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What does Decision Analytics mean for Decision Analysts?
The top three commandments on Decision Analytics for Decision Analysts, from a group of close to 90 decision professionals gathered for the DAAG Conference in Austin, are: Embed Decision Analysis, Focus on Results and Incorporate Human Judgment. Embedding decision analysis involves the application of the principles of decision analysis to everyday work processes of an organization without much fanfare around the term "decision analysis" or the consulting process behind it. Decision analysts tend to care more about decision quality and not so much on results. However, decision makers care more about results, and therefore, decision analysts need to de-emphasize the distinction between decisions and outcomes. Decision makers can exclusively rely on analytics and get anchored to incremental improvements. By incorporating human judgment, they can break out of this trap and leverage the unique human ability of synthesis.
In an action-packed session involving speakers from companies as diverse as Chevron and Google, we learned that:
Bill Klimack, Decision Analyst at Chevron, reported on the enthusiasm around analytics in the INFORMS Analytics Conference, which had wrapped up in San Antonio just before DAAG began in Austin. He shared with us two charts - the first was of trending words on the INFORMS website, where Decision Analysis was at the bottom. Replacing "Decision Analysis" with "Analytics" completely eclipsed everything else (on a normalized scale). In this backdrop, Bill established a compelling need for Decision Analysts to acknowledge the massive interest in analytics to drive better decision-making.
John Busbice, Founder of MIDA, illustrated how marketing, like big wave surfing, is now about leveraging big data to go to where the big waves are. Combining data and judgment provides better results than just using one or the other for marketing mix decisions. Statistical methods can help us find patterns but they are limited to what we can see in the data. Human judgment can be creative and logical but it is limited by instinctual biases. Using the strength of one to counteract the weakness of the other makes for a powerful combination. Combining Decision Analysis with data analysis allows us to systematically incorporate human judgment. By incorporating human judgement as prior probability assessments, John does Bayesian updates and develops marketing mix models that learn from data.
Vikram Naidu, Finance Leader for Print and Digital at Chegg, shared how he uses the tools of Decision Analysis, in particular, the Tornado diagram, to identify key metrics that drive the value of a book purchased on their site. These metrics then drive supply chain operations, with targets that are monitored and fed back into Vikram's model. Vikram has created a decision process where, without much fanfare around Decision Analysis, he is able to focus the organization's conversations around uncertainties that really matter. Thus, he focuses on basic conversations around clarity on the problem to be solved and uses modeling to help key stakeholders appreciate uncertainty in their operations.
David Matheson, CEO of SmartOrg, provocatively asked why Decision Analysis is not as prevalent as accounting. The Decision Analysis community is preventing the rapid spread of Decision Analysis principles with their fixation on the traditional consulting approach. If not traditional consulting, then what? David defined "Embedded Decision Analysis" as the use of the principles of Decision Analysis within everyday business processes of an organization.
This involves using systems that rest on the foundations of Decision Analysis to combine data from people and data from other systems and produce key metrics around prioritization of work that can fit right into the project stage gate. David then shared an example of a company that performs 3000 decision analyses for each of its projects every year with just such a system, utilizing ranges instead of single numbers for market forecasts, using Tornado diagrams to focus attention on the most important factors, etc. Embedded Decision Analysis is then a producer of decision analytics that moves the organization forward. Embracing this view of decision analytics shifts our thinking dramatically, as shown in the attached table. By merely shifting our own thinking, decision analysts can create lots of new opportunities for themselves.
Clint Korver, a former DA consultant, serial entrepreneur and presently a Venture Capitalist in Silicon Valley, noted that he was far more effective when using the principles of decision analysis without a "decision analyst" badge. He used the example of a colleague who struggled as a decision analyst. This person became a high-performer when he moved over to business development and applied decision analysis principles without the fanfare of consulting. The key to his success was in adapting the language of decision analysis to his applied domain. Clint also gave his own example, where, as a venture capitalist, he is judged by the standards of his profession - the quality of the companies he invests in. He uses Decision Analysis heavily which makes him unique and stand out. People care about his approach only because he delivers results with it.
The thread of Embedded Decision Analysis ran through Vikram, David and Clint's talks. The session ended with attendees capturing the "Commandments of Decision Analytics" and voting on it. After compiling all the inputs, three themes emerged, as shown in the graphic. The three dominant themes were "Embed Decision Analysis," "Focus on Results" and "Incorporate Human Judgment."
Specific comments for the theme "Embed Decision Analysis" included:
Specific comments for the theme "Focus on Results" included:
Specific comments for the theme "Incorporate Human Judgment" included:
Taken together, these three commandments say that Decision Analysts have a vital role in the world of analytics, but we need to take off the "Decision Analyst" badge.
Keywords: evaluation anamod, analytics bigdata, embedded da embedda, organizational capability orgcap, decision quality decqual, innovation, implementation of da implda
This session was co-chaired by Somik Raha and Jack Kloeber. The videos here have been produced by Onder Guven, a PhD student at Stanford University in Decision Analysis. The Embedded Decision Analysis theme that emerged at DAAG 2013 was followed up the next year with an exclusive session examining Embedded versus Consultative Decision Analysis at DAAG 2014.