Decision Making

The Conveyor Belt Decision Pattern

Conveyor BeltA friend of mine recently bought a house with her husband. It wasn’t their ideal house. The kitchen and bathroom hadn’t been updated since the seventies. And they weren’t ready yet to make an offer—their old house sat on the market. But they had researched and looked at a couple dozen houses and knew this was a rare opportunity. So they pounced.

We often think of house buying as a multiple choice decision, with all our options laid out in front of us. We weigh and evaluate each option, then pick one to make an offer on.

More often, house buying follows a conveyor belt pattern, with options appearing and disappearing continuously. At any given point, we might only have a handful of options we’re evaluating. But there are always more options on the horizon, or old options we can re-evaluate, if they’re still available.

The decision-making process can go on…forever sometimes. Knowing when to make a decision for a good outcome, or even what a good outcome is, can be tricky.

Read on to learn more about the conveyor belt pattern, dangers to watch out for, and strategies that can help when you find yourself making this type of decision. Continue reading >

How To Challenge Your Assumptions

Challenging assumptions can unlock the creativity needed for innovative solutions. That was a key theme that emerged at the Leadership Asheville overnight retreat I attended this weekend.

During the weekend, we were given leadership and team building exercises that involved solving problems collaboratively. Upon solving a problem, we were challenged to solve it faster with fewer resources. In essence, to make a radical leap forward in our thinking of potential solutions and do what initially seemed impossible.

To solve the problems presented to us, we often had to ignore the “phantom rules” we approached problems with and challenge our underlying assumptions. When we did so, problems that seemed impossible suddenly seemed solvable.

But how do you challenge assumptions? Are there specific techniques that can help you unlock your creativity and come up with a radical new solution that dramatically improves upon the old one? Continue reading >

Referrals vs Recommendations vs Reviews

I’m in the process of selling a house. So I asked my friends and posted on Twitter for referrals to real estate listing agents. Then I realized my mistake.

See, I have a diverse set of friends who own a diverse set of houses. The ideal listing agent for me might be completely different than the ideal listing agent for them. And asking on Twitter for referrals isn’t much better than going out into the middle of the street and shouting “I need a real estate agent”.

In that moment, I realized the weakness of referrals. Continue reading >

To Hypothesize Or Not?

Steve Miller recently wrote an article entitled “Science of Business vs. Evidence-Based Management” in which he contrasts the hypothesis-driven philosophy of what he calls the Science of Business, which aims to support decisions by discovering business best practices using the scientific method, with the hypothesis-less philosophy of Evidence-Based Management, which aims to support decisions by looking for trends and clusters in historical data without any need to define a reason why that trend or cluster occurred.

The Science of Business he describes as a top-down approach while Evidence-Based Management he describes as bottom-up, driven only by data and not hypothesis. Steve asks whether this distinction is important for business intelligence. In this post, I argue that the distinction is important, that it applies to all decisions and not just those supported by business intelligence systems, and further attempt to define when each approach has merit.

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The Sunk Cost Dilemma

Do you ignore sunk costs when making decisions? Then you may be at risk for getting trapped in the sunk cost dilemma.

What Is A Sunk Cost?

A DilemmaA sunk cost is money, time or another resource that has been irretrievably spent. The hour you spent yesterday playing solitaire or the money you spent on dinner last night are sunk costs. You can never get that hour or money back.

Costs in the past are usually sunk costs, though not always. If you buy a sweater for your niece, you can return it and get a refund if it doesn’t fit. In this case, the cost is a retrievable cost rather than a sunk cost. It becomes a sunk cost only once the return period has expired.

Costs in the future can be sunk costs if they are, for all practical purposes, inevitable. If you sign a contract requiring you to pay $100 a month for a year, and there’s no way out of the contract, that $1,200 is a sunk cost because you’re legally obligated to pay the money. While you could default or declare bankruptcy, that usually isn’t an option.
Continue reading >

A Model of User Driven Analytics

Here’s a diagram I threw together a while back breaking out the different parts of user-driven analytics. With automated analytics all the rage right now, I think there’s still a lot of untapped innovation and value on the user-driven side, and this diagram serves as my road map for building that out. Over the next couple months I’ll be talking about parts of this model, where Lab Escape is innovating in it, and where I see other opportunities for companies at the data, visualization and analytics layers.

For now, if you see parts you want me to elaborate on sooner, or have questions, post a comment or e-mail me.

A Model of User Driven Analytics

The Go/No-Go Decision Pattern

Should you accept a new project a potential customer is offering you? Should you hire an assistant? Should you buy a friend’s beach house as an investment property?

These are all examples of the Go/No-Go decision pattern. Go/No-Go decisions belong to a family of dual-choice decision patterns that are used when making a choice between two options. The Go/No-Go pattern deals specifically with dual-choice decisions where:

  • The Go option involves an ongoing commitment of resources, e.g.: time or money.
  • The No-Go option involves no additional commitment of resources.
  • Choosing the No-Go option has the same effect as if the decision never occurred.

You can think of the Go/No-Go decision as deciding whether to stay sitting under a tree, or to walk down a path. Continue reading >

A Pattern Language for Decision-Making

Photo by Windell Oskay

Pattern languages have become all the rage. Why? Because they help codify best practices and provide a vocabulary to talk about those practices with others. A pattern language provides a conceptual framework for understanding a practice area, explaining it to others and improving performance. Patterns become tested, reusable pieces of knowledge that help people avoid the mistakes of others and increase their chance of success.

So why a pattern language for decision-making? Despite years of research and dozens of techniques in how to make good decisions, most decision-making is still ad-hoc, done by gut feel or with custom processes, with no documentation and little awareness of the best techniques to apply to a given decision. Certainly, some industries have excelled at certain types of decisions. Allocation decisions are well understood in financial services when trying to optimize a portfolio. But without a pattern language to talk about these decisions, it is difficult to share best practices across industries.

I aim to change that. By documenting, naming and classifying types of decisions, the situations surrounding those decisions and the types of analysis used to support those decisions, we can create a pattern language and decision-making framework that can help people learn, track and improve their decision-making.

Continue reading >

Learn Poker To Improve Your Business Acumen

Photo by Chris Chappelear

If you run a business, you should learn poker.

Let me clarify. You should learn Texas Hold ‘Em Poker. In person, around a table, with five to ten other people.

Poker will teach you on a gut level many of the key skills of business, from distinguishing good opportunities from bad ones, to the best strategies for playing out those opportunities. Texas Hold ‘Em, in particular, balances luck with skill, strategy with tactics, mathematics with psychology, and internal discipline with social dynamics.

Continue reading >

A Decision Framework

We make hundreds of decisions a day, some conscious, some unconscious. But do we really understand what each decision entails, and are there ways to improve our decision-making?

The academics have defined dozens of models of decision-making, from the rational decision-making model to the ethical decision-making model to a nine step decision model proposed by David Welch. None of these, however, feels complete. Each deals with specific types of decisions, and while quite valuable for those types of decisions, fails to address so many of the other decisions we make in life. No one, or at least no one I’m aware of, has defined an overarching framework that covers all decisions that are made. This post is the beginning of my attempt to define such a framework. Continue reading >

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