Effective decision making is the process of identifying the best option by gathering information to asses alternative resolution. It’s a step-by-step process to increase chances that you will choose the most satisfying alternatives possible and better prevent hasty decision making.
Many different techniques of decision making have been developed from simple rules-of-thumbs to complex procedure. Each method used deepens on the nature of the decision to be made and how complex the problem is. To give structured model, here is most common 7 steps in decision making [1] that make it easier to pick specific option, as follow:
Figure 1. 7 steps in decision making [1]
Step 1: Identify the decision
Recognizing the problem or opportunity and decided how to address it. Try to clearly define the nature of decision you must make. Some useful points to analyze such as: 1/ What is the problem or opportunity; 2/ Why the problem arises; 3/ What objective to be achieved; 4/ Who will be impacted with the decision, and 5/ What is the urgency
Step 2: Gather relevant information
Before making decision, you need to make sure that you fully understand your situation, so that you can make decision based on facts and data. This stage requires value judgement determining information relevance and how you can get it. It includes what and how the problem will impact relevant stakeholder.
Step 3: Identify the alternative
It may seem a long thread by gathering a number of different alternatives. It may appear too complicated at first, but coming up with few alternatives will forces you to understand and dig deeper to see the problem at different angles.
Step 4: Weigh the evidence
Evaluating all the options with their pros and cons to know which alternatives is the best. It might be helpful to seek-out experience advisor or trusted second opinion to gain new perspectives on the issue at hand. Evaluate the options with evidence helps to favour certain alternatives that have a higher potential for reaching your goal.
Step 5: Choose among the alternatives
By this step, you have gained an understanding of the possibilities, pros and cons of each options, the risk involved for each alternative, and which of those will bring you closer to your objective with least fallout. You may also choose combination of alternative providing better gain for your decision.
Step 6: Take actions
This is an implementation stage which involves identifying what resources are required to pull the decision you choose from previous steps. This positive action is necessary to test and review your decision, in which you can quickly pivot as an iterative approach.
Step 7: Review your decision
Take an honest look back at your decision and evaluate its effectiveness, i.e. did the decision solve the problem, did you meet your goals. This is an important but often overlooked in decision-making process. If the solution or decision has not met the identified needs, you may repeat certain process and make new decision.
Case Study in Digital Supply Chain Management
This case study is designed to illustrate the practical application of effective decision-making concepts to answer business challenge. Specifically, focuses on digital transformation in supply chain management. As head of supply chain, you are challenged to streamline the whole supply chain process as it can successfully provide competitive advantage to the business. The company itself has several production plants and manage nationwide demands through a number of distributors spreading over Indonesia.
To answer the challenge, I would like to use SAR (Situation, Action, Result) approach in which I found it very useful while I am studying Product Management and User Experience. First you assess and describe the situation, then describe the actions you took to solve the conflicts, and finally asses and evaluate the result linked for your solution in decision making process.
SITUATION
The way you pose situation or problem plays a major role in how you will respond and how you will perceive your success. Below is an example on how to address situation and make it align with your goals.
1) Goals
End-to-end supply chain streamline to leverage Company’s competitive advantage (Traceability, Productivity, and Profitability). This competitive advantages can be predefined or in this case, it is actually a deduction after assessing user pain point and aspiration to answer the challenge.
2) Value chain to streamline
Figure 2. FMCG Value Chain Example
3) Supply Chain Process & Value Chain
The first step to improve business by improving its process is to study them, analyse them and understand them. It’s part of the actions of reviewing the process components, including inputs, outputs, procedures, controls, stakeholders, data, technology, and process interactions to produce results. The analysis also includes evaluation of time, cost, capacity, and quality process. Below is the simplified supply chain process to better understand the process and information flow.
Figure 3. Supply chain information and goods flows example in FMCG industry (simplified)
4) Pain point and aspiration
Assessing user or stakeholder pain points throughout the process is necessary to identify their true needs. Understand the underlying pain point of your user or stakeholder may change your approach to innovation. It’s also the process in which you get connect and build trust with them by understanding their needs. Below is the example of possible pain points and aspiration across value chain.
Figure 4. Example of user pain point and needs to better understand problem or situation to address
In this case, user pain points and risks are specific problem that users or customers are experiencing across value chain. While Needs and aspiration capture task goals, accountability, and desire to deliver potential value.
5) Opportunity for Improvement
Knowing what you can enhance can help you develop actions that align with your goals. By analyzing business process, user pain point & risk, as well as user needs and aspiration, you are able to determine your improvement areas as follow:
Figure 5. Improvement areas to align with goals
In this case, traceability, productivity, and profitability become desirable improvement areas to leverage company’s competitive advantage by streamlining value chain.
1/ Traceability: Increase capability to trace asset / product movement across value chain
2/ Productivity: Increase effectiveness across value chain
3/ Profitability: Increase yields profit or financial gain (both from cost control and or revenue)
ACTION
6) Map opportunity for improvement across value chain with possible alternative solutions.
You may use some digital use cases or specific solution alternatives which related with your improvement areas and gather as many as relevant information as possible.
Figure 6. Digital use case example for each improvement area across value chain
7) Weigh the evidence to choose among the alternatives
Beyond having an effort to choose the best options, our decision is only as good as information we have about our choice options. The more reliable facts and information we can gather and consider about a decision, the more we can reduce uncertainty and make better choice. Besides defining pros and cons of each alternatives, one of the best approaches is to define your evaluation criteria and start to weigh the evidence among the alternatives. You may modify and adjust the criteria based on your requirements and needs. In this case, the criteria are divided into two categories; Impact to business and ease of implementation.
Figure 7. Prioritization Metrics to weigh the evidence among alternatives
For this case study, solution 1.a appears to be the most favourable alternatives due to its higher business impact and ease of implementation. This approach helps you to narrow down the option, prioritize, and better choose the alternatives based on factual data.
Another popular approach to prioritizes your decision alternatives and get the best options is using PACE (Priority-Action-Consider-Eliminate) metrics as follow. You may also elaborate each alternative with calculated business impact using i.e. value at stake analysis.
Figure 8. PACE metrics to better understand impact to business vs. ease of implementation for each possible alternative
Below is elaboration example of 1.a solution which consist of solution definition, investment or value at stake, deployment period, and transformation from current condition to desirable condition.
Figure 9. Elaboration example of solution 1.a Product Digitalization Management
RESULT
8) Performance metrics
To measure your decision performance, you need to track relevant metrics displaying measurable value and show the progress towards your goals. In this case, the improvement areas of traceability, productivity, and traceability set to create new organizational capabilities. Below is the example of expected result to monitor after solution deployment:
Figure 10. Performance metrics example
This case study only elaborates one solution (1.a) which is considered to be the best alternative and emphasize on decision making as well as prioritization process. In real case, streamlining processes and workflows may take some time and best completed in small steps, depend on situation/problem to solve, solution complexity, and your S.M.A.R.T goal.
To get better understanding of decision-making practical application on this case study, below is the relevance from each perspective. It’s a basic rule of thumb that you can adopt in various framework and adjust its complexity approach based on your situation.
Figure 11. Decision-Making Rule of Thumbs in Practical Case Study Application
Last but not least, decision comes from need to solve a problem or the need for a potential opportunity. Effective decision maker knows when a decision has to be based on principle and when it should be made pragmatically (case-by-case), especially when facing trickiest decision in which right and wrong are compromise.
Useful insight and reference:
[1]https://www.umassd.edu/media/umassdartmouth/fycm/decision_making_process.pdf
[2] https://www.knowledgehut.com/tutorials/project-management/decision-making-process
[3] https://medium.com/pminsider/the-sar-method-for-product-management-interview-questions-4f9884e630bc
