“The psychological core of understanding… consists of having a ‘working model’ of the phenomenon in your mind. If you understand inflation, a mathematical proof, the way a computer works or DNA… you have a mental representation that serves as a model” (Johnson-Laird 1983: 3)

What are Mental Models?

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“Each of us uses models constantly. Every person in private life and in business instinctively uses models for decision making. The mental images in one’s head about one’s surroundings are models. …A mental image is a model. All decisions are taken on the basis of models.” (Forrester 1971: 55)

Alternative terms for Mental Models Cognitive maps Interpretative schemes Industry recipes Implicit theories Corporate theory Screens Routines Cognitive representations Frames / Strategic frames Mental templates Causal maps Belief structures

Dominant logic Mindscapes Worldview Managerial lenses Mental pictures Organizing frameworks Perception filters Analogies Knowledge structures Heuristics Decision biases Schema

Mental model of Disney’s Corporate Strategy

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Military Mental model of Afghanistan Stability

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Mental Model Components Performance

Decision Rules

Strategies

Perceived Causal Relationships

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Our Mental Models... Enable us to make sense of complexity •  Help us process information quickly and make decisions

under uncertainty •  Often provide ‘good enough’ solutions

But are not accurate representations •  They are incomplete and constantly evolving •  Typically contain biases, errors, & contradictions

Two Studies of Mental Models

1.  Mental models, decision rules, and performance heterogeneity

2. Dynamic decision making using the balance scorecard framework

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Study 1: Examining effects of mental model accuracy on decision rules, strategies, and performance

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Study 1: New Product Launch Sim

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Study 1 Experimental Design

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Delayed Testing Phase

3 simulation runs

Learning Phase

3 simulation runs

! Mental model measures

Immediate Testing Phase

3 simulation runs

! 15 weeks after immediate phase

Measures Performance: Cumulative Net Income Mental Model Accuracy –  Perceived causal relationships –  Mental simulations of small components (Graphical

integration) –  Knowledge of core feedback structure (market diffusion

process)

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Performance Relative to Benchmark

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Mental Model Accuracy & Performance

More accurate mental models improve performance –  Increasing MMA 1 std deviation ñ performance 22-40%

More accurate mental models of core feedback structure improve performance –  1 std deviation ñ performance 17-38%

Two types of mental model errors –  Causal blind spots –  Superstitious causal beliefs

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Mental Models and Decision Rules More accurate mental models improve decision rules More accurate mental models of key principles

improve decision rules Participants’ decision rules stabilized rapidly –  No differences in information weights after 4th trial block

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Identified 4 Distinct Strategies on High Complexity Task

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Significant differences in: • Mental model accuracy • Performance

Study 2: Examining effects of a strategy map with causal relationships and time delay information on mental model accuracy and performance

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Study 2: Experimental Design

Case Briefing

Strategy Information Presentation Provideda

Round 2 Round 3 Round 1 Round 4

Post-Learning Round Questionnaireb

(and Short Break)

Post-Tenure Questionnairec

Study 2: Balanced Scorecard Sim

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Treatments: Strategy Map

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Study 2 Measures Performance: Cumulative Profit Mental Model Accuracy of causal relationships and

delays –  Perceived causal relationships –  Mental simulations of small components –  Knowledge of core feedback structure

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Cumulative Profit by Sim Round & Treatment

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Strategy Map, Mental models, & Performance Both strategy map treatments ñ MMA of causal relationships

compared with control group

Strategy map with delays treatment ñ MMA of delays compared with strategy map without delays and control group

Both strategy map treatments ñ performance compared with control group

More accurate mental models of causal relationships and delays ñ performance

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Take-aways about Mental Models We need them to make sense of the world around us! –  They enable us to consider, decide and act quickly –  More accurate mental models (perceived causal relationships, decision

rules, & strategies) increase performance

But at the same time... –  They make us passive thinkers –  Lead us to reject information that does not fit our current beliefs –  Automatically fill in missing information for sensemaking –  Usually unaware of the power of our mental models –  And… mental model accuracy often quite low (averages ~ 50%)

We need to constantly enrich and update our mental models that guide strategic choices

How can we enrich our mental models? Using Systems Thinking & Modelling Tools to understand the

big picture can enrich our mental models –  Causal diagrams (including simple strategy maps) –  Simulation models to understand puzzling dynamics –  Management Flight Simulators / Microworlds

A lot more research needed to test these (and other) types of interventions!

Thank you!

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