Decision-Making Techniques For Business People

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.

Speed-Reversibility Matrix

decision-making-matrix

Lightning Decision Jam

The Lightning Decision Jam
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.

Less-Is-Better Effect

less-is-better-effect
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.

Kelly Criterion

kelly-criterion
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.

Ladder of Inference

ladder-of-inference
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.

Pareto Principle Analysis

pareto-principle-pareto-analysis
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.

Force-Field Analysis

force-field-analysis
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

bounded-rationality
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.

Cost-Benefit Analysis

cost-benefit-analysis
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.

Go/No-Go Decision Making

go-no-go-decision-making
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.

Scenario Planning

scenario-planning
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.

Decision Matrix

decision-matrix
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.

Satisficing

satisficing
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.

RAPID Framework

rapid-framework
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.”

Foursquare Protocol

foursquare-protocol
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.

DACI Decision-Making

daci-decision-making-framework
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.

Lightning Decision Jam

The Lightning Decision Jam
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.

Multi-Criteria Analysis

multi-criteria-analysis
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.

Cynefin Framework

cynefin-framework
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.

SWOT Analysis

swot-analysis
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.

Personal SWOT Analysis

personal-swot-analysis
The SWOT analysis 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 SWOT analysis helps individuals identify their strengths, weaknesses, opportunities, and threats.

Pareto Analysis

pareto-principle-pareto-analysis
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.

Failure Mode And Effects Analysis

failure-mode-and-effects-analysis
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 SWOT analysis 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.

Read Next: Mental ModelsBiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon EffectDecision-Making Matrix.

Related Strategy Concepts: Go-To-Market StrategyMarketing StrategyBusiness ModelsTech Business ModelsJobs-To-Be DoneDesign ThinkingLean Startup CanvasValue ChainValue Proposition CanvasBalanced ScorecardBusiness Model CanvasSWOT AnalysisGrowth HackingBundlingUnbundlingBootstrappingVenture CapitalPorter’s Five ForcesPorter’s Generic StrategiesPorter’s Five ForcesPESTEL AnalysisSWOTPorter’s Diamond ModelAnsoffTechnology Adoption CurveTOWSSOARBalanced ScorecardOKRAgile MethodologyValue PropositionVTDF FrameworkBCG MatrixGE McKinsey MatrixKotter’s 8-Step Change Model.

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