All entries for Friday 18 March 2011

March 18, 2011

Explore your options

In one of the lectures last week, Jeff touched on the point that one of the key steps of the decision-making process was exploring and developing the options or alternatives available, through various means. Doing so tends to result in having more choice obviously, but it's also likely that you might spot a more out-of-the-box solution than otherwise that challenges what is expected. If I'm honest, the creative solutions that our team came up with were not the result of a particular brainstorming session, or any special technique. They spontaneously arose during the natural course of our collective approach. Perhaps we had an element of luck in this, but I think that the really open nature of our working environment helped this.

I think that this is a really important lesson to take-away. Always take the time to think what else you could do, before you take a decision. This is especially important if you're not particularly happy with any of your present options! Real progress only ever occurs by step change, when someone like Gandhi brings to the fore the ideas of total non-violence, or Steve Jobs introduces the Ipod, or Ipad for that matter. You can bet that they were not happy with the status quo!

It's obviously a difficult thing to do in practice - there is not always time to generate alternatives or to challenge the assumptions of a given situation. But, you can be sure that if you have done so, your eventual decision is likely to be more robust, because you know a lot more about what else you (or others competing with you) might have done. It's quite similar in that sense to having more information when making any decision. Sure, you might become paralysed, waiting to act until you are sure, but the very fact that you have considered what is relevant means that your informed decision is one you can have confidence in.


Good research for robust decisions

We gave our decision-making presentations today; wow that was a long, tough session to endure! I’m not sure anyone was able to sustain their focus through the whole thing, especially due to how tired we all were. Still, in the moments that I wasn’t completely vacant (some might say that these are rare, or non-existent even! ;-)), I did get to note some interesting comparisons between the approaches of other groups and our own.

Something that surprised me though was the lack of research that some groups put into their marketing strategy and budgeting. I don’t know whether anybody was already quite familiar with the industry and so didn’t need to do much research, but I am pretty sure that the task specifically asked for it. How can you expect to make a robust decision without having the requisite knowledge to base it on (I’m sure you can hear the undertones of Deming in what I am saying hehe!)?

I was really proud of the fact that my group did spend quite a lot of time on this. After initially struggling, and trying to base the decisions on our own biases (e.g. “we all do our shopping on the internet, so fishermen will too”, or, “I always take in adverts that I hear on the radio”) the availability heuristic in particular was clearly present for all to see. When we could find no academic work related to what we were looking for, we simply decided to ask those who might know! This entailed looking for companies producing fishing boats in the UK, and effectively calling them up and speaking to their leaders or marketing departments in order to ascertain the information about the best and most effective marketing methods. From this, we learned that TV and radio were virtually useless (we had previously assumed fishermen listened to the radio all day, and that it would be an effective route), but also, most importantly, that internet and advertising in fishing magazines was good. However, the best find for us, which wasn’t one of the options given originally, was that boat shows were the most effective route for selling boats. For example, the Southampton boat show is the biggest in the UK, runs for 10 days each year, and brings in around 120,000 people each year, with average incomes above £95,000 and around 80% of visitors making a purchase from exhibitors of the show. What a fantastic way to target customers who have disposable income and want to buy from you! And we would never have known without picking up the phone and speaking to professional boat salesmen. Doing so informed our decision no-end, leading to confidence that if we had to implement our plan for the different methods, we are relatively sure we would have been successful. Good theory (or knowledge or experience) should be the backbone of decision-making.


I guess I’m a (Decision) tree–hugger!

After spending a lot of time looking at a lot of different tools lately, I have decided that DT’s are probably one of the best (obviously, depending on the situation and the information that you have. Their ability to get to the heart of a problem through finances (or utility) is quite amazing, and the structuring of the process is brilliant in that it helps you to ensure that you have covered every eventuality. It is especially good at helping you to avoid the confirmation trap. For example, any time you make a branch, you also have to question if there is an opposite alternative at the very least, if not more completely distinct ones. They are also hard to argue with, and help you make informed decisions based on the likelihood of certain scenarios playing out. The power of decision trees is something that I am unlikely to forget, and they are probably something I will integrate into my general System-2 decision-making methodology.

In terms of helping our team to reach a final decision, about whether to continue or not, and where to locate, they were absolutely invaluable. Of course, the tree doesn’t know anything that you don’t tell it, so qualitative factors are very hard to incorporate, and something like Grid Analysis or Analytical Hierarchy Process are much more appropriate. Similarly, while we did include marketing costs, or factory re-sale gains, other costs that are difficult to estimate, such as the potential training costs of workers for the Exmouth factory, were not included.

So it can be argues that DT’s do not always give you the full picture, which is true. But, you don’t have to take the outcome as fact. Even after evaluating the tree, you need a high degree of judgement to decide what is important or not, and how risky certain paths really are. The chance of the worst case-scenario playing out for Waveriders (so, product doesn’t get developed until Dec 2012, and when production begins in Jan 2014, the market conditions are poor) is around 0.15. That is the only situation under which producing at both factories might be a problem, so it is worth balancing the risk and pursuing that course of action anyway.

However, DT’s are clearly an excellent tool for decision making, and when used correctly, are capable of judging a situation in a way that our own cognitive processes are rarely capable of. Of course, there is still potential for bias, and they are no substitute for experience and good judgement. They cannot be relied upon to actually make the decision, as they will certainly NOT be taking the blame for bad decisions!


March 2011

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