V.N.

Bhattacharya
Business & Corporate Strategy

℠
22 November 2018

INDIAN INSTITUTE OF MANAGEMENT BANGALORE

PGP 2017-19, Term 5
Course: Strategic Thinking and Decision Making
(Credit 3, 20 sessions)

1. Background
Strategy is an imperative. If you wish to achieve an objective in business, the playing field, or life, you need
strategy. In business it is critical for growth, health and prosperity of the firm. Strategy has been defined as a
pattern of decision making that enables a firm to create and sustain competitive advantage. That is why
managers must learn to think strategically.
Strategy is a product of mental models. Formulation of effective strategies requires abstract thinking as
opposed to thinking of specific actions. Socialisation process in modern times, the emphasis on analysis in
education and the pre-occupation with action in the corporate world has inhibited our capacity for abstract
thinking and the willingness to reflect. This weakness makes success difficult and chancy.
Simply put, strategic thinking is goal directed thinking. We make judgements, weigh risks and evaluate costs
and benefits en route to making decisions and bearing their consequences. Strategic thinking is the process by
which we figure out the best way to achieve a given end in the context of our desires, values, risks, resources
and the environment. It is the result of both rational and non-rational – intuitive, and emotional – processes of
the mind.
Intuition is a powerful involuntary and spontaneous thinking process. Unfortunately it comes with inherent
biases that creep in unbeknown to us and affects judgement and decisions. Intuition helps us make life and
death decisions in the blink of an eye but it also sometimes betrays our larger self-interest.
There is much better understanding of intuitive processes of the mind today. It is possible now to apply
research findings and conceptual frameworks to achieve working knowledge of how the strategic mind
functions. Formal study can sharpen awareness and help us train our thinking to become more effective as
individuals and organisations.
This course has been designed to create an awareness of the way we think and introduce you to
methodologies by which you can train yourself to make good judgements and think like a seasoned strategist. It
will also help you explore processes, behavioural and cultural aspects of strategic thinking in organisations.
This outline provides you (students) a bird’s eye-view of the course, what you may gain from it, and the nature
and extent of effort that will be expected of you.

2. Objectives
This course aims to improve your awareness and knowledge of strategic thinking and decision-making by
helping you….
2.1. Achieve an appreciation of how we think. Become aware of the powers of the rational as well as the
non-rational processes of the mind.
2.2. Acquire working knowledge of principles, theoretical models and concepts that can make rational
thinking rigorous and effective.
2.3. Become aware of how we think intuitively and how emotions and biases help and hinder decision-
making.
2.4. Learn to apply the principles to everyday life and business and make good decisions.

Villa # 300, Palm Meadows 2, Airport – Whitefield Road, Bangalore 560 066, India.
Tel: +91-80-2539 2300; +91-98450 58034 (M); e-mail: vn@vnbhattacharya.com
Website: http://www.vnbhattacharya.com
V.N. Bhattacharya

3. Pedagogy & Content

The course will be covered in two modules.
3.1. Module 1: Rational thinking. This module will be anchored in Game Theory and focus on how to think
using its precepts. We will use non-mathematical approach to Game Theory and focus on anticipatory
aspect of strategic thinking.
• What is strategic thinking? How creativity, innovation and strategic thinking are different, yet
related. Abstraction as a strategic thinking process.
• Goal directed behaviour, defining the problem, search for abstract solutions as different from
reaching out for solutions. How objectives – perceived or real – influence strategy.
• How we think. Two systems of thinking: intuitive and analytical.
§ Introduction to game theory. Strategic Form, Extensive Form (Sequential), and combination games,
their solutions and applications. Games of conflict: zero-sum and non-zero-sum games and their
solutions. Repeated Prisoners' Dilemma, Nash Equilibrium and lessons for strategists.
§ Strategic moves: warning, threats, assurances and promises. Brinkmanship and other moves
aimed at creating strategic advantage.
§ Fostering co-operation. Overcoming the limitations of conflict games and how co-operation can be
engineered for better outcomes for players. Application in negotiation, organisational policy,
taxation, law and order, etc.
§ Concept of Added Value and its relationships with strategic advantage (power). Application in
negotiations and stakeholder management. Value Net and other strategies using added value,
their applications in business in everyday life.
3.2. Module 2: The non-rational mind – intuition and emotion in decision-making. In this module we will
study intuitive thinking from the heuristics and biases tradition as well as decision making in naturalistic
settings. The approach will be to examine strengths and weaknesses of the non-rational mind and
explore ways in which individuals and organisations can make better choices.
• Perception and different systems of cognition; deliberate and intuitive thinking.
• Bounded rationality, heuristic thinking as opposed to traditional view that humans as economic
agents act rationally in self-interest. Intuition, how it helps and hinders decision-making.
• Framing effects on decisions. Why and when people make risky or conservative choices. How to
avoid undue risk taking and risk-averse behaviour.
• Heuristics and cognitive bias. Important heuristics, associated biases and how they affect
perception of risk, judgement, and decisions. De-biasing strategies for individuals and groups, how
they work and where they don’t.
• Principal – agent problems, morality, ethics and values in decision-making. Corruption in everyday
life and lessons on organisational policy.
• Intuition, insight and creative problem solving. How insight is inhibited or strengthened.
Organisational strategies to encourage intuitive thinking, proliferation of insight and mitigating bias.
The teaching method will be a mix of exercises, case discussions and lectures. You will greatly benefit by
reading extensively beyond the requirement of the course. Essential and supplementary reading materials have
been recommended in the Schedule of Lectures. Some are available on the Internet and can be freely
downloaded for individual consumption. Please observe appropriate intellectual property and copyright laws
while downloading them. Several Internet resources have been recommended in section titled Consolidated List
of Reading Material. Please read selectively as appropriate.
You will do well to prepare yourself for each lecture by reading the recommended material in advance. We will
then be able to devote more time during the class hours to discuss business problems and cases.

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4. Schedule of Lectures
Topics are arranged by lectures. Reading in this section means essential reading. Supplementary reading
material is prescribed where applicable. There are two textbooks for this course.
• Games of Strategy by Avinash Dixit, Susan Skeath & David H. Reiley Jr. for lectures 1-9.
• Thinking Fast and Slow by Daniel Kahneman for lectures 11-20.
Session 1: Introduction to the course. Decision dilemmas senior managers face. Learning ‘how to decide’
as different for ‘what to decide’. Strategic thinking as goal directed thinking and different from
creative and innovative thinking. Two systems of thinking: analytical and intuitive as part of the
strategic thinking process.
Case discussion: DHARNA by Prof. V.N. Bhattacharya (see section titled Cases below).
Framework based thinking: role of strategy models in strategic thinking.
Reading.
Text book or course pack Student to source from Internet
Text Book: Games of Strategy by Dixit, Skeath & Reilley, Maps of Bounded Rationality: A Perspective on
chapters 1 & 2. Intuitive Judgement and Choice. Prize Lecture,
December 8, 2002 by Daniel Kahneman, Princeton
Case study: DHARNA by Prof. V.N. Bhattacharya.
University, Department of Psychology. Pages 449-
456.
http://www.nobelprize.org/nobel_prizes/economics/
laureates/2002/kahnemann-lecture.pdf

Session 2: Strategy formulation in interactive human situations. Introduction to Game Theory: types of
games, their solutions and applications in everyday problems. Sequential games: decision and
game trees. Roll back reasoning and equilibrium. Game Theory in everyday life and business.
How it can be used to formulate strategy.
Reading.
Text book or course pack Student to source from Internet
Text Book: Games of Strategy by Dixit, Skeath & Reilley, Supplementary reading:
chapters 2-3.
http://www.gametheory.net/

Session 3: Simultaneous games. Zero-sum and non zero-sum games. Prisoners Dilemma, dominant,
dominated strategies and equilibrium. Solving simultaneous games by dominance method, best
response, and cell-by-cell inspection.
Case discussion: Practising Socialism in Class by Prof. V.N. Bhattacharya.
Dominant strategy equilibrium, Nash Equilibrium and their business applications. Games with more than one
equilibrium. Games of co-ordination and the need for conventions or rules. Application in formulation of policies
for interaction within and outside the corporation.
Reading.
Text book or course pack Student to source from Internet
Text Book: Games of Strategy by Dixit, Skeath & Reilley, Supplementary reading:
chapter 4.
http://www.gametheory.net/
Case study: Practising Socialism in Class by Prof. V.N.
Bhattacharya.

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V.N. Bhattacharya

Session 4: Business game: Between a Rock and a Hard Place by Prof. V.N. Bhattacharya (see section
titled Cases)
Zero sum games, such as in wars and sports. Mixed strategy and its application in business. Extensive Form
Games, roll back equilibrium and negotiations. Bargaining games and the impact of information, rules,
assumptions, etc.
Reading.
Text book or course pack Student to source from Internet
Text Book: Games of Strategy by Dixit, Skeath & Reilley, Supplementary reading:
chapter 5.
http://www.gametheory.net/
Business game: Between a Rock and a Hard Place by
Prof. V.N. Bhattacharya. Prof. Bhattacharya will provide
the material directly to students after add/drop.

Session 5: Resolving Prisoners Dilemma, Prisoners Dilemma Tournament and lessons for fostering co-
operation. Tit-for-Tat strategy: philosophy, applications, strengths and weaknesses. Basic co-
operative and bilateral monopoly games.
Discussion: Prisoners’ Dilemma in business situations and how to resolve them.
Reading.
Text book or course pack Student to source from Internet
Text Book: Games of Strategy by Dixit, Skeath & Reilley,
chapter 11.
The Evolution of Co-operation, Robert Axelrod. Basic
Books 1984, chapters 2, 6 & 7.
Supplementary reading:
The Evolution of Co-operation, Chapter 4.

Session 6: Strategic moves: use of unconditional and conditional moves. Properties of promises, threats,
assurances and warnings. Brinkmanship in politics, war, negotiation and business. Reputation
and commitments.
Case Discussion: The Cuban Missile Crisis.

Reading.
Text book or course pack Student to source from Internet
Text Book: Games of Strategy by Dixit, Skeath & Reilley, The Cuban Missile Crisis
chapters 10 and 15.
http://williamrrush.org/docs/CubanMissileCrisis.pdf
http://en.wikipedia.org/wiki/Cuban_Missile_Crisis
http://www.gwu.edu/~nsarchiv/nsa/cuba_mis_cri/a
nnals.htm
Cuban Missile Crisis Documentary
https://www.youtube.com/watch?v=Ig8UdfQKXSY
Interesting documentary "The Cuban Missile
Crisis: on the Brink of World's End"
http://www.youtube.com/watch?v=4A0fFRIEgQM

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BBC Two documentary

https://www.youtube.com/watch?v=dC4XhIjBPEQ

Session 7: Concept of Added Value, subjective rationality and allocentrism. Applications in bargaining and
creating strategic advantage. Use in competitive strategy and assessing relative power of
players in negotiations.
Reading.
Text book or course pack Student to source from Internet
The Right Game: Use Game Theory to Shape Strategy
by Adam M. Brandenburger and Barry J. Nalebluff, HBR
July-August 1995.

Session 8: Case Discussion: Hard Wired by Prof. V.N. Bhattacharya.

Value Net, the co-operative model of strategy. Use of complementors to create superior value for customers
and the firm.
Reading.
Text book or course pack Student to source from Internet
The Right Game: Use Game Theory to Shape Strategy
by Adam M. Brandenburger and Barry J. Nalebluff, HBR
July-August 1995.
Case: Hard Wired by Prof. V.N. Bhattacharya.

Session 9: Case Discussion: Massive Inc. (A), HBR case.

Use of frameworks, strategy models in strategic decision-making. How they help. Why we are not always able
to discern points of strategic leverage and fail to craft effective strategies.
Reading.
Text book or course pack Student to source from Internet
Case: Massive Inc. (A), Harvard Business Review case.

Session 10: Perception and cognition. Intuition and reasoning, two systems of thinking, their characteristic
properties. Framing effects on decisions.
Reading.
Text book or course pack Student to source from Internet
Textbook, chapters 3-8; 26-29. Supplementary reading:
How senior managers think, Daniel J. Isenberg,
HBR Nov/Dec84, pp. 81-90.
Rational Choice and the Framing of Decisions by Amos
Tversky and Daniel Kahneman, The Journal of
Business, Vol. 59, No. 4, Part 2: The Behavioural
Foundations of Economic Theory. (Oct., 1986), pages
S251–S278.

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Mid-term Examination

Session 11: Heuristics and cognitive biases 1: Availability, anchoring, confirmation and representativeness
heuristics. Associated biases and how they affect judgement and influence decisions.
Examples and exercises that demonstrate their advantages and dangers.
Reading:
Text book or course pack Student to source from Internet
Extensional versus Intuitive Reasoning: The Conjunction Fallacy in
Probability Judgement. Amos Tversky and Daniel Kahneman,
Psychological Review, Vol 90(4), Oct, 1983. pp. 293-315.
Text book chapters 4, 11-16.
Supplementary reading:
Distortions and Deceptions in Strategic Decisions by Dan P. Lovallo
and Olivier Sibony. The McKinsey Quarterly, 2006 Number 1.

Session 12: Case discussion: The Space Shuttle Columbia Failure: insights from the accident. IIMB Case
by Prof. S. Chandarshekar.
Reading:
Text book or course pack Student to source from Internet
Case: Space Shuttle Columbia Failure: Insights from the Accident to
the Space Shuttle Columbia. IIMB Case by Prof. S. Chandarshekar.

Session 13: Heuristics and cognitive biases 2: Affect heuristic. Emotion and decision-making.
Reading:
Text book or course pack Student to source from Internet
The Affect Heuristic in Judgments of Risks and Benefits By Supplementary reading:
Melissa Finucane, Ali Alhakami, Paul Slovic, and Stephen
Johnson, Journal of Behavioural Decision Making, 13, pp 1-17.
Text book chapters 13, 19-20. Emotion, overconfidence, Somatic marker hypothesis – interview
optimism, and related biases. with Antonio Damasio on Fora TV
https://www.youtube.com/watch?v=KYtBcs
K5c7s

Session 14: Analogies and assumptions. How they shape behaviour; advantages and pitfalls.
Case discussion: United Express Flight 3411 Incident (see section titled Cases).
Reading:
Text book or course pack Student to source from Internet
How strategists really think: tapping the Case: United Express 3411 Incident: decision making in crisis.
power of analogy by Giovanni Gavetti &
https://en.wikipedia.org/wiki/United_Express_Flight_3411_inciden
Jan W. Rivkin. Harvard Business Review,
t
April 2005.
United breaks guitars
Case brief: United Express 3411 Incident:

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V.N. Bhattacharya

decision making in crisis. https://en.wikipedia.org/wiki/United_Breaks_Guitars

Johnson & Johnson, the Tylenol murders
http://knowledge.wharton.upenn.edu/article/tylenol-and-the-
legacy-of-jjs-james-burke/
http://fortune.com/2012/10/07/the-fight-to-save-tylenol-fortune-
1982/
Jan Carlzon and SAS https://en.wikipedia.org/wiki/Jan_Carlzon
Is the airline industry in an oligopoly state?
http://www.investopedia.com/ask/answers/011215/airline-
industry-oligopoly-state.asp
Supplementary reading:
When to trust your gut. By Alden M.
Hayashi, HBR Feb ’01.

Session 15: Case discussion: Mt. Everest 1996, HBR Case.

Reading:
Text book or course pack Student to source from Internet
Case: Mt. Everest 1996, HBR case.

Session 16: The principal–agent problem. Moral hazard, ethics and values in decision-making, how they
guide strategy formulation and determine payoffs. Applications in negotiation, conflict resolution
and other problems.
Reading.
Text book or course pack Student to source from Internet
Dishonesty in Everyday Life and Its Policy Implications. A framework for thinking ethically,
Nina Mazar and Dan Ariely. Journal of Public Policy and http://www.scu.edu/ethics/practicing/decision/frame
Marketing, Vol. 25 (1) Spring 2006, 1–000. work.html
Stanley Milgram experiment on obedience to
authority. Youtube video
https://www.youtube.com/watch?v=fCVlI-
_4GZQ

Session 17: Case discussion: Joe Gifford in Tal Afar, Iraq (A), (HBR Case, see section titled Cases).
Reading:
Text book or course pack Student to source from Internet
Case: Joe Gifford in Tal Afar, Iraq (A). HBR Case.

Session 18: Intuition, insight, and innovation. What is insight? How does it help problem solving, creativity,
and innovation? How insight is impeded, and fostered. Value innovation.
Reading:
Text book or course pack Student to source from Internet
A Naturalistic Study of Insight by Gary Klein and Andrea
Jarosz, Journal of Cognitive Engineering and Decision

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Making, Volume 5, Number 4, December 2011, pp. 335–

351.
Creating Breakthroughs at 3M by Eric von Hippel, Stefan
Thomke, and Maruy Sonnack, HBR Sep-Oct 1999.
Supplementary reading:
Value Innovation: The Strategic Logic of High Growth by
W. Chan Kim and Renee Mauborgne, HBR, July-August
2004.

Session 19: Developing insightful individuals and organisations. What fuels insight and how it can be
strengthened in individuals? How to kindle insight in organisations? The role of and how to instil
an innovative culture.
Reading:
Text book or course pack Student to source from Internet
The Power of Asking Pivotal Questions by Paul J.H. Supplementary reading:
Schoemaker and Steven Krupp, MIT Sloan Management
For Honda, Waigaya Is the Way by Jeffrey
Review, Winter 2015, December 16, 2014.
Rothfeder. Strategy + Business, August 1, 2014,
Autumn 2014, Issue 76.
How to build a culture of originality by Adam Grant. HBR
March 2016.

Session 20: Summarising the course, its application in decision-making in business, politics and life. Role of
leadership in building an insightful, objective, and innovative organisation.
Reading:
Text book or course pack Student to source from Internet
Improving Decision Making, Book chapter 11, Judgment Supplementary reading:
in Managerial Decision Making by Max Bazerman and
A case study in combating bias, McKinsey
Don Moore.
Quarterly, May 2017.
The Big Idea: Before You Make That Big Decision
by Daniel Kahneman, Dan Lovallo, and Olivier Sibony,
HBR, June 2011.

End-term Examination

5. Assessment
One quiz on fixed date 15% Syllabus: sessions 6-14 20 mins.
Mid-term examination 40% Syllabus: sessions 1-10. 1 hr. 30 mins.
Final Examination 50% Syllabus: sessions 7-20. 1 hr. 30 mins.
Total 100%
They will be on pre-appointed dates and shall be open book, and open laptop. If you miss any quiz or
examination, you will not be given a retest except as applicable under Institute rules.
Quizzes and examinations will aim to assess your grasp of concepts and ability to apply them to real world
problems and situations. You will do well to write succinct and precise answers in a lucid manner. Quality of

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V.N. Bhattacharya

explanations and use of appropriate concepts will fetch higher marks. If you do not know the answer or are
not sure, and try to apply a number of concepts in the hope one of them will stick, you may lose marks.

Much of the reading material is based on academic research and papers. Some of them will require effortful
application. I recommend you access the reading material as soon as possible and prepare ahead of each
lecture. Adequate preparation will greatly help you to profit from this course.

V.N. Bhattacharya
Business & Corporate Strategy

Instructor’s profile appears below.

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V.N. Bhattacharya

V.N. BHATTACHARYA

Mr Bhattacharya is a highly regarded business and corporate strategy

consultant. He advises and works with senior management teams to help
make firms competitive, and grow rapidly and profitably in a sustained
manner. His work cuts across industry sectors ranging from electronics to
engineering, paints to pharmaceuticals, software to shipping, and telecom to
technology.
He is deeply involved in executive education. He conducts custom
management development programmes for senior managers.
He teaches Strategic Thinking and Decision Making in Indian Institutes of
Management (IIMs) Ahmedabad and Bangalore, and Intuitive Decision
Making in IIM Calcutta. He serves on the Editorial Advisory Board of American Journal of Business. He
writes regularly on management and is a sought after speaker.

CAREER. Mr Bhattacharya is a seasoned business leader with a rare breadth of perspective and world-
view. He has over forty years’ experience in diverse industries in India and abroad. He has turned
around loss-making businesses, revitalised old ones and created new streams of revenue. He blends
sound conceptual rigour, rich experience, and strong focus on execution.

During his corporate career he worked in large and medium sized Indian and multi-national
corporations. His breadth of perspective stems from experience in a variety of industries – consumer
goods, automobiles, paints and chemicals, engineering, capital equipment, packaging, hospitality,
and telecom. He served as the Chief Executive of BPL Telecom Ltd. – a telecom engineering,
manufacturing and networking company - before setting up his consulting practice.

CONSULTING. His consulting work is strongly anchored in research based management theory and
settled thinking. He engages deeply with clients to help them create and execute effective and
innovative strategies. He guides managers to develop insight, broaden perspective, and bring to bear
superior knowledge and data to make crucial business decisions.

EXPERTISE. Formulating and guiding implementation of strategies for sustainable and profitable growth
is his special forte. He has advised firms on business portfolio selection, managing multi-business
corporations, and designed structures for complex organisations.

He is deeply interested in decision-making of senior managers and leadership teams. He guides them
on structural and process methodologies that foster curiosity, collaboration, and innovation. He has
studied the subject extensively. It is one of his research interests.
He is one of the few practitioners of Game Theory. He uses its principles in his consulting work, in
establishing collaborative practices in firms, and to encourage anticipatory (strategic) thinking
among middle and senior managers.

EDUCATION. He earned a Bachelor of Technology in Chemical Engineering from Indian Institute of

Technology (IIT) Kanpur and MBA in Marketing and Finance from Indian Institute of Management (IIM)
Calcutta. He blends rich experience with strong academic credentials.

INTERESTS. VN, as he is better known, enjoys English fiction, science and astrophysics, behavioural
economics, and cognitive psychology. He is an avid golfer and played tennis. He loves mountains. For
a number of years he did high altitude trekking in the Himalayas. He lives in Bangalore, India with his
wife and dog. There is more information on him on his website www.vnbhattacharya.com. He can be
reached at vn@vnbhattacharya.com.

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