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April 28, 2011

Variation in Decision–Making

Here is a link to an interesting BBC News Magazine article: http://www.bbc.co.uk/news/magazine-13213667

I think, by now, we are all quite familiar with the concept of variation, and how you need to get a system into a control before you start thinking about making changes to it (;-), so the material will not be new, and does not need to be explained. I do, however, want to think about the applications to decision-making. It is essential to be aware of natural variation, even with our intuitive System 1 decisions, or representativeness bias can come into play, and cause havoc. It can cause further problems through anchoring if later decisions are built on this.

The article cites the example of the movie boss who was fired after some poor films, only for the ones that came out soon after (which she had started) to do really well. Had her manager understood variation better, he would not have made the terrible decision to throw away a STAR, for pretty much no reason.

I'm glad we had the benefit of PIUSS (and pretty much all of the other modules) when we took RDM. Doing it this way allowed us to take advantage of what we have learned to date to understand the impact some of the heuristics and associated bias can have, and highlights the importance of knowledge in the decision making process. This links even further with the way we approached the KBAM in-module work. Coming back to RDM, I don't think that understanding of variation was particularly relevant to the decisions we actually had to make, especially since there was so little data, but the principle that you really need to understand something before you can do something about it carries over. Our approach to analysing the situation mainly involved TOWS analysis and the BCG Matrix, which may have had a strong impact on the systemic way we framed the three decisions.


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