of: Purpose, scope, and perspective Decisions to be addressed 1 Appropriate Frame 1.06 • The Appropriate Frame

42. Purpose & Perspective –Define the goal and value metrics for the strategy effort – Ask the right questions– Test the perspective and boundaries of the problem ? Complexity Problem Characterization –Recognize the true need to solve the problem Organ- ization Analytical People/Process/Tools – Tailor the approach to fit the problem In our experience, improper framing is the most common failure in making major, strategic decisions. 1.06 • The Appropriate Frame

43. ? Complexity Organ- ization Analytical Failures at higher levels cannot be corrected at lower levels... …and seeming failures at lower levels can be traced to root causes at higher levels. 1.06 • The Appropriate Frame