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Tbl hc5

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Tbl hc5

  1. 1. the Bottom line Rotterdam, 6 september 2010
  2. 2. Making decisions
  3. 3. Impact & Effort Consider you are selling an alcohol-free beer, that gets ridiculed by the country’s leading stand-up comedian. as a result sales are plummeting think of some options and write five of your best on post-it notes.
  4. 4. Making decisions “Decision making can be regarded as the mental processes (cognitive process) resulting in the selection of a course of action among several alternatives.” - wikipedia the science of decision making: CAPM, net value (risk assesment) Analytical network process decision trees etc...
  5. 5. Some vocabulary Utility= expected outcome (“attractiveness”) of a decision Risk= the probable distribution of outcomes is known Uncertainty= the nature of the outcomes is unknown Regret= measure of how much better a decisionmaker could have done had he known the nature of the outcomes
  6. 6. Decisions under risk (decision tree) Risk means the probability of the outcomes is known, as are the values. (IMHO these instances are actually pretty rare in “normal” businesses. but the purpose is to illustrate decisions and outcomes)
  7. 7. http://en.wikipedia.org/wiki/Decision_tree
  8. 8. Rational decision making process (simplified) “What is the problem that needs solving?” therefore which criteria must my solution adress “how “important” are these criteria? What solutions do I have? How (well) do they adress the problem? What do they cost?
  9. 9. Weighted sum method issue 1 issue 2 issue 3 scoreweight 1 0.2 0.6strategy 1 10 5 4 13.4strategy 2 5 10 8 11.8strategy 3 10 5 10 17
  10. 10. Recap Decision making can be done rationally or on gut feeling Neither has been proven to be “better” In a case competition / presentation setting you might want to use the “rational” method to bolster your case. the rational method does not work well in enviroments of high uncertainty, complexity and/or turbulence
  11. 11. Next week: defining the business problem making your case

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