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INTECSEA Consulting

So, You Think You’re Good

At Making Decisions??

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 A B C

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 An Investment ‘Opportunity’ 

Investment of £10 with uncertain return

Investment is sunk cost (will not be returned)

To simulate uncertainty, we use four playing cards – two red and two black.

- Two black cards win £30- One black and one red win £15

- Two red cards attract an additional penalty of £6 i.e. total loss of £16

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 A Decision Tree Makes The Problem Clearer

Do Not Invest

Invest

-£10

Two Black

One Red / One Black

Two Red

£30

£15

-£6

£0

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The Expected Value

Do Not Invest

Invest

-£10

Two Black

One Red / One Black

Two Red

£30

£15

-£6

£0

1/6

1/6

2/3

EV = 30.(1/6)

+15.(2/3) – 6.(1/6)

£14

£4

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Value of Information

Do Not Invest

Invest

-£10

Two Black

One Red / One Black

Two Red

£30

£15

-£6-£3

Info

£0

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The First Card is Red

Do Not Invest

Invest

-£10

Two Black

One Red / One Black

Two Red

£30

£15

-£6

£0

0

1/3

2/3

EV = 30.(0)

+15.(2/3) – 6.(1/3)

£8.00

-£2.00

-£3

Info

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The First Card is Black

Do Not Invest

Invest

-£10

Two Black

One Red / One Black

Two Red

£30

£15

-£6

£0

1/3

0

2/3

EV = 30.(1/3)

+15.(2/3) – 6.(0)

£20.00

£10.00

-£3

Info

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The Monty Hall Problem

 A B C

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The Monty Hall Problem

 A B CStick with

originalchoice

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The Monty Hall Problem

 A B C Switch from

originalchoice

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Decision Quality

DQ represents the periodic application of structured decision making tospecific opportunities and decision problems.

Organisational Decision Quality (ODQ) is the understanding and use ofDQ by the full, corporate-wide decision making community, incollaborative value creation.

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Elements of Decision Quality

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 AppropriateFrame

Clear Valuesand Trade- off

Creative Alternatives

Meaningful

ReliableInformation

LogicallyCorrect

Reasoning

Commitmentto Action

 A Decision Is Only As Good As Its Weakest Link

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Defining the Decision Frame

Policy

Strategic

Tactical

Constraints and boundaries within which the decisionmust be made

Primary decisions to be made

Secondarydecisions

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Decision Framing Workshop

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BusinessOpportunity

StrategicQuestions

BusinessDrivers

DecisionCriteria

Strategy Map– All Options

Concepts to be

Considered

DecisionFrame

 Values andTrade-offs

Creative Alternatives

InformationReasoning

 Action

BusinessFraming

ConceptIdentification

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Prospect Development Study

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Strategy Map

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Strategy Map

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Summing Up

 An organisation’s value is just the sum of the decisions it makes and

executes

Humans are not naturally wired to consistently make good decisions

Decision Quality methods provide a structured framework within whichcomplex decision making can be transparent and auditable

Decision Quality is a learned skill

Take a look at ……………. 

SPE Technical Report – Guidance for Decision Quality for Multi-company Upstream Projects

Society of Decision Professionals website www.decisionprofessionals.com 

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http://www.decisionprofessionals.com/http://www.decisionprofessionals.com/