Decision-making for business people needs to leverage simple techniques. Indeed, in most cases, the problem is unknown in the real world, the situation highly opaque and highly uncertain. Therefore, simple frameworks and techniques that require little data can be much more helpful than complex models.
The Lightning Decision Jam (LDJ) is a means of making fast decisions that provide quick direction. The Lightning Decision Jam was developed by design agency AJ&Smart in response to the inefficiency of business meetings. Borrowing ideas from the core principles of design sprints, AJ&Smart created the Lightning Decision Jam.
The less-is-better effect was first proposed by behavioral scientist Christopher Hsee in a 1998 study. He noted in the experiment that a person giving a $45 scarf as a gift was perceived to be more generous than someone giving a $55 coat. The less-is-better effect describes the consumer tendency to choose the worse of two options – provided that each option is presented separately.
The Kelly criterion is a formula-based approach to investing and gambling. The individual allocates funds as a percentage of the entire portfolio for each investment or bet. The Kelly criterion was created by researcher John Kelly in 1956 to analyze long-distance telephone signal noise. In more recent times, the formula has been adopted by the gambling and investment industries as means of wise resource allocation to a bet or investment.
The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.
The Pareto Analysis is a statistical analysis used in business decision-making that identifies a certain number of input factors that impact income most. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.
Social psychologist Kurt Lewin developed the force-field analysis in the 1940s. The force-field analysis is a decision-making tool to quantify factors that support or oppose a change initiative. Lewin argued that businesses contain dynamic and interactive forces working in opposite directions. To institute successful change, the forces driving the change must be stronger than the forces hindering the change.
Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. He believed that rather than optimizing (the mainstream view in the past decades), humans follow what he called satisficing.
A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective, it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, and assess the alternatives.
In general, go/no-go decision-making is a process of passing or failing a proposition. Each proposition is assessed according to criteria determining whether a project advances to the next stage. The outcome of the go/no-go decision-making is to assess whether to go or not to go with a project or perhaps proceed with caveats.
Businesses use scenario planning to make assumptions about future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts to better strategic decision-making by avoiding two pitfalls: underprediction and overprediction.
A decision matrix is a decision-making tool that evaluates and prioritizes a list of options. Decision matrices are useful when: A list of options must be trimmed to a single choice. A decision must be made based on several criteria. A list of criteria has been made manageable through the process of elimination.
Simon’s satisficing strategy is a decision-making technique where the individual considers various solutions until they find an acceptable option. Satisficing is a portmanteau combining sufficing and satisfying and was created by psychologist Herbert A. Simon. He argued that many individuals make decisions with a satisfactory (and not optimal) solution. Satisfactory decisions are preferred because they achieve an acceptable result and avoid the resource-intensive search for something more optimal.
The RAPID framework is a tool used to help businesses make important decisions. The RAPID framework was developed by global consultancy firm Bain & Company, which noted that “high-quality decision making and strong performance go hand in hand.”
The Foursquare Protocol is an ethical decision-making model. The Foursquare Protocol helps businesses respond to challenging situations by making decisions according to a code of ethics. It can also be used to help individuals make decisions in the context of their own moral principles. It consists of four steps: gather the facts, understand previous decisions, assess the degree of similarity to past events, and assess yourself.
The DACI Decision-Making Framework was developed by software company Intuit in the 1980s. The DACI Decision-Making Framework assigns and then displays the responsibilities of the individual when making decision. DACI stands for driver, approver, contributor, and informed.
The Lightning Decision Jam (LDJ) is a means of making fast decisions that provide quick direction. The Lightning Decision Jam was developed by design agency AJ&Smart in response to the inefficiency of business meetings. Borrowing ideas from the core principles of design sprints, AJ&Smart created the Lightning Decision Jam.
The multi-criteria analysis provides a systematic approach for ranking adaptation options against multiple decision criteria. These criteria are weighted to reflect their importance relative to other criteria. A multi-criteria analysis (MCA) is a decision-making framework suited to solving problems with many alternative courses of action.
The Cynefin Framework gives context to decision making and problem-solving by providing context and guiding an appropriate response. The five domains of the Cynefin Framework comprise obvious, complicated, complex, chaotic domains and disorder if a domain has not been determined at all.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
The SWOTanalysis is commonly used as a strategic planning tool in business. However, it is also well suited for personal use in addressing a specific goal or problem. A personal SWOTanalysis helps individuals identify their strengths, weaknesses, opportunities, and threats.
The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.
A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.
Key highlights of decision-making techniques in business:
Speed-Reversibility Matrix: A technique for making quick and reversible decisions, especially in uncertain and complex situations.
Lightning Decision Jam (LDJ): A method for making fast decisions and providing quick direction, developed by design agency AJ&Smart.
Less-Is-Better Effect: Describes the consumer tendency to choose the worse of two options when each option is presented separately.
Kelly Criterion: A formula-based approach to investing and gambling, used for wise resource allocation in bets or investments.
Ladder of Inference: A thinking process where individuals move from a fact to a decision or action using mental models.
Pareto Principle Analysis: A statistical analysis that identifies a small number of input factors that have the greatest impact on income.
Force-Field Analysis: A decision-making tool to quantify factors that support or oppose a change initiative.
Bounded Rationality: A concept where individuals make satisfactory decisions instead of optimizing in decision-making.
Cost-Benefit Analysis: A process to analyze decisions based on the costs associated with making them.
Go/No-Go Decision Making: A process of passing or failing a proposition based on specific criteria.
Scenario Planning: A method to make assumptions about future events and their potential impact on business operations.
Decision Matrix: A tool to evaluate and prioritize options based on specific criteria.
Satisficing: A decision-making technique where individuals consider various solutions until they find an acceptable option.
RAPID Framework: A tool to help businesses make important decisions by defining roles and responsibilities.
Foursquare Protocol: An ethical decision-making model that helps businesses respond to challenging situations according to a code of ethics.
DACI Decision-Making: A framework that assigns and displays responsibilities for decision-making.
Multi-Criteria Analysis: A systematic approach for ranking options against multiple decision criteria.
Cynefin Framework: A decision-making and problem-solving framework that provides context and guides appropriate responses.
SWOT Analysis: A framework for evaluating an organization’s strengths, weaknesses, opportunities, and threats.
Personal SWOT Analysis: Adapting SWOTanalysis for personal use to address specific goals or problems.
Failure Mode and Effects Analysis (FMEA): A structured approach to identifying design failures in a product or process.
User Guide to These Frameworks
Decision-Making Framework/Concept
Description
When to Use
Advantages
Drawbacks
Speed-Reversibility Matrix
A tool for evaluating decision speed and reversibility.
When facing time-sensitive decisions requiring reversibility.
Helps make quick yet reversible decisions.
May oversimplify complex decisions.
Lightning Decision Jam (LDJ)
A rapid decision-making method for efficient meetings.
When quick direction is needed in meetings or brainstorming sessions.
Speeds up decision-making and promotes collaboration.
May not suit all decision scenarios.
Less-Is-Better Effect
A phenomenon where less valuable options are perceived as more generous.
When presenting choices individually to influence perceptions.
Can lead to cost savings and favorable perceptions.
Limited applicability to all decisions.
Kelly Criterion
A formula-based approach for investment and gambling fund allocation.
In investment or gambling to optimize fund allocation.
Aids in maximizing returns while managing risk.
Requires accurate probability estimates.
Ladder of Inference
A process for moving from facts to decisions based on mental models.
When analyzing decision-making processes and improving critical thinking.
Helps identify cognitive biases and enhance decision quality.
May be challenging to apply in practice.
Pareto Principle Analysis
A statistical analysis identifying key input factors with the greatest impact.
When prioritizing factors influencing outcomes.
Focuses resources on high-impact factors, improving efficiency.
May not consider interactions between factors.
Force-Field Analysis
Quantifies factors supporting or opposing change initiatives.
When assessing the feasibility of implementing organizational changes.
Provides a structured approach to change management.
Requires comprehensive data and analysis.
Bounded Rationality
A concept acknowledging cognitive limitations in decision-making.
In scenarios where seeking optimal solutions is impractical.
Helps make satisfactory decisions efficiently.
May result in suboptimal outcomes.
Cost-Benefit Analysis
Analyzes decisions based on costs, benefits, and alternatives.
When evaluating the feasibility of projects or initiatives.
Provides a systematic approach to decision-making.
Relies on accurate cost and benefit estimates.
Go/No-Go Decision Making
Evaluates propositions against criteria for project advancement.
When deciding whether to proceed or terminate projects.
Enhances project selection and resource allocation.
Criteria may require continuous adjustment.
Scenario Planning
Makes assumptions about future events and their impact.
When anticipating future uncertainties and strategic planning.
Helps identify potential risks and opportunities.
Requires thorough scenario analysis.
Decision Matrix
Evaluates and prioritizes options based on multiple criteria.
In complex decision scenarios with multiple factors to consider.
Facilitates systematic evaluation and comparison of options.
Can be time-consuming to create and use.
Satisficing
Chooses a satisfactory solution rather than seeking the optimal one.
When optimizing is impractical or resource-intensive.
Streamlines decision-making and conserves resources.
May lead to missed optimal solutions.
RAPID Framework
Clarifies roles and responsibilities in decision-making.
When making important decisions within organizations.
Enhances decision clarity and accountability.
Requires clear definition of roles.
Foursquare Protocol
An ethical decision-making model for businesses and individuals.
When facing ethical dilemmas or moral decisions.
Provides a structured ethical decision-making process.
Limited applicability beyond ethical decisions.
DACI Decision-Making
Assigns responsibilities (Driver, Approver, Contributor, Informed) for decision-making.
In organizations to clarify decision roles and responsibilities.
Enhances transparency and accountability in decision processes.
May not address all aspects of complex decisions.
Multi-Criteria Analysis
Ranks options against multiple criteria, each weighted by importance.
When making decisions with multiple influencing factors.
Considers various criteria and their relative importance.
Complex and requires data on multiple criteria.
Cynefin Framework
Categorizes situations into domains (obvious, complicated, complex, chaotic) to guide responses.
When addressing problems or making decisions in various contexts.
Helps tailor decision-making approaches to different situations.
May require subjective interpretation.
SWOT Analysis
Evaluates Strengths, Weaknesses, Opportunities, and Threats for strategic planning.
In strategic planning and assessing business situations.
Provides a comprehensive overview of internal and external factors.
Relies on accurate and up-to-date data.
Personal SWOT Analysis
Applies SWOT analysis to individuals for personal development.
When individuals want to assess their strengths, weaknesses, opportunities, and threats.
Helps individuals identify areas for personal growth and improvement.
Subjective self-assessment may be biased.
Pareto Analysis
Identifies key input factors with the greatest impact on outcomes.
In decision-making when prioritizing factors with significant influence.
Focuses resources on factors contributing most to desired outcomes.
Ignores potential interactions between factors.
Failure Mode And Effects Analysis (FMEA)
Identifies design failures in products or processes to prevent issues.
In product or process design to anticipate and mitigate potential failures.
Enhances product reliability and safety through proactive problem-solving.
Time-consuming and may not uncover all possible failures.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
