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 costanalysis 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.
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.
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.
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.
