Embedded Decision Analysis

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The future of Decision Analysis is Embedded Decision Analysis where DA is embedded as part of the natural work process. See the webinar on this topic.

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Embedded Decision Analysis

  1. 1. Embedded Decision Analysis David Matheson President and CEO SmartOrg, Inc. @SmartOrgInc #DecisionMgt 1 © 2000-2013 SmartOrg. | Confidential and Proprietary.
  2. 2. SmartOrg software and services helps companies find the most profitable projects Life science 2 (c) 2000-2013 SmartOrg, Inc. Aerospace Technology @SmartOrgInc Other
  3. 3. What is the largest scale DA instance you have been directly involved in? 10 people 50 people 100 people 500 people 1,000 people 5,000 people People = those directly involved in the decision somehow, e.g. providing information, creating alternatives, etc. Does not include those affected by a decision. 3 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  4. 4. How many decision were directly in play? i.e. on the “focus” part of the decision hierarchy 1 decision 5 decisions 10 decisions 50 decisions 100 decisions 500 decisions 1,000 decisions 5,000 decisions 4 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  5. 5. Why is Decision Analysis not as prevalent as Accounting? 5 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  6. 6. Decision Analysis has not even made it to the list of “management fads”. Management by objectives Matrix management Theory Z One-minute management Management by wandering around Total quality management Business process reengineering Empowerment ISO 9000 Knowledge Management 6 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  7. 7. Our profession has a weak value proposition. What we offer: good decisions What people want: results The Goal— Decision Quality Information Alternatives Values DQ Reasoning Frame Commitment 7 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  8. 8. We have been outclassed by algorithms. Decision Analysis 8 VS © 2000-2013 SmartOrg. | Confidential and Proprietary. Predictive analytics Business intelligence Big data (insert computer decision buzzword here) @SmartOrgInc
  9. 9. Spam filtering is among the largest scale highest impact applications of decision analysis The Way Forward 9 Embedded Decision Analysis © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  10. 10. Delivering A Billion Dollars – Lessons In Portfolio Evaluation Global Leader Dow AgroSciences
  11. 11. To Succeed We Must Be Better Than Competitors DAS Is Being Outspent In R&D Low Project Success % Of Value Promise R&D As % Of Sales 16% 14% 12% 10% 8% 6% 4% 2% 0% 100 Sales Margin 50 0 ay on er sa Sy nto ng en ta B A SF D O D W uP on t 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Performance Comparison Of Projects* Actual Vs. Forecast (pre-2000) M B R&D Spend ($ Bil) Competitive comparison of R&D spending in 2000 Source: Phillips McDougal May - 2000 Source: Internal Study
  12. 12. Our Results Show Our Performance To Be Better DAS #3 In New Ag Chem Product Introductions Improved Project Success 45 Performance Comparison Of Projects* Actual Vs. Forecast 40 100 % Of Value Promise 35 30 25 20 15 10 5 Sales Margin 50 0 Pre-CPS Post-CPS 0 Ba ye r BA SF DO Sy W ng en t Du a Po M nt on sa nt o* New Ag Chem Introductions Competitive comparison 1990-2007 Source: Cropnosis * Does not include Biotech introductions Source: Internal Study
  13. 13. Process And Tools Support A Complex Global Portfolio – 1500 Concepts And 150 Projects Our Portfolio Over a hundred active ingredients and biological traits for … That work differently in dozens of different crops… And are sold in dozens of local markets with products formulated to support specific agricultural practices. Our Tools Our Teams Central executive management overall affordability, targets, and project priority. Global project leaders prioritize concepts and manage the overall project value and risk. Local teams assess commercial value and uncertainty of a specific concept. Technical Market Technical Market
  14. 14. Our Portfolio Process Is Built On Best Practice Decision & Risk Analysis Tools Issues & Assumptions Identifying key project Uncertainties and their Impact (Value Drivers) • • • • • • • • Probability Distribution Valuing Projects and Characterizing alternatives Less Emphasized Project Risk Assessment Sensitivity Analysis Technical Expected Future Value H Market Mean L Decision Analysis Investment Intensity Risk Reward Bal. Portfolio
  15. 15. Impact of Decision ($) Where does the future of our community lie? Strategy Major Projects Portfolio Management DQ Training Spam Filtering Number of Decisions 15 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  16. 16. Where does the future of our community lie? Impact of Decision ($) Premium Consulting Firms Strategy Internal Consultants Major Projects Portfolio Management Training & Courses Smarter Computers DQ Training Spam Filtering Number of Decisions 16 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  17. 17. Impact of Decision ($) We have to scale decision analysis. Strategy Embedded Decision Analysis Major Projects Portfolio Management DQ Training Spam Filtering Number of Decisions 17 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  18. 18. Where embedding DA make the biggest difference to your company’s results? Mergers & Acquisitions Capital Investment / Capital Stewardship R&D / Innovation / NPD Planning & Budgeting Product Management Marketing Investment / Mix Demand Forecasting / Capacity Planning Other 18 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  19. 19. We have great strengths Decision Analyst Advantages: Knowledge of decision structure and human processes Our systems do modeling and decision analysis 19 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  20. 20. Scaling requires shifting our thinking. Before After DA Consultant Interventions Decision Focused One-time Expert judgment Careful assessments Decision Analysis / DQ Power tools for specialists Embedded DA Ordinary business process Learning Focused Iterative / ongoing Consumes & provides data Good enough assessments Role of DA/DQ in evaluation Scalable tools for non-DA users Good Decisions Valuable Results 20 © 2000-2013 SmartOrg. | Confidential and Proprietary.
  21. 21. The scariest shift DA Consultant A highly specialized person intervenes in a situation to facilitate a group to a great decision as measured by decision quality. 21 © 2000-2013 SmartOrg. | Confidential and Proprietary. Embedded DA Ordinary people doing routine work drive their organization to great decisions as measured by great results
  22. 22. Reframing a decision situation to learning. Decision Focus Learning Focus ENPV 22 © 2000-2013 SmartOrg. | Confidential and Proprietary.
  23. 23. How did Intel “decide” to get out the memory business and focus on CPUs? Source: Fading Memories, Burgelman, 1994 23 © 2000-2013 SmartOrg. | Confidential and Proprietary.
  24. 24. A new take on Decision Quality Decision Analysts Want Embedded DA Reframes Explicit Alternatives Alternatives emerge and evolve Information based on careful expert assessments Change jobs so that uncertain information is generated Evaluation based on models focused in great detail on complex issues Simple: 80-20 rule to generate good results most of the time Commitment follows decisions 24 © 2000-2013 SmartOrg. | Confidential and Proprietary. Committed action is already underway when decision gets made
  25. 25. Who has a case of Embedded DA or other large scale DA deployment? I have a successful one I have one well underway I intend on starting one (or have just gotten started) I do not have an example 25 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  26. 26. Systems are transformational in enabling embedded DA. Internet, cloud and process automation Ubiquity of Excel as a business “language” 26 © 2000-2013 SmartOrg. | Confidential and Proprietary. Analytics and data-driven decisions Computing power @SmartOrgInc
  27. 27. 27 © 2000-2012 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  28. 28. 28 © 2000-2012 SmartOrg. | Confidential and Proprietary. @SmartOrgInc
  29. 29. I am committed to making DA a powerful force in the 21st century. Innovating the tools for Embedded DA • Need your help getting it right Rangal is in beta, and we want people to use it. • Please contact me if you would like to have a personal demo and try it out. I’d like to collect examples of Embedded DA and other large scale implementations of DA. • Please contact me / send me cases. dmatheson@smartorg.com 650-470-0180 29 © 2000-2013 SmartOrg. | Confidential and Proprietary. @SmartOrgInc

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