tbl hc5
DESCRIPTION
TRANSCRIPT
Rotterdam, 6 september 2010
the Bottom line
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Making decisions
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Impact & Effort
Consider you are selling an alcohol-free beer, that gets ridiculed by the country’s leading stand-up comedian.as a result sales are plummeting
think of some options and write five of your best on post-it notes.
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What was the problem?
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Making decisions
“Decision making can be regarded as the mental processes (cognitive process) resulting in the selection of a course of action among several alternatives.” - wikipedia
the science of decision making:CAPMAnalytical network processdecision treesetc...
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Some vocabulary
Utility= expected outcome (“attractiveness”) of a decisionRisk= the probable distribution of outcomes is knownUncertainty= the nature of the outcomes is unknownRegret= measure of how much better a decision maker could have done had he known the nature of the outcomes
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Decisions under risk (decision tree)
Risk means the probability of the outcomes is knowas are the values.
(IMHO these instances are actually pretty rare in “normal” businesses. but the purpose is to illustrate decisions and outcomes)
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Rational decision making process (simplified)
“What is the problem that needs solving?”therefore which criteria must my solution adress“how “important” are these criteria?
What solutions do I have?How (well) do they adress the problem?
What do they cost?
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issue 1 issue 2 issue 3 score
weight 1 0,2 0,6
strategy 1 10 5 4 13,4
strategy 2 5 10 8 11,8
strategy 3 10 5 10 17
Weighted sum method
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Recap
Decision making can be done rationally or on gut feelingNeither has been proven to be “better”
In a case competition / presentation setting you might want to use the “rational” method to bolster your case.
the rational method does not work well in enviroments of high uncertainty, complexity and/or turbulence
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Next week:
defining the business problemmaking your case
vrijdag 29 oktober 2010