How do you know if you have a strategic decision to make?

"Should I buy a Rolex?" someone once asked me.

"Why are you asking me that?" I enquire? "If you want to buy a Rolex, buy it."

"Yeah, but aren't you the strategic decision making guy?"

"Yes, but is this a strategic decision?" I ask.

"How will I know? You're the expert...!"

So started a conversation with a friend. What really makes for a strategic decision, and what should we do if it was? In this article I share the three criteria we use to assess whether a decision is strategic or not.

1. Does it affect more than you?

If your decision will affect people other than you or your group, then the decision is strategic. The more people it affects, the more strategic it becomes. So, if you buy a Rolex, would it affect more than you?

2. Is the opportunity cost high?

The second criteria is opportunity cost. We understand that opportunity cost is the lost value brought about by choosing one option over another. The more you stand to "lose" over the choice, the higher your opportunity cost. Obviously, for a watch with the price tag of $20,000, the opportunity cost is much higher than one with a $10,000 price tag. But for some people, even a $1M opportunity does not carry a huge cost simply because he is a person of considerable means. So to that person, the decision would not be strategic. For us simple folk, that is way too high an opportunity costs.

3. Does it have future impact

The further into the future your decision impacts, the more strategic it becomes. So, how would your Rolex impact the future? Perhaps if you were buying it for its investment value, you will be more likely to see it as a strategic purchase than if you merely bought the watch for immediate consumption.

It is AND not OR

But for a decision to be strategic, all these three criteria must be present at the same time. Hence it is affecting more than you AND has a high opportunity cost AND impacts the future. If your decision has all these, then your decision is strategic and to answer that, use our 8-step Strategic Decision Making process. But if one or more of the criteria is missing, then your decision is not strategic. Then just go on and make the decision already!

Life should not be so complicated.