The effective decision
– synopsis of an article by Peter F. Drucker.
This is definitely worth re-publishing …. a classic read.
NOTE: best practice process and tools available here
Best Practice Decision Making
While browsing through the B School library the other day, I happened across an article on decision making by Peter Drucker, originally written in 1967. Naturally as this is our business I was curious to see what one of the true masters of management had to say on the topic. Here is the synopsis together with our commentary.
Drucker commences by stating that an effective decision making process must go through some basic steps. These steps will not “make” the decision – it will always be a judgement call – but if the steps are ignored, the decision is not likely to be effective nor right. The 6 steps he recommends are: Continue reading “Drucker: The Effective Decision”
Business models – rock your world
You all know that the next one of the 7 habits series is due out soon and you all know it is about the power of visualisation in decision making. Well, for something to tantalise your imagination while waiting … think about the power of visualisation when it comes to developing business models.
That may be defining, reviewing or refining your own. Or it may be a paradigm smashing, industry-disrupting model that is going to make Mark Zuckerberg say “WTF” (that may be rude, but those would be his exact words).
Well here are two neat resources to get you thinking:
A slideshare presentation that describes the top 10 business models of 2010 with an interesting way of portraying it:
Top 10 Business Models
A web-site discussing a book and a concept called Business Model Generation. It is obviously a promotion of the book but has plenty of interesting material that is useful in its own right including a 72 page preview
Business Model Generation
(And a quick acknowledgement to Xenia Viladas from XVDMC for directing me to Business Model Generation).
If you would like to discuss how we can help you make a decision on your business model (existing or new), drop me an email at email@example.com or give me a call.
Good business intelligence produces good decisions
If the “Second habit: actively manage knowledge” resonated with you, then you will enjoy this short blog by Strat-Wise where they discuss the next level of business intelligence which Gartner calls interactive visual analytics. This is not simply graphical depiction of data, but rather the process of analytical reasoning using interactive visual interfaces.
Two points in particualr that we find exciting are that
- it is run by the user(s) of the information in real time and so must be intuitive and simple to operate. (For instance the decision making team).
- it can link data from a variety of different sources – databases, spreadsheets, text, web, etc.
So it seems that the technology is now catching up with the business requirements: easy-to-use tools that help create insights from data and knowledge. The concept of visual analytics is based on the work by Edward Tufte (see Bloomberg article if you do not know of him), the father of simplicity in graphics. His book is now in the second edition (check out our book recommendations page).
You van find the the Strat-Wise article at this link
Strat-Wise : what is BI3.0
Whether you are a multinational or a small/medium-sized business, to discuss how Genesis Management Consulting and our partners are able to help you with the knowledge management required to support your strategic decisions, send an email to firstname.lastname@example.org .
Harvard Business Review article: reducing behavioural problems
Kahneman, Lovello and Sibony
HBR, in conjunction with McKinsey, have published an interesting article about reducing the impact of behavioural issues in decision making.
The underlying premise is that it is very difficult for individuals to recognise their own subconscious bias – simply put: we cannot see our own blind-spots. But we are far better at identifying those of others or of groups.
They put forward a check-list of questions that should be asked when a group is putting forward a decision recommendation. We will describe that list below. But first some commentary:
What is good about the article?
- Anything that can help us reduce the negative impact of behaviour that we are unaware of is good. As the article says: advice up to now has been more of a case of “forewarned is forearmed” which has shown to do little to have an impact on our behaviours.
- Using an external person to question a group is also a great idea (albeit not entirely original – Genesis have been suggesting this in one form or other for years) as it is definitely easier to see someone else’s blind spots than our own.
- Having a check-list is a good idea and forces one to go through the appropriate disciplines of asking and challenging.
What could be improved?
- We believe that the concept of challenging behaviours is better built into the entire decision-making process – or at least at a number of check-points along the way. Waiting until the recommendation phase is fraught with obvious problems.
- The check-list itself should be tailored to best suit the requirements of the situation and the team involved. The generic list put forward is fine, but the emphases may well be in the wrong areas.
- Agreeing on who should play the role of “decision-auditor” is critical. A combination of appropriate experience (in the role), expertise in the subject matter (of behaviours and the decision context), independence and authority are all important. Just as we believe the person who ultimately takes the decision should not be the person to drive the decision process (better suited to a “decision coach”), we believe that the decision leader should also not be playing this behaviour-challenge role. After all, they have their own set of behaviours, perspectives and bias to consider.
For those of you who do not want (or do not have time) to read the article itself, here is the 12 point check-list put forward (the article has more detail behind the items as well as the rationale):
- Is there any reason to suspect motivated errors, or errors driven by the self-interest of the recommending team?
- Have the people making the recommendation fallen in love with it?
- Were there dissenting opinions within the recommending team?
- Could the diagnosis of the situation be overly influenced by salient analogies?
- Have credible alternatives been considered?
- If you had to make this decision again in a year, what information would you want, and can you get more of it now?
- Do you know where the numbers came from?
- Can you see a halo effect?
- Are the people making the recommendation overly attached to past decisions?
- Is the base case overly optimistic?
- Is the worst case bad enough?
- Is the recommending team overly cautious?
We do not wish to appear overly critical. The article is important and timely. Furthermore, we have great respect for the authors: Daniel Kahneman particularly is a world-leader in this area. Our comments are merely to assist our clients in taking this good idea into real practice.
And we believe there is free access up until 4th July 2010.
If you would like to discuss how we at Genesis can help to optimise the decision making process in your organisation, please contact Simon Gifford – or have a look around our web-site at
Intuition – more than trusting your gut.
Here is a link to a useful article written by Modesto Maidique (visiting professor at Harvard Business School) who talks about intuition and knowledge.
The core theme of the article is that intuition may be more than just gut. His examples show great “intutive decisions” often are accompanied by great knowledge of the subject matter as well. Additional examples show spectacular failure when this has been missing.
There is, however, a third ingredient and that is deep introspection as highlighted in the quote below.
If you are going to understand the biases, emotions, and offsets of your decision-making compass which may effectually trump your domain knowledge and result in poor judgments, you must learn to “observe all men, but yourself most.”
Intuition is not just trusting gut by Modesto Maidique
If you would like to discuss how you could improve the decision making capacity and capability of your own organisation, please contact Simon Gifford at email@example.com.
Improving decision value through behavioural strategy
Below is a link to a summary on an article written by Dan Lovallo and published in the McKinsey Quarterly earlier this year. The document discusses the impact of biases on strategic decisions and goes so far as to calculate the improved return on investment of a decision if the decision process is improved – a not unsubstantial 6,9 percentage points.
The article also offers some ideas as to how to counteract these biases – albeit a little simplistically and linearly in our humble opinion. But the summary and the article are well worth a read if you wish to improve your own strategic decision-making process.
Improve decision value through behavioural strategy
“Challenges faced when taking strategic decisions”.
Executive summary of global survey
“A critical factor in the success – and often survival – of any organisation lies in its ability to make effective strategic decisions. This skill is of increasing significance in today’s world, where the nature of these decisions is becoming more complex – as currently seen in the turmoil being experienced by the global economy.”
Below is a link to the Executive Summary of the results of our global survey into this topic. We hope you find the results both interesting and useful.
A copy of the full report will also be available on request.
Genesis Decision Survey Executive Summary December 2010
Global economic risks as at September 2010
When taking strategic decisions, it is important to understand the current and future environments in which the decision will be enacted , that is we must undertake some scenario planning. The global economic context is an important input to this.
On a monthly basis, the EIU update their global risks and rate the likelihood and impact of the top ten. The document below portrays those risk graphically and adds two further dimensions:
- likely speed of occurrence (ie how long will we have to react) and
- intensity of the risk or opportunity based on a judgemental combination of the other three factors .
Global economic risks and opportunities as at September 2010