Decision Performance

December 22, 2021
Hybrid Intelligence

The business world of today is drastically different from what most companies and their executives experienced in the last decades. Emerging disruptive competitors, fast-changing customer needs, exploding IT landscapes, complex ecosystems and a global pandemic require nearly every company to constantly adapt their business model to succeed.

Today's business world demands high-stake decisions, the ones that define your career, and if your company outperforms or is just average to happen at enormous pace:

  • How can we transform our business model?
  • How can we respond to an emerging technology?
  • What strategic options will help us to grow our business?
  • How can we react to fast-changing customer needs?

Answering key questions, for strategic actions, has become one of the greatest management challenges of our time because most companies can’t keep up with the world in which business decisions are made today. And this new reality is here to stay.

We are in the midst of a historic shift, where, two types of companies are emerging. The ones that can manage uncertainty and win, and the ones that will be disrupted.

In such uncertain times, many companies accepted to fly blind. Costing organizations an estimate of $4.3T (yes $4,300,000,000,000) of lost revenue per year — in the US alone (Signal AI, 2021). And in fact, the average S&P500 company spends an average of $250M per year on ineffective decision-making (McKinsey, 2019).

Outperforming business leaders, however, know precisely where they’re going. They understand that the ability to be able to manage more uncertainty, confidently and with skill, than your competition becomes a differentiator — the ultimate advantage in this era of uncertainty.

In fact, this ability creates a huge gap between best-in-class firms and the average.

Outperforming Decision
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We call this ability Decision Performance. A measure of how well your company makes decisions under extreme uncertainty. This ability to make faster, more consistent, more adaptable and higher-quality decisions at scale defines the performance of your entire business. Because ultimately, the value of your company is just the sum of decisions made and executed.

The metric that predicts if you will outperform or just be average

So what's decision performance? There is a long history of research that shows how a rigorous approach to decision-making, empowers organizations to accelerate their financial performance (Dellermann 2020, Kahneman et al. 2021).

Decision performance is the ability to manage uncertainty with skill and take the optimal action in the context of your business at the right time. Optimal in this case means that typically in business, there is no single right or best decision. It will highly depend on the situation your organization is. Take for example an upcoming, fast growing competitor. If you are an incumbent firm, your best decision might be to acquire them. If you are a SME or startup, however, this might not be even realistic to consider. Your business might rather try to partner or out compete in a certain niche.

Your decision performance is high, if you take the optimal action given the context you are in. As former Navy SEAL Rich Diviney states it in his recent book, sometimes optimal means performing at your best, sometimes the best you can do is just surviving.

Decision Performance
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Decision performance is defined along four dimensions that combined measure your level of this ability and directly result in relevant business outcomes: Quality, Efficiency, Learning, and Speed.

Quality

Quality is probably the most obvious dimension. The higher the quality of your decisions is, the more often when looking back on critical decisions, you will find that you chose the “right” course of action. Resulting in business success such as increased revenue, growth and higher financial returns.

Efficiency

The second dimension is efficiency. Efficiency is relevant because you only have a limited set of resources in terms of time, money etc. that you can use for making a decision. Instead of ending up in analysis-paralysis, you want to spend exactly the right amount of effort when making decisions. This will help your business to increase the ROI of many strategic initiatives.

Learning

The third relevant dimension is learning. The ability to learn, adapt once new information arrives and pivot your business towards success is a crucial competitive advantage in today's uncertain business world. Best-in-class decision performance focuses not just on making the optimal decision, but also includes feedback cycles that help decision makers to constantly improve their performance.

Speed

Finally, speed is a critical factor in decision-making today. While in the past, companies were able to take enough time to analyze all relevant information and come up with a decision after months, this is no longer feasible. In a fast-changing world, most of this information will be outdated once you make a decision if you take too long. Or the opportunity will simply be gone. Increasing the number of missed opportunities and reducing opportunity costs is a game changing component of any business decision.

How to get started

Getting started with your transformation to accelerated decision performance is simple. It's not a big bang full enterprise wide change but can be achieved with small pilot initiatives one step at a time. This gives your company the chance to achieve quick results and increase the ROI of your initiatives for single decisions once you are ready to take the next step. We developed a simple 4-step process to empower your business for the transformation of accelerated decision performance.

Decision Sprint
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Step 1 — Decision Audit

The first step to get started is a Decision Audit. We help you to identify the most critical high-stake decisions inside your business and reveal the underlying as-is process, involved stakeholders and goals.

Step 2 — Decision Engineering

The next step is Decision Engineering. We use a scientific approach to design a to-be process, define a set of measures, insights, and tasks for the decision use case to make sure you make such key decisions based on the same insights. Every time. This engineered decision template provides you with an explicit, standardized and decomposed process that can be re-used across decisions in your organization.

Step 3 — DeOS Pilot

In this phase, we implement your tailored decision template in software and set up your dedicated Decision OS. We help you to onboard your time and data and support you during every step of your first decision to achieve breakthrough results. During this pilot phase, we make sure that you make immediate wins by making better decisions, faster.

Step 4 — DeOS Rollout

The fourth phase is focused on scaling augmented decision-making across decisions and use case in your organization. The more you will use technology to make decisions, the more advantage your business will gain in terms of data, learning and decision performance.

Want to get started with your transformation to accelerated decision performance? Get in touch with us or sign-up for our free e-book HERE.

References

Dellermann, D. (2020). Accelerating Entrepreneurial Decision-Making with Hybrid Intelligence: Design Paradigms and Principles for Decision Augmentation. Vencortex.

De Smet, A., Jost, G., & Weiss, L. (2019). Three keys to faster, better decisions. The McKinsey Quarterly.

Kahneman, D., Sibony, O., & Sunstein, C. R. (2021). Noise: a flaw in human judgment. Little, Brown.

Signal AI (2021).The State of Decision Making Report 2021. https://www.signal-ai.com/blog/the-state-of-decision-making-report-2021