METO Revision Document - Decision Making PDF

METO Revision Document -- Decision Making ========================================= Basic Decision-Making Theory ---------------------------- - **Challenges in Decision-Making:** - Risk and uncertainty in outcomes. - Multiple, often conflicting objectives. - Complex decision...

METO Revision Document -- Decision Making ========================================= Basic Decision-Making Theory ---------------------------- - **Challenges in Decision-Making:** - Risk and uncertainty in outcomes. - Multiple, often conflicting objectives. - Complex decision structures with numerous stakeholders. - **Types of Decision-Making:** - **Intuition:** Quick, experience-based decisions effective for unstructured problems but prone to biases. - **Analytical Thinking:** Systematic and data-driven but can be slower and resource-intensive. - Effective decisions often blend intuitive and analytical approaches. Frame Blindness --------------- - **Definition:** Mental simplifications of decision problems that can obscure important details. - **Impact of Frame Blindness:** - Solving the wrong problem (e.g., U.S. automakers focusing on batch sizes rather than reducing changeover times). - Overlooking simple solutions by overcomplicating problems. - Sunk cost fallacy: Continuing investments in failing strategies due to past expenditures. - Imposing imaginary constraints, leading to a limited range of options. - **Mitigating Frame Blindness:** - Question existing frames and adapt them to evolving contexts. - Use diverse perspectives to challenge habitual or outdated frames. Analyzing Decisions Involving Multiple Objectives ------------------------------------------------- - **Key Concepts:** - **Objectives:** Desired outcomes (e.g., minimize pollution, maximize revenue). - **Attributes:** Measures used to assess performance against objectives. - **Value Trees:** Visual tools to map objectives and attributes. - **Validation of Value Trees:** Ensure completeness, operationality, decomposability, absence of redundancy, and parsimony. - **Efficient Frontier:** Identifying options offering the best trade-offs between objectives. SMART Method (Simple Multi-Attribute Rating Technique) - **Steps:** 1. Define decision-makers and objectives. 2. Identify alternatives and relevant attributes. 3. Assign scores to each alternative for every attribute. 4. Determine attribute weights using techniques like swing weights. 5. Calculate weighted averages for each alternative. - **Advantages of SMART:** 1. Breaks complex problems into manageable parts. 2. Provides a defensible rationale for decisions. 3. Allows for \"what-if\" analysis to test decision robustness. Long-Term Decision-Making - **Challenges:** - Involves high uncertainty and complex interdependencies. - Requires considering multiple potential future states. - **Approaches:** - Use systematic methods like scenario planning to explore plausible futures. - Build resilience by preparing for a range of potential outcomes. Scenario Planning - **Definition:** A structured method for exploring and preparing for multiple possible futures. - **Steps (Extreme World Method):** 1. Define the issue and time horizon. 2. Identify current trends and uncertainties. 3. Assess the impact of trends and uncertainties. 4. Construct extreme world scenarios combining all positive and negative elements. 5. Ensure scenarios are internally consistent and realistic. - **Applications:** 1. Testing the robustness of strategies under different scenarios. 2. Identifying new business opportunities and early contingency planning. - **Strengths and Limitations:** 1. Encourages creative thinking and the inclusion of minority opinions. 2. Lack of formal theoretical foundation and empirical evidence.