Black hat workshops are a type of competitive insight workshop that can help organizations model how competitors might behave in a particular scenario. The author describes how these sessions can help teams simulate the outcomes of decisions and situations their company will face in the real world through role-playing exercises. He also offers a step-by-step guide to conducting black hat workshops to better anticipate competitors' next moves and develop successful market strategies.

Most companies struggle with setting executive performance targets. From 2006 to 2014, almost all of the 1,000 largest U.S. firms completely changed their CEOs' performance metrics at least once, and almost 60% changed them multiple times. The problems with such targets are well known: They often encourage managers to sacrifice a firm's long-term health or to manipulate their numbers in order to make their bonuses. What companies need is an incentive structure that makes it easier to meet targets by creating real value than by gaming the system. New research analyzing data from more than 900 firms over 15 years suggests companies can create one by following these four principles: Use multiple metrics; increase payouts at a constant rate; reward relative performance; and include nonfinancial targets.

Understanding how competitors will respond to your actions should be a critical component of decision making. Few companies, however, incorporate such insights into their strategic decisions, in large part because most methods for obtaining them are complex and unreliable. The authors have drawn on their research and work with companies to develop an approach for predicting rivals' behavior that is both accurate and easy to apply. It involves considering just three questions: Will the competitor react at all? Few strategic planners consider the possibility that a rival may not respond to a company's competitive move. Yet 17% of the companies surveyed by the authors did not react to a rival's major initiative. Some competitors may not detect a company's move, while others may not feel threatened by it or may simply be unable to coordinate a timely response. What options will the competitor actively consider? Most companies seriously examine fewer than four response options, and it's likely that among them will be the most obvious, such as introducing a me-too product or matching a price change. To come up with a short list of options, companies will probably look at what they have done in similar situations. Which option will the competitor most likely choose? Your adversaries will choose the option that they consider to be most effective. It helps to know that in anticipating competitive behavior, most companies analyze only one round of moves and countermoves, and they evaluate their options using simple, short-term measures. The key is to get inside your rival's head and look at the situation from that perspective, not yours.

Pursuing a merger or acquisition is inherently difficult. Things get even harder when executives are blind to their own faulty assumptions, say Lovallo--a professor at the University of Western Australia Business School and a senior adviser to McKinsey--and three of his McKinsey colleagues. The authors identify biases that can surface at each step of the M&A process and provide practical tips for rising above them--an approach they call targeted debiasing. During the preliminary due-diligence stage, biases abound. To overcome the confirmation bias, aggressively seek evidence that challenges your initial hypothesis about a deal. The best medicine for overconfidence in identifying revenue and cost synergies is to learn from precedents at your firm and others. Avoiding underestimation of cultural differences between your company and the target requires understanding the differences in the ways people interact at each organization. Misjudging the time and resources you need is at the core of the planning fallacy, which you can elude by formally identifying best practices and continually revisiting them. Finally, dilute conflict of interest by soliciting dispassionate external expertise. The bidding phase is vulnerable to the winner's curse, a phenomenon common in auctions. To avoid paying too much for a target, actively generate alternatives to the deal under consideration and develop a set of bidding cutoff rules. After offering an initial bid, deal makers are susceptible to anchoring, whereby they remain attached to their original price estimate, and to the sunk cost fallacy that they've invested too much to stop now. The secret to overcoming both: Use your newly available access to the target's books to better assess the investment case--and change your tune accordingly.