Download - The Essence of Decision
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THE ESSENCE OF
DECISIONHow information can keep you
competitive
…Ever wondered:- How some sports teams win consistently,
while others languish at the bottom of a table?
- How the worst house on the street can be sold for the highest price?
- How price has everything to do with how much you pay?
- Why outcomes matter?
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“Decisions are necessarily a function of information” – Kenneth Arrow (Nobel Laureate, Economics 1972)
“Strategy is a pattern in a stream of decisions” – Henry Mintzberg (1994)
“Quality of decision making is reliant upon the knowledge workers access to good information – Peter Drucker (1955)
“Know your enemy and know yourself, find naught in fear for 100 battles” – Sun Tzu (Military Strategist – 6th Century BC)
“I have always found that plans are useless but planning is indispensable” – Dwight D. Eisenhower
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Strategy
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The high level planning of goals and objectives under conditions of uncertainty and maintaining a position of advantage
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Uncertainty…?
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What are the Top 5 Reasons Small Businesses Fail?
• Unknown Market Clarity (Why, How, What, Where, When, Who)
• Growth (Wrong geography; Too Quickly; Too Slowly)
• Competitor Knowledge (Who are they and what are they doing?)
• Organization (Poor planning; Operational inefficiencies; Poor accounting; Bad Management; Failure to delegate)
• Failure of Market to ReactConscientia Research • Pasadena, CA 10
We live in a business world where…
- The business environment is clouded with seemingly contradictory information
- We are bombarded with new information constantly- We don’t always know what constitutes the right
information…or how it effects how we make decisions- We need to stay current and informed about our
direction- We lack the tools for information symmetry, to remain
competitive- We need to plan ahead
WE NEED INFORMATION Conscientia Research • Pasadena, CA 11
Information…• Reduces risk• Increases certainty• Is the creator of goals and objectives• Increases the ability to plan• …To execute• …To DECIDE
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Consumer Decision Making• Five Step Decision Making Process
• Dependent values: how involved the consumer is in their commitment to the process
• Corporations can manipulate the process at any stage
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Gala Honey Crisp Braeburn MacIntosh Fuji
Using Fallacy of Demand• Mostly consumers choose products based on value, quality
and availability• Consumers get used to purchasing certain products at a
certain price - Anchoring• Anchoring is how one associates value to an arbitrary
product• Demand therefore can be easily manipulated and made
false• The value of a product is related to how it is associated to
supply and demand, and…• Demand is dependent upon supply and it is based on
memory rather than preference
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Bias• Corporations decision making invariably
takes advantage of cognition, belief and confirmation biases
• Think of the Brands as “proprietary antonyms” in common useage:
• Kleenex (instead of tissue)• Q-Tip (Cotton swab)• Zipper (originally a brand by BF Goodrich)• Band-Aid (Elastic Plaster)• Champagne, Cheddar, Tequila
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Word Use in Decision Making• “Climate Change” – 1972 paper; 1998 common usage• An analysis of the language used in real-estate ads shows
that certain words are powerfully correlated with the final sale price of a house - Five of them have a strong positive correlation to the ultimate sales price, and five have a strong negative correlation
• Common: Spacious, State-of-the-art, granite, charming, great neighborhood
• Positive: Granite, State-of-the-art• Negative: Spacious, charming, great neighborhood
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Do Top Football Teams Always Win?
• 2009 Univ. Maryland study• Looked at top seeded teams expected to win 2006
World Cup• Top teams only have a 28% chance of winning• Why? What accounts for this?
• Predictors…• Outcomes: 58% determined by goal order• Team 62% more likely to advance from deficit win• However: if first goal is scored later in the match,
scoring team 80% more likely to win (RMC Kingston, ON 2009/McGill)
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Outcomes Matter• Information is important• Create models• Can justify and clarify goal setting• Determine realistic expectations• Mitigate hazards and barriers to growth• Use information to increase chances of
success and beat the information asymmetry war
• Better Outcomes = Better Payoffs
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THANK YOU
Questions?
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