business, people need to make important choices every day.

Often these choices must be made without delay and have broad, far-reaching consequences.

How can we make sure that our choices remain rational and objective and free from our potentially

harmful cognitive biases?

As it turns out, there is a system, but it's a lot more like a process or a habit than

a magic bullet.

New research has shown that the world's best managers can overcome biases and reliably

make effective decisions by following an approach called diligence-based strategy.

Doing business in the 21st century isn't easy.

No matter the industry, most organizations will eventually face a crisis: maybe new competitors

will appear out of nowhere or an existing brand will try to carve a slice out of your

customer base.

Today's competitive conditions are forcing organizations to strategize and act quickly.

Thus it's easy to see why many companies scramble to create a revolutionary new strategy

to cope with crisis -- conducting market research, analyzing trends, and evolving the core business

model.

But this is the wrong approach.

Following the traditional “big strategy” approach leaves room for more errors in judgment,

particularly during a crisis.

Instead, organizations should rely on diligence-based strategy by turning their attention to a small

number of ordinary business activities -- like sourcing inputs, managing customer relationships,

and developing the right people.

Diligence is about focusing on the fundamentals.

By optimizing their operations, organizations can promote the conditions that allow for

better, more thoughtful, long-range strategies to emerge inductively.

Developing diligence requires a different type of thinking.

The best executives attend relentlessly to what they can control.

They rely more heavily on measurement and empirical evidence and less on opinions or

persuasion.

Think of baseball executive Billy Beane, who set a famous precedent by using advanced statistical

analysis, overthrowing the more traditional methods of evaluating baseball talent.

The “moneyball phenomenon” has motivated a new surge of interest in optimization -- many

companies now find that big data can reliably inform their decision-making.

As an executive, your primary task is to know the levers that drive business performance,

and to pull those levers.

To identify fundamental activities, ask yourself this: does mastery of this activity contribute

significantly to the performance of the company?

And can the activity be reliably measured and monitored?

Companies should only have a handful of fundamental activities -- like “sourcing inputs,”

“managing the supply chain,” or “serving customers.”

It is only after isolating the company's fundamental activities that the work of optimization

can occur.

Most importantly, managers should use every available technology and data source to compile

information on the company's activities.

It's easy to go astray when decisions are made based on emotional responses or incomplete

information -- which are a natural occurrence during a competitive crisis.

Diligence-based strategy allows companies to systematically focus on what matters most:

improving the fundamental operations that lead to success.

To find out more about diligence-based strategy, decision-making in organizations, and cognitive

biases, please read California Management Review's special issue on Behavioral Strategy,

Volume 59, Issue 3.