Decision-Making Models

Synopsis

How do you better organize your priorities to make stronger decisions backed up by data? With this framework, you'll learn how to use the top decision-making tools like decision matrix and Pareto analysis, Fishbone and Kano diagrams, Eisenhower, Action priority, and Rapid matrices, OODA loops, DMAIC model and Delphi Method which you can download and customize to your needs.

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What are some resources for learning more about these decision-making tools?

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There are numerous resources available for learning more about these decision-making tools. You can find detailed guides and tutorials on websites like MindTools, Harvard Business Review, and Project Management Institute. Online courses on platforms like Coursera, Udemy, and LinkedIn Learning also offer comprehensive lessons on these tools. Additionally, books like 'Smart Choices: A Practical Guide to Making Better Decisions' and 'HBR's 10 Must Reads on Making Smart Decisions' provide in-depth insights into these tools.

How can these decision-making tools be used to make long-term decisions?

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These decision-making tools can be used to make long-term decisions by helping to organize and prioritize tasks, identify problems and their causes, and evaluate potential solutions. They can also assist in understanding customer needs, determining the urgency and importance of tasks, and making quick decisions. The DMAIC model can be used for improving existing processes, while the Delphi Method can be used for forecasting and decision making in uncertain situations.

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Outcome

When you make decisions, emotions, ego, and bias often get in the way. With these tools, you can be more organized with your decision process to better dissect a complex problem or turn a brainstorm session into a digestible dataset. Learn how to make decisions you can back up with a chart, a graph, a matrix, or a weighted table alongside how companies like Apple, Ford, Sony and Microsoft make decisions. Plus, learn about the toughest decision General Dwight Eisenhower had to make during World War 2 and how you can use his mental model for your own important decisions.

Questions and answers

How can decision-making models be used in team settings?

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Decision-making models can be used in team settings to organize and streamline the decision process. They can help dissect complex problems and turn brainstorming sessions into digestible datasets. These models can also help reduce the influence of emotions, ego, and bias in decision-making. Companies like Apple, Ford, Sony, and Microsoft use these models for their decision-making processes.

What are some strategies to overcome bias in decision-making?

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Some strategies to overcome bias in decision-making include using tools to organize your decision process, dissecting complex problems, turning brainstorm sessions into digestible datasets, and making decisions that can be backed up with charts, graphs, matrices, or weighted tables. Studying how successful companies like Apple, Ford, Sony, and Microsoft make decisions can also provide valuable insights. Additionally, learning from historical figures like General Dwight Eisenhower and their decision-making processes can be beneficial.

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Tool highlights

Decision matrix analysis

So you have a tough decision to make with a lot of competing factors. How do you make the right call without relying on gut instinct?

Over the last 20 years, Sony's Playstation and Microsoft's Xbox have been neck and neck for the top-selling game console with each new generation. But both companies made decisions they had to walk back this year: Xbox decided to raise the cost and charge gamers the same price they would pay for a whole year of its Xbox Live Gold service, only now they would only get six months. Playstation also angered fans when it decided to shut down the legacy Playstation network stores, also ultimately deciding to walk back the decision.

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How could these decisions impact the perception of these brands among gamers?

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These decisions could negatively impact the perception of these brands among gamers. Gamers may view these actions as a disregard for their interests and loyalty, which could lead to a loss of trust and potentially a decrease in brand loyalty. This could ultimately affect the brands' sales and reputation in the gaming community.

What are some potential alternatives to the decisions made by Sony and Microsoft?

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Potential alternatives to the decisions made by Sony and Microsoft could include maintaining the original pricing structure for Xbox Live Gold service, instead of raising the cost. For Playstation, an alternative could be to keep the legacy Playstation network stores operational, or perhaps offer a transition plan for users to migrate to new platforms. These alternatives could potentially avoid upsetting their user base.

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To avoid a decision that seems smart based on cost analysis but could cost you a lot more in brand equity, use a decision matrix analysis to use an analytical approach to your decision options. (Slide 3)

A simple decision matrix on the left lists the criteria to make a decision alongside a score for each potential solution. A weighted matrix on the right lets you value different criteria based on their level of importance.

For example, if cost isn't as important as service or vice versa, each can be weighted lower or higher as needed. If the cost scores high on a decision but the rest of the criteria is weighted lower, it will bring the entire score down, which could lead to a different decision depending on what's most important.

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What are some strategies for effectively implementing these decision-making models?

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One strategy for effectively implementing decision-making models is to assign weights to different criteria based on their importance. For instance, if cost isn't as important as service, it can be weighted lower. If the cost scores high on a decision but the rest of the criteria is weighted lower, it will bring the entire score down, which could lead to a different decision depending on what's most important. It's crucial to understand the priorities and adjust the weights accordingly.

How can these decision-making models be used to improve personal decision-making?

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Decision-making models can be used to improve personal decision-making by providing a structured and systematic approach to decision making. They can help in identifying and evaluating different options based on various criteria such as cost, service, etc. By assigning weights to these criteria based on their importance, one can make more informed and rational decisions. These models can also help in reducing bias and subjectivity in decision making.

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Once all these weighted scores are tallied up, you can use a graph visualization to see how they all stack up. (Slide 4)

Pareto analysis

So you know how to make an informed decision. But how do you decide which decision will have the most impact on your company?

Coined by Italian economist Vilfredo Pareto, the Pareto principle states that for many events, 80% of the effects come from 20% of the causes. This means a minority of inciting incidents lead to a majority of outcomes. For example, in 2018, 93% of all EV sales came from just 12 models, of which the Tesla model 3 sold 4x as many units as its next closest competitor. Tesla not only led the electrification of the industry but changed its peers' business models. In addition to going electric, Ford announced earlier this year it will permanently reduce the range of vehicles carried on dealership lots and transition to a build-to-order model. Ford is taking the Pareto principle to heart and will spend less on promotions, reduce manufacturing costs and complexity, and invest more in the models' buyers really want.

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Pareto analysis is a simple decision-making technique to assess competing problems and measure their impact. In this case, the 80-20% rule can be translated into decision-making as it forces you to look at what causes what and the impact of those causes.

In a table or survey format, you can identify and list a series of problems that contribute to a particular outcome. You then score the problems based on their frequency of occurrence, percentage of the whole, and level of impact. In a graph visualization, group problems together to see which problem would be the most impactful to solve. Decision made. (Slide 6)

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Fishbone diagram

During your Pareto analysis, you may find it important to identify the root cause of each problem that you identify.

For example, a new report from accounting firm Grant Thorton identified nearly one million job vacancies in the UK. Half of these jobs were in the food and drink sector, industries that typically rely on an immigrant workforce from the EU. This labor shortage has created a supply chain crisis where the government blames the pandemic and businesses blame Brexit, which left many holes in the British labor market without the workers to fill them. So which of these is the root cause?

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To identify root causes, you can use a fishbone diagram, also called a root cause and effect diagram. A fishbone diagram begins with a problem statement that is written on the right, or the head of the fish. Then, contributing causes are added to the bones of the fish, with smaller bones that branch off from the larger issues that add additional context or contribute to the issue. (Slide 8)

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How do the decision-making frameworks enhance business strategy in the context of post-Brexit immigration policies?

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Decision-making frameworks can enhance business strategy in the context of post-Brexit immigration policies by helping businesses to analyze and understand the impact of these policies on their operations. For instance, a decision matrix can be used to weigh the pros and cons of different strategies in response to the labor shortage caused by the immigration policies. Pareto analysis can help identify the most significant factors affecting the labor supply, while Fishbone analysis can be used to identify root causes of the labor shortage. These tools can help businesses to make informed decisions and develop strategies to mitigate the impact of the immigration policies.

How can companies implement decision-making tools like decision matrix and Pareto analysis to address labor shortages?

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Companies can implement decision-making tools like decision matrix and Pareto analysis to address labor shortages by first identifying the key factors contributing to the labor shortage. Using the decision matrix, they can evaluate and prioritize these factors based on their impact and feasibility. For instance, factors could include wage rates, working conditions, or recruitment strategies. Each factor is assigned a weight and a score, and the highest scoring solutions are prioritized.

Pareto analysis, on the other hand, can help identify the most significant factors contributing to the labor shortage. This is based on the Pareto principle that 80% of problems are usually caused by 20% of the causes. By focusing on these critical causes, companies can effectively address the labor shortage.

These tools, when used effectively, can provide a structured approach to decision making and problem solving, enabling companies to address labor shortages in a strategic manner.

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Once all the contributing factors are listed, this root cause discovery analysis can be used to compile the results and weight them according to their relative importance with another decision-making tool like Pareto.

In the case of the UK labor shortage, Grant Thornton's research found that since the start of the pandemic, 1.3 million foreign-born workers had left the UK. While the pandemic was the root cause, the government's current post-Brexit immigration policies have not done enough to offer short-term visas to foreign workers that could solve the problem, and everything from supermarkets to meat processors to farmers and truckers now pay the price.

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Kano diagram

You have the root cause and the impact of a decision. But what about when you want to make decisions about what features to include in a product?

This year, Apple unveiled the iPhone 13 with some pretty impressive video features, including a new low-light sensor and AI-powered rack focus feature. While both sound niche, Apple had a big customer segment in mind: the creator economy. Apple likely made the decision to capture the creator economy with these new features and take market share from competitor brands. Since TikTok announced it has 1 billion monthly active users, Apple seems to want to position its iPhone 13 as being the creative tool of choice for all those potential creators.

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To decide what product features to focus on for your next product launch, you can use a Kano Diagram to help your decision-making. Survey potential users with key questions to ask that draw out insights on potential features. Ask respondents to answer whether they would like, expect, tolerate, dislike, or be neutral on a feature. Create a table of responses with the number of answers for each. (Slide 10)

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Then, collate these responses in a table that you can plot on the Kano diagram. The features with high functionality and high user satisfaction should be your main features to focus on. (Slide 12)

Eisenhower matrix

With so many urgent priorities demanding you make a decision, how do you prioritize which decisions to make?

As President, Dwight Eisenhower was known for the wars he didn't fight. But on May 30th in 1944, then Supreme Commander of the Allied Forces, Eisenhower was faced with the greatest decision he ever had to make. With a little less than a week before the landing in Normandy, British Air Chief Marshal Sir Trafford Leigh-Mallory came to him with an analysis that they should call off the mission because casualties of the glider troops could be as high as 90%. Of 18,000 men, only 5,00 would survive — a cost so high that the mission would be doomed before they reached the ground. But in Ike's words, "The success of the landings on the beaches might well turn on the success of the paratroopers behind the lines." So how did he solve the decision?

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Founded after Eisenhower, the Eisenhower Matrix is a decision-making matrix for productivity that separates tasks that need to be done immediately, scheduled, delegated, or deleted. In following Eisenhower's own decision-making process, you can quickly arrange tasks by whether they are urgent or whether they are important. Dwight did this so only important and urgent matters came across his desk. If you divide your tasks into urgent and important, you can quickly see which tasks to devote more thought to and be more deliberate about and which others to handle quickly without spending too much time on. (Slide 13)

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How did Eisenhower's decision-making process influence the outcome of D-Day?

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Eisenhower's decision-making process greatly influenced the outcome of D-Day. He meticulously reviewed the invasion process multiple times, weighing the costs and potential outcomes. His primary concern was preventing the Germans from bringing up reinforcements, which could have drastically changed the course of the invasion. Ultimately, he decided to let the order stand, which resulted in the airborne doing their job effectively with a casualty rate of only 8%. This decision played a crucial role in the success of D-Day.

What are some effective decision-making models that can be used in a business setting?

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There are several effective decision-making models that can be used in a business setting. Some of the most popular ones include the Decision Matrix Analysis, the Pareto Analysis, and the Fishbone Diagram. The Decision Matrix Analysis is a useful technique to use for making a decision. It's particularly powerful where you have a number of good alternatives to choose from, and many different factors to take into account. The Pareto Analysis is a simple technique for prioritizing possible changes by identifying the problems that will be resolved by making these changes. And the Fishbone Diagram is a simple tool that allows quick and easy identification of many possible causes for a problem.

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As Eisenhower was quoted: "I have two kinds of problems: the urgent and the important. The urgent are not important, and the important are never urgent."

Additional tools

For more tools to increase your productivity, download this presentation. You'll gain more variations and visualizations to help plan every type of productivity, with daily, weekly, and monthly views.

So what did Ike decide to do? He reviewed the process for the invasion countless times over the next few days. When it came down to decide, he weighed the cost of sending his men into D-Day without doing everything he could do to prevent the Germans from bringing up reinforcements, and he couldn't permit that cost either. So he let the order stand. And, as he later told a group of student journalists, "The airborne did their job. And, I am happy to say, the casualties were only 8%.

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For more Decision-Making Models like an action priority matrix, OODA loop, RAPID matrix, DMAIC or Delphi Method that you can download and customize with your data, you can download and enjoy this framework.