HOMEWORK 2

Mini-Case Study – Biases in R&D Decision Making

Udayan Saxena
Decision Making Methods for Innovation Management
Executive Summary

At SCA Chemical Company, the Research & Development committee manages the innovations and concepts which are decisive for
the future of the company. These projects are reviewed and given direction by the steering committee. With a bank of different
projects in different portfolios, the committee has decided to support a few projects after reviewing the terms and conditions. The
process of review for these projects has been decided on by the steering committee. The process of the decision comes into
question here as the new projects in the pipeline suffer.
To enhance the effect of these new projects on the company, a change of direction is needed in the decision-making process. To
analyze the decision taken for a project, two major ways can be used to analyze the decision, i.e. Decision Quality and Decision
Biases. To change the decision-making process of the committee, the focus should be directed towards the effectiveness of the
project over the company’s portfolio. To analyze the project, various aspects of the project should be analyzed to fit different
criterion’s like the inclination to take the decision, quality of decision taken, how does this affect the company, etc. These techniques
use the basis of heuristics and cognitive decision-making skills that every human possess as basic. These techniques identify the
logic behind the decision and rate the logic in various aspects to help make the best decision. To achieve the best decision for the
projects, the best decision quality needs to be achieved.
The understanding of biases provides a profound way to question and explore various methods to enhance the decision-making
skills within the committee. The understanding of biases plays a major role in this process. The details in the memo discuss the
impact of various types of biases and how to overcome those biases in the decision-making process.
Decision Biases

With the new projects being considered by the steering committee, the process of decision is affected (directly or indirectly) by
processing and interpreting the information. These details are considered of the utmost importance to make a judgement. A
judgment of these details revolving around the system is considered a bias. A decision bias is directly related to the cognitive bias of
a human being. These are often considered as the result of the brain’s attempt to process the information that is supplied. These
biases are often linked to two major types of classifications:
1. Experience – Some biases are formed by the brain after years of experiencing a redundant process. A
decision taken by the individual or group can lead to biased thinking and hence a decision based on the
experience.
2. Attention to detail – A limited span of attention can also lead to a biased decision. A decision taken based on
incomplete information can make it difficult to achieve a comprehensive decision.
To take a decision, the biases can play a major role directly affecting the decision-making cognitive skills possessed by the human
brain. The most common type of cognitive bias is mentioned as follows:
1. Anchoring Bias – This type of cognitive bias occurs when the decision is taken based on a particular part of the information
about the topic. This type of bias stops us from taking new information about the topic and adding it to the existing plan to
improvise.
2. Availability Heuristic Bias – This type of bias describes the way where the information used regarding the project is the one
that is quickly and easily available.
3. Bandwagon Effect – This effect is referred to as the decision was taken based on the culture followed in the committee.
This influence is created mostly based on the experience that the committee has had in the past.
4. Blindspot Bias – This type of bias is registered to an individual where the individual fails to recognize the different biases in
oneself while taking a decision or contributing to a decision.
5. Choice Supportive Bias – This type of bias revolves around the overestimation of the choices taken for the decision. This
aspect creates hindsight to the negative aspects of the choices taken.
6. Confirmation Bias – This type of bias is focused on the tendency to give greater credit to the information that fits the
primitive discussion for the decision.
7. Ostrich Bias – This type of bias describes the negligence observed by the decision-maker towards the negative aspects of
the projects.
8. Outcome Bias – This type of bias is best described by the tendency to make a decision based on the outcome of the
decision rather than the factors that lead to the decision.
 9. Overconfidence Bias – This type of bias is observed in the people to have more confidence in one’s abilities to decide than
to observe and entrust the opinion of others.
10. Placebo Bias – This type of bias is observed when a placebo effect on the information related to the project. This
information is perceived as being sensitive and useful to the project, but it is not of that much essence.
11. Survivorship Bias – This type of bias is observed when a lack of registration of the unqualified information of the project
occurs. This type of bias is very common in group execution scenarios.
12. Selective Perception – This type of bias is observed while collecting the information based on the outcome that is expected
out of the process for the decision. This bias occurs due to a pre-conceived notion assumed by the decision-makers.
A few of the biases have been observed in the steering committee. With the committee being focused on the different projects, the
new projects which can be a great option into the future are not being considered. This committee observes that the information from
the project and more likely to consider the estimation of decisions like how easily can these projects be set up, but what they fail to
consider are the parameters that the projects are surrounded with. Information based on the performance can portray only one issue
of the whole project. The points to consider here are hidden way deeper than the facts and information that are considered in the
decision-making process of the committee. For example, a project can be costly to set up but the profit margins from the project can
be huge considering the different changes in the market that are likely to occur in the nearby future. The committee should consider
checking in with the information related factors that can provide a balance to bias against the consideration of new projects. They
should focus on the different ways in which the information is presented to them, they should consider the different effects of the
market in the past, present and future over the projects that the company plans to invest in.
With the different projects in the pipeline, the company should consider the reshuffling of the decision-making committee. This
decision will help increase the decision-making efficiency of the committee as the biases like ostrich and outcome are prevalent
among the chairs of the committee. These biases are spread over multiple levels of hierarchy in the committee. To benefit from each
other’s decision, the committee members are observed supporting ignorance of plausible information for the one that they are
already confident about. This kind of bias leads to an inaccurate judgement among the different options presented. With the
confidence levels attached to the projects that are well established, the other projects suffer to get an equal chance of promotion.
This decision is being biased by the presence of prevalent information. This bias can be structured around the framing of the
information of the different projects. With the decision of promoting a project lying with a single set of decision-makers, the chances
of new projects finding the light of day become slim as this set of decision-makers can be biased against the information that suits
there convenience. And the convenience of forming a frame around a type of information can lead to the formation of biases like
placebo bias, where the information perceived is of not much essence but is considered to play a major role in the decisions.
These unconscious biases can play a major role in the decisions that are taken for the projects in the pipeline. These decisions can
be directly affected by various factors that the human judgement is not susceptible to. The unreliability of the human judgement
presents the need to study the different biases that exist within the committee. The mere existence of the different biases can create
a challenge in the creative process of the projects. A realization of these biases can diverge the original idea of the project to be
executed to fit the choosing criteria of the steering committee. This redundancy in the projects can distort the innovation process.
These biases not only have a negative effect but can also be considered for the improvement of the decision-making process. To
attain the best quality of the decision, an equal chance should be given to logical with the credibility of the people. The biases can
be used to create a logic that is different from the one that exists. This can help provide a different perspective on the evaluation of
the innovation project while taking a decision.
With the investment in an innovation project, comes the risk that can be damaging to the process of execution. To gauge such risks,
the importance of the varied opinion is considered to be underrated. The presence of bias help in the discovery of processes that
are not considered to be primary but can be beneficial when utilized in a contingency plan. With the help of various options present,
a chance of safeguard the projects from facing various consequences is available. These options can also a major role in increasing
the efficiency of the project with the option of reiterating available for the taking. This can also be helpful to customize the project in a
manner that the project fits the company’s profile aptly.
To enhance the selection process, the process of decision-making needs to be used to reduce uncertainty. The uncertainty reduces
as distorted thinking in the process of analyzing the projects. The committee needs to review the information about every project in
detail to come up with a successful decision. The step to understanding biases plays an important role here. This will provide a
streamlined process for decision making. The process of identifying the bias and improve the process of decision making –

The three basic steps to identify and overcome the different biases experienced by the committee are mentioned as follows:
1. Spot the biases – The first step is to identify the biases that the individual or the team might experience will be by listing out
the different biases within the process. Understanding the different biases can help identify the misleading in the process
of decision making.
2. Know & conquer your enemy – An open discussion about the different biases while identifying the pros and cons of the
innovation projects can be helpful to the decision-making process. Opening up to the different biases give the committee a
chance to get into the crucial detail of the projects that were not being considered in the decision-making process. This
step becomes a crucial step as knowing different biases plays an important role in the process of accepting the different
perspectives offered by this process.
3. Overcome cognitive biases – After realizing the different biases applicable to the situation, the need to overcome those
biases arises. This need can be satisfied by questioning the decisions to completely evaluate every section of the
decision. These questions can be reflections of the biases of the situation. These questions form a framework to subdue
the unforeseen situation by addressing them through these questions.
There are various ways of overcoming biases in the decision-making process. The initial steps to understand and overcome a
bias are as follows:
1. Being aware of the biases – It becomes a crucial need to understand the various kinds of biases present in the committee.
This realization will provide a current stand on the situation of the members of the committee. The understanding of these
biases is important to influence the decision in the future. These understandings can be directly interpreted as the point of
 views for attention while making a decision. Every participant should be aware of these biases and should be able to
contribute to the questioning process to understand the decision better.
2. Considering the factors that influence the decisions – The process of questioning brings out the various factors attached to
the decision. The factors are the key points of focus that need to be attended to make a difference in the decision. These
factors play a major role in the recognition of the various biases.
3. Challenging your biases – There are various types of biases that have been identified in the current scenario with the
steering committee. To overcome these biases, the first and the second step prove helpful to analyze the various biases
and how they can prove to be effective on the decision taken for future projects.
References
1. Board of Innovation. “16 Cognitive Biases That Can Kill Your Decision Making,” August 2, 2017.
https://www.boardofinnovation.com/blog/16-cognitive-biases-that-kill-innovative-thinking/.
2. The Decision Lab. “List of Cognitive Biases and Heuristics.” Accessed November 22, 2020. https://thedecisionlab.com/biases/.
3. Ethics Unwrapped. “Overconfidence Bias.” Accessed November 22, 2020.
https://ethicsunwrapped.utexas.edu/glossary/overconfidence-bias.
4. “Outcome Bias Definition | Psychology Glossary | Alleydog.Com.” Accessed November 22, 2020.
https://www.alleydog.com/glossary/definition.php?term=Outcome+Bias.
5. Verywell Mind. “How Cognitive Biases Influence How You Think and Act.” Accessed November 25, 2020.
https://www.verywellmind.com/what-is-a-cognitive-bias-2794963.
6. Soll, Jack B., Katherine L. Milkman, and John W. Payne. “Outsmart Your Own Biases.” Harvard Business Review, May 1, 2015.
https://hbr.org/2015/05/outsmart-your-own-biases.