Following on from our previous blog on Alternative Generation, the next stage in the decision-making process is Evaluation. Evaluation plays a crucial role in the process, assessing the options that are being considered. A decision model can be used at this stage as a simple proxy to reality, testing what the future outcome maybe if different options are pursued.
Why is Evaluation important?
It is too easy for organisations to jump to conclusions early on or just evaluate one or two alternatives without looking for that optimal high-value option. Having an evaluation stage backed up with proper framing helps to debias pre-conceived ideas and quantify the decision in a fair and transparent manner.
How long should it take?
The timeframe for Evaluation depends on the complexity of the problem, the size of the investment decision and information required. It can take anywhere between a day to several months.
Who should be involved at the Evaluation stage?
All the project team should have input in the evaluation stage, but specifically those with inputs to the model or subject matter experts of the decision problem. Key team members will also need to validate the model as a proxy for reality.
What information do companies need at this stage?
Companies need the information that is specific to the decision problem at hand. The future is usually uncertain so an estimate of that uncertainty range under different options would be beneficial in the evaluation stage. E.g. this could be an estimate of future sales volumes, Investment costs or ongoing operating costs.
Is a decision model necessary?
A decision model is a simplified version of reality that focuses on the key inputs, calculations, and outputs of a problem. Not all decisions need a decision model, but a decision model is necessary when quantifying complex, uncertain outcomes that affect the bottom line or another key metric. A decision model is usually triggered when information is too difficult to compute in the mind with many inputs and calculations.
How do you know when you are ready to move on to the next stage?
Once the model has been tested and is a good approximation for reality, it is time to move on to the next stage of insight. Also, when there is a reliable range of logical outputs for each alternative that provide strong insight. It should be noted that this stage in the decision process can be revisited again, which is recommended, if it is needed – the whole process is iterative.
6DQ provides Training on Decision Making and offers Decision Facilitation services, as well as Economic Support to organisations across the UK. For more information, please get in touch.
