Why optimizing decisions is the most important thing you can do

The most important piece of advice we can give to organizations and their leadership for the next 30 years is this:

Optimizing decisions is the single most important factor in long-term organizational success. It's more important than strategy, organization design, quality, customer relationship management, innovation, or any other business model, technique, or practice.

That statement is provocative, but it's the reason why we started a company. It also begs the question, "What has changed to make optimized decisions so important?" This post outlines some of the reasons why; the next post will discuss ideas on what to do about it. The reasons are far too many to list here, but below are my views of the key interdependent factors.

1) Business model innovation. Innovations in business models--the underlying mechanisms that define the way organizations operate to provide goods and services--have been changing at breakneck speed in the last 15 years, and there is no reason to expect a coming period of stabilization. Organizations that are successful don't adopt a model and stick with it; they are hyper-adaptive to new business model opportunities when they emerge. The number of choices in business models and the resulting consequences are rapidly multiplying.

2) Intensifying expectations for regulatory compliance. Companies and governments entered a new era after 9/11 and the Enron scandal marked by a dramatic intensification of oversight by shareholders, regulatory authorities, Congress, OMB, and others. Not only is there pressure to make critical decisions quickly and accurately, but organizations must explain to overseers why the decisions were made. This new emphasis on transparency of decision-making is not supported by 20th century decision-making processes.

3) Compressing decision cycles. As business models shift and information becomes more accessible and available, organizations are faced with compressing decision cycles, particularly in critical capability processes. They have less time to choose options, and more options to choose from. In any decision, data must be aggregated, criteria established, options considered, and decisions made. Organizations have less and less time to pass each gate.

4) Advancing decision automation. Advancements in artificial intelligence compound the severity of the decision making problem. More and more decisions may be automated every year, placing additional pressure on manual decisions to either be expedited or automated themselves. Critical decisions will either be severe time traps in critical processes, or the source of substantial competitive advantage. Ignore this technology at your peril--over the next ten years the ability of software to solve complex, unstructured problems will revolutionize what organizations define as their core capabilities. James Taylor writes the best blog out there on decision automation.

5) Accelerating acceleration. As everyone knows, the innovation in technology, business, and life is accelerating. This is well documented---Moore's Law and studies of technology adoption curves are just two good pieces of evidence. However, what places so much more pressure on decision cycles is that the rate of change is also accelerating. Why? Because enablers of innovation are themselves undergoing rapid, logarithmic change. Ray Kurzweil and Alvin and Heidi Toffler have done some great writing on this phenomenon.

These are just five thoughts on my list. . . it's certainly not exhaustive. Our next post will focus on how we view solutions to the challenge--specifically, decision-centric capability development.