Ordinal Logistic Regression

Ordinal Logistic Regression

Ordinal Logistic Regression is a statistical method used to analyze and model ordinal outcomes, which are categorical variables with ordered categories or levels. It is a powerful tool for examining the relationship between predictor variables and the likelihood of an ordinal outcome falling into a particular category or higher.

The Foundations of Ordinal Logistic Regression

Understanding Ordinal Logistic Regression requires knowledge of several foundational concepts and principles:

  1. Ordinal Data: Ordinal data represent variables with ordered categories or levels. The categories have a natural, meaningful order, but the intervals between them are not necessarily equal.
  2. Cumulative Logit Model: Ordinal Logistic Regression is based on the cumulative logit model, which relates the cumulative probabilities of observing an ordinal outcome in a specific category or higher to the predictor variables.
  3. Proportional Odds Assumption: One key assumption in Ordinal Logistic Regression is the proportional odds assumption, which posits that the odds of being in a higher category versus a lower category are constant across different levels of the predictor variables.

The Core Principles of Ordinal Logistic Regression

To effectively implement Ordinal Logistic Regression, it’s essential to adhere to the core principles:

  1. Ordered Categories: Recognize that the outcome variable is ordinal, with ordered categories that reflect increasing levels or preferences.
  2. Cumulative Logit Model: Understand the structure of the cumulative logit model, which relates the log-odds of being in a particular category or higher to predictor variables.
  3. Proportional Odds: Assess the assumption of proportional odds and ensure that it holds for the data.
  4. Model Selection: Choose appropriate predictor variables and model specifications that capture the relationship between predictors and the ordinal outcome.

The Process of Implementing Ordinal Logistic Regression

Implementing Ordinal Logistic Regression involves several key steps:

1. Data Preparation

  • Data Collection: Collect data on the ordinal outcome and predictor variables.
  • Data Cleaning: Clean and preprocess the data, handling missing values and outliers.

2. Model Specification

  • Outcome Categories: Define the ordinal outcome categories and establish the order among them.
  • Predictor Selection: Choose predictor variables that are hypothesized to influence the ordinal outcome.

3. Model Estimation

  • Estimation Method: Use appropriate estimation techniques to estimate the model parameters, often through maximum likelihood estimation (MLE).
  • Parameter Interpretation: Interpret the model coefficients in the context of the proportional odds assumption.

4. Model Evaluation

  • Goodness of Fit: Assess the goodness of fit of the Ordinal Logistic Regression model using appropriate metrics, such as the likelihood ratio test or the proportional odds assumption test.
  • Predictive Performance: Evaluate the model’s predictive performance using measures like concordance and the area under the receiver operating characteristic (ROC) curve.

5. Interpretation and Reporting

  • Coefficient Interpretation: Interpret the estimated coefficients to understand the direction and strength of the relationships between predictor variables and the ordinal outcome.
  • Model Comparison: Compare models with different predictor variables to identify the best-fitting model.

6. Applications

  • Social Sciences: Apply Ordinal Logistic Regression in social sciences to analyze survey responses with ordinal Likert-scale items or ordered preference rankings.
  • Healthcare: Use the model to assess the severity of a disease or the effectiveness of a treatment on an ordinal scale.
  • Education: Analyze educational data, such as student performance levels, based on ordered categories.

Practical Applications of Ordinal Logistic Regression

Ordinal Logistic Regression has a wide range of practical applications:

1. Social Sciences

  • Psychology: Analyze responses to psychological questionnaires with ordinal Likert-scale items to understand attitudes and behaviors.
  • Political Science: Model the ordinal preference rankings of political candidates or policy options.

2. Healthcare

  • Clinical Research: Assess the severity of medical conditions on an ordinal scale or evaluate the efficacy of treatments with ordered response categories.
  • Patient Reported Outcomes: Analyze patient-reported outcomes related to health and quality of life.

3. Education

  • Educational Assessment: Examine student performance levels or proficiency in different subjects based on ordinal scores.
  • Survey Research: Analyze survey data with ordinal items to understand educational preferences or perceptions.

The Role of Ordinal Logistic Regression in Research

Ordinal Logistic Regression plays several critical roles in research:

  • Ordinal Outcome Modeling: It provides a framework for modeling ordinal outcomes and understanding how predictor variables influence the likelihood of falling into different ordinal categories.
  • Predictor Assessment: Researchers can assess the importance and significance of predictor variables in explaining the variation in ordinal outcomes.
  • Comparative Studies: Ordinal Logistic Regression allows for the comparison of different groups or conditions in terms of their ordinal outcome responses.
  • Model Selection: Researchers can identify the most suitable model specification and predictor variables for explaining the ordinal outcome.

Advantages and Benefits

Ordinal Logistic Regression offers several advantages and benefits:

  1. Applicability: It is well-suited for analyzing ordinal data with ordered categories, making it applicable to a wide range of research areas.
  2. Interpretability: The model coefficients can be interpreted in terms of odds ratios, providing insights into the impact of predictors on the odds of being in a higher category.
  3. Model Fit: Researchers can assess the goodness of fit of the model and its ability to explain the observed variation in the ordinal outcome.
  4. Statistical Tests: Hypothesis tests and significance testing are available for evaluating the significance of predictor variables.

Criticisms and Challenges

Ordinal Logistic Regression is not without criticisms and challenges:

  1. Proportional Odds Assumption: The model relies on the assumption of proportional odds, which may not hold in some cases.
  2. Model Complexity: Interpreting model coefficients can be challenging, especially with a large number of predictor variables.
  3. Data Requirements: Adequate sample sizes are required for reliable parameter estimation and model convergence.
  4. Ordinal Category Assumption: The ordinal categories must be correctly specified, and misordering can lead to incorrect model results.

Conclusion

Ordinal Logistic Regression is a valuable statistical method for analyzing and modeling ordinal outcomes with ordered categories. Its applications span various fields, from social sciences to healthcare and education, providing insights into the factors that influence ordinal responses. While it comes with assumptions and challenges, Ordinal Logistic Regression remains a fundamental tool for researchers seeking to understand and explain ordinal data in a structured and interpretable manner.

Key Highlights of Ordinal Logistic Regression:

  • Foundations:
    • Ordinal Logistic Regression analyzes ordinal outcomes with ordered categories, utilizing the cumulative logit model.
    • It relies on the proportional odds assumption, which states that the odds of higher categories versus lower categories remain constant across predictor variable levels.
  • Core Principles:
    • Ordered Categories: Recognize the ordered nature of the outcome variable and the importance of maintaining this order.
    • Cumulative Logit Model: Understand the structure of the cumulative logit model and its relationship to predictor variables.
    • Proportional Odds: Assess and ensure that the proportional odds assumption holds for the data being analyzed.
  • Process:
    • Data Preparation: Collect and preprocess data, handling missing values and outliers.
    • Model Specification: Define outcome categories and select predictor variables.
    • Model Estimation: Estimate model parameters using techniques like maximum likelihood estimation.
    • Model Evaluation: Assess goodness of fit and predictive performance of the model.
    • Interpretation and Reporting: Interpret coefficients and compare models to draw meaningful conclusions.
  • Practical Applications:
    • Social Sciences: Analyze survey responses and preference rankings.
    • Healthcare: Assess disease severity and treatment effectiveness.
    • Education: Evaluate student performance levels and educational preferences.
  • Role in Research:
    • Outcome Modeling: Provides a framework for modeling and understanding ordinal outcomes.
    • Predictor Assessment: Allows assessment of predictor variables’ impact on ordinal responses.
    • Comparative Studies: Facilitates comparison of different groups or conditions based on ordinal outcomes.
    • Model Selection: Helps identify the most suitable model specification for explaining ordinal data.
  • Advantages:
    • Applicability: Well-suited for analyzing ordinal data with ordered categories.
    • Interpretability: Coefficients can be interpreted in terms of odds ratios, providing insights into predictor impact.
    • Model Fit: Allows assessment of model goodness of fit and explanatory power.
  • Criticisms and Challenges:
    • Proportional Odds Assumption: Relies on the assumption of constant odds ratios across predictor levels.
    • Model Complexity: Interpreting coefficients can be challenging, especially with many predictors.
    • Data Requirements: Requires adequate sample sizes for reliable estimation.
  • Conclusion: Ordinal Logistic Regression is a valuable method for analyzing ordinal outcomes, offering insights into the relationships between predictor variables and ordinal responses. Despite assumptions and challenges, it remains a fundamental tool in various research fields.
Related FrameworksDescriptionPurposeKey Components/Steps
Ordinal Logistic RegressionOrdinal Logistic Regression is a statistical method used for modeling and predicting ordinal outcomes. It extends logistic regression to handle dependent variables with ordered categories or levels. It models the cumulative probabilities of each category relative to a reference category.To model the relationship between predictor variables and an ordinal dependent variable with ordered categories, predicting the probabilities of each category relative to a reference category, allowing for the analysis of ordinal outcomes and their predictors.1. Data Preparation: Preprocess and prepare the dataset, including handling missing values and encoding ordinal outcome categories. 2. Model Specification: Specify the ordinal logistic regression model, including predictor variables and reference category. 3. Model Estimation: Estimate model parameters using maximum likelihood estimation or other appropriate methods. 4. Model Evaluation: Assess model fit and performance using goodness-of-fit tests, measures of predictive accuracy, or validation techniques. 5. Interpretation: Interpret model coefficients and odds ratios to understand the relationship between predictor variables and ordinal outcome categories.
Multinomial Logistic RegressionMultinomial Logistic Regression is a statistical method used for modeling and predicting categorical outcomes with more than two unordered categories. It extends binary logistic regression to handle multiple categories by modeling the probability of each category relative to a baseline category.To model the relationship between predictor variables and a categorical dependent variable with multiple unordered categories, predicting the probabilities of each category relative to a baseline category, allowing for the analysis of categorical outcomes with more than two levels.1. Data Preparation: Preprocess and prepare the dataset, including handling missing values and encoding categorical outcome categories. 2. Model Specification: Specify the multinomial logistic regression model, including predictor variables and baseline category. 3. Model Estimation: Estimate model parameters using maximum likelihood estimation or other appropriate methods. 4. Model Evaluation: Assess model fit and performance using goodness-of-fit tests, measures of predictive accuracy, or validation techniques. 5. Interpretation: Interpret model coefficients and odds ratios to understand the relationship between predictor variables and categorical outcome categories.
Ordered Probit RegressionOrdered Probit Regression is a statistical method similar to ordinal logistic regression used for modeling ordinal outcomes. It models the relationship between predictor variables and ordinal outcome categories using a latent continuous variable and the cumulative normal distribution (probit function).To model the relationship between predictor variables and an ordinal dependent variable with ordered categories, predicting the probabilities of each category using a latent continuous variable and the cumulative normal distribution, allowing for the analysis of ordinal outcomes and their predictors.1. Data Preparation: Preprocess and prepare the dataset, including handling missing values and encoding ordinal outcome categories. 2. Model Specification: Specify the ordered probit regression model, including predictor variables. 3. Model Estimation: Estimate model parameters using maximum likelihood estimation or other appropriate methods. 4. Model Evaluation: Assess model fit and performance using goodness-of-fit tests, measures of predictive accuracy, or validation techniques. 5. Interpretation: Interpret model coefficients and marginal effects to understand the relationship between predictor variables and ordinal outcome categories.
Generalized Linear Models (GLMs)Generalized Linear Models (GLMs) are a class of statistical models that extend linear regression to handle non-normal and non-continuous outcome variables. GLMs include various regression methods, such as logistic regression for binary outcomes and ordinal regression for ordered outcomes.To model the relationship between predictor variables and outcome variables with different distributions and link functions, allowing for the analysis of various types of dependent variables, including continuous, binary, categorical, and ordinal outcomes.1. Data Preparation: Preprocess and prepare the dataset, including handling missing values and encoding categorical or ordinal outcome categories. 2. Model Specification: Specify the GLM model, including the distribution and link function appropriate for the outcome variable. 3. Model Estimation: Estimate model parameters using maximum likelihood estimation or other appropriate methods. 4. Model Evaluation: Assess model fit and performance using appropriate metrics and validation techniques. 5. Interpretation: Interpret model coefficients and predictions to understand the relationship between predictor variables and outcome variables.

Connected Analysis Frameworks

Failure Mode And Effects Analysis

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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.

Agile Business Analysis

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Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.

Business Valuation

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Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.

Paired Comparison Analysis

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A paired comparison analysis is used to rate or rank options where evaluation criteria are subjective by nature. The analysis is particularly useful when there is a lack of clear priorities or objective data to base decisions on. A paired comparison analysis evaluates a range of options by comparing them against each other.

Monte Carlo Analysis

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The Monte Carlo analysis is a quantitative risk management technique. The Monte Carlo analysis was developed by nuclear scientist Stanislaw Ulam in 1940 as work progressed on the atom bomb. The analysis first considers the impact of certain risks on project management such as time or budgetary constraints. Then, a computerized mathematical output gives businesses a range of possible outcomes and their probability of occurrence.

Cost-Benefit Analysis

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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, assess the alternatives.

CATWOE Analysis

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The CATWOE analysis is a problem-solving strategy that asks businesses to look at an issue from six different perspectives. The CATWOE analysis is an in-depth and holistic approach to problem-solving because it enables businesses to consider all perspectives. This often forces management out of habitual ways of thinking that would otherwise hinder growth and profitability. Most importantly, the CATWOE analysis allows businesses to combine multiple perspectives into a single, unifying solution.

VTDF Framework

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It’s possible to identify the key players that overlap with a company’s business model with a competitor analysis. This overlapping can be analyzed in terms of key customers, technologies, distribution, and financial models. When all those elements are analyzed, it is possible to map all the facets of competition for a tech business model to understand better where a business stands in the marketplace and its possible future developments.

Pareto Analysis

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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.

Comparable Analysis

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A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.

SWOT Analysis

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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.

PESTEL Analysis

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The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

Business Analysis

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Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

Financial Structure

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In corporate finance, the financial structure is how corporations finance their assets (usually either through debt or equity). For the sake of reverse engineering businesses, we want to look at three critical elements to determine the model used to sustain its assets: cost structure, profitability, and cash flow generation.

Financial Modeling

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Financial modeling involves the analysis of accounting, finance, and business data to predict future financial performance. Financial modeling is often used in valuation, which consists of estimating the value in dollar terms of a company based on several parameters. Some of the most common financial models comprise discounted cash flows, the M&A model, and the CCA model.

Value Investing

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Value investing is an investment philosophy that looks at companies’ fundamentals, to discover those companies whose intrinsic value is higher than what the market is currently pricing, in short value investing tries to evaluate a business by starting by its fundamentals.

Buffet Indicator

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The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Financial Analysis

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Post-Mortem Analysis

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Retrospective Analysis

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Root Cause Analysis

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In essence, a root cause analysis involves the identification of problem root causes to devise the most effective solutions. Note that the root cause is an underlying factor that sets the problem in motion or causes a particular situation such as non-conformance.

Blindspot Analysis

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Break-even Analysis

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A break-even analysis is commonly used to determine the point at which a new product or service will become profitable. The analysis is a financial calculation that tells the business how many products it must sell to cover its production costs.  A break-even analysis is a small business accounting process that tells the business what it needs to do to break even or recoup its initial investment. 

Decision Analysis

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Stanford University Professor Ronald A. Howard first defined decision analysis as a profession in 1964. Over the ensuing decades, Howard has supervised many doctoral theses on the subject across topics including nuclear waste disposal, investment planning, hurricane seeding, and research strategy. Decision analysis (DA) is a systematic, visual, and quantitative decision-making approach where all aspects of a decision are evaluated before making an optimal choice.

DESTEP Analysis

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A DESTEP analysis is a framework used by businesses to understand their external environment and the issues which may impact them. The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar. The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.

STEEP Analysis

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The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.

STEEPLE Analysis

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The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.

Activity-Based Management

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Activity-based management (ABM) is a framework for determining the profitability of every aspect of a business. The end goal is to maximize organizational strengths while minimizing or eliminating weaknesses. Activity-based management can be described in the following steps: identification and analysis, evaluation and identification of areas of improvement.

PMESII-PT Analysis

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PMESII-PT is a tool that helps users organize large amounts of operations information. PMESII-PT is an environmental scanning and monitoring technique, like the SWOT, PESTLE, and QUEST analysis. Developed by the United States Army, used as a way to execute a more complex strategy in foreign countries with a complex and uncertain context to map.

SPACE Analysis

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The SPACE (Strategic Position and Action Evaluation) analysis was developed by strategy academics Alan Rowe, Richard Mason, Karl Dickel, Richard Mann, and Robert Mockler. The particular focus of this framework is strategy formation as it relates to the competitive position of an organization. The SPACE analysis is a technique used in strategic management and planning. 

Lotus Diagram

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A lotus diagram is a creative tool for ideation and brainstorming. The diagram identifies the key concepts from a broad topic for simple analysis or prioritization.

Functional Decomposition

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Functional decomposition is an analysis method where complex processes are examined by dividing them into their constituent parts. According to the Business Analysis Body of Knowledge (BABOK), functional decomposition “helps manage complexity and reduce uncertainty by breaking down processes, systems, functional areas, or deliverables into their simpler constituent parts and allowing each part to be analyzed independently.”

Multi-Criteria Analysis

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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.

Stakeholder Analysis

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A stakeholder analysis is a process where the participation, interest, and influence level of key project stakeholders is identified. A stakeholder analysis is used to leverage the support of key personnel and purposefully align project teams with wider organizational goals. The analysis can also be used to resolve potential sources of conflict before project commencement.

Strategic Analysis

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Strategic analysis is a process to understand the organization’s environment and competitive landscape to formulate informed business decisions, to plan for the organizational structure and long-term direction. Strategic planning is also useful to experiment with business model design and assess the fit with the long-term vision of the business.

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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