The skew toward tactical and volume-based decisions
1 Comments Published by John Dillard on Sunday, August 13, 2006 at 10:02 AM.
David Maister recently wrote a great post on "How we really make decisions." It centers on Lovaglia's Law: "The more important the outcome of a decision, the more people will resist using evidence to make it."
In reading blogs on decision analytics and decision sciences posts over the last few months, we have noticed that there is a strong emphasis on tactical decisions over strategic decisions. There are far more sites that provide excellent coverage of large-scale decision automation, use of metrics and analytical tools than there are sites that address fundamental, business-model changing decisions. By business-model changing decisions we mean questions like:
-- Which businesses to enter and exit
-- What large-scale strategic investments to make
-- Which customer segments to focus on
The emphasis on decision automation and tactical, volume-based decisions is not a bad thing; these efforts will dramatically improve market efficiencies. However, they don't help much with decisions that David is addressing in his piece: the big decisions.
David's piece gets to why this is the case: there is far less at stake politically and perhaps emotionally in large volume decisions that don't have widespread repercussions. David states in his post, "It sometimes seems as if, for all of us, nearly all the time, rhetoric triumphs over reason, personality over substance, politics over merits, neuroses over facts."
This is certainly the case with many of the clients we have seen when faced with the big choices: of the many programs to fund, which ones should we fund? Which customer segments do we target? On these business model-defining questions, the decisions often are made from the gut. Sometimes this works well (think "Blink"), but it often doesn't. In the government especially, those decisions are easily picked apart by bureaucratic processes or submissions to Congress.
In our view executives must exert discipline through structured decision processes and evidence for strategic decisionmaking. The only way to do this is set the rules of the decision up front, define the data required to make those decisions, and then execute the process according to plan. Furthermore, executives should hold themselves accountable for using evidence in their decisions. In many cases, their gut instinct will be validated. However, in some cases a key mistake could be avoided. In the case of business-model changing decisions, we think it's worth the upfront effort.
In reading blogs on decision analytics and decision sciences posts over the last few months, we have noticed that there is a strong emphasis on tactical decisions over strategic decisions. There are far more sites that provide excellent coverage of large-scale decision automation, use of metrics and analytical tools than there are sites that address fundamental, business-model changing decisions. By business-model changing decisions we mean questions like:
-- Which businesses to enter and exit
-- What large-scale strategic investments to make
-- Which customer segments to focus on
The emphasis on decision automation and tactical, volume-based decisions is not a bad thing; these efforts will dramatically improve market efficiencies. However, they don't help much with decisions that David is addressing in his piece: the big decisions.
David's piece gets to why this is the case: there is far less at stake politically and perhaps emotionally in large volume decisions that don't have widespread repercussions. David states in his post, "It sometimes seems as if, for all of us, nearly all the time, rhetoric triumphs over reason, personality over substance, politics over merits, neuroses over facts."
This is certainly the case with many of the clients we have seen when faced with the big choices: of the many programs to fund, which ones should we fund? Which customer segments do we target? On these business model-defining questions, the decisions often are made from the gut. Sometimes this works well (think "Blink"), but it often doesn't. In the government especially, those decisions are easily picked apart by bureaucratic processes or submissions to Congress.
In our view executives must exert discipline through structured decision processes and evidence for strategic decisionmaking. The only way to do this is set the rules of the decision up front, define the data required to make those decisions, and then execute the process according to plan. Furthermore, executives should hold themselves accountable for using evidence in their decisions. In many cases, their gut instinct will be validated. However, in some cases a key mistake could be avoided. In the case of business-model changing decisions, we think it's worth the upfront effort.
An interesting point of view. I would say that our experience trying to get customers to adopt analytically-driven strategies for high-volume decisions (like direct marketing for instance) run into some of the same emotional responses.