Strategy Development – My Decision Analysis Experiences – Part 1

During my career in the chemicals industry, I worked assignments in operations, technology, business, and capital projects. Then in 1995, I was part of a team tasked with improving the way capital projects were developed and executed. The company wanted to re-design the entire stage-gate/decision process. To get started, the team needed to define the current state of how capital projects were developed and then to benchmark our processes with industry Best Practices.

I visited every major internal operating site and regional headquarters and found that there was no consistent approach in terms of the process and financial tools. Independent Project Analysis (IPA), a company that provided capital projects benchmarking services, helped identify companies with better processes for their capital projects. Discussions with these companies established a common denominator – a process commonly referred to as Decision Analysis (DA). Other names include Decision & Risk Analysis (D&RA) and Decision Quality (DQ).

My company decided to test the DA approach by applying it to five projects currently in the early development stage. The five projects were of various sizes from large greenfield and brownfield investments to smaller incremental expansion projects. These pilot projects showed significant value in using the DA approach, and the decision was made in 1998 to adopt DA processes and to apply them to large investments as the first step.

As the company gained experience in the capital projects experience with the DA approach, they began to also apply the methodology to Strategy Development. Consequently, there was a growing need to provide DA resources to support the implementation and a Center of Expertise was formed.

Assisting with the implementation process, I became quite skilled in the facilitation of the DA approach, and it became my passion and where I wanted to spend the remainder of my career. I retired in 2000 and became a full time Decision Analyst as I joined the launch of a new consulting company.

So, what is the Decision Analysis process?

In simple terms, there are three key steps:

1. Define the opportunity unambiguously (Framing Statement or Strategic Question and Scope)
2. Establish the potential solutions to consider (Alternatives Framing)
3. Do the appropriate math to identify the optimum solution (Evaluation Approach)

This may appear rather simplistic, but in reality, these three key steps encapsulate the important elements of the DA process. Whether the decision situation is very complex as in a major strategic decision for a new product launch or as simple as the personal decision of where to go on vacation this summer, DA can add clarity to improve decision quality. Using a solid DA process can effectively achieve Framing alignment between the Decision Maker, the Decision Team and Stakeholders as well as modeling and uncertainties evaluation to establish risk of alternate solutions in complex issues. The DA process is also very scalable to deal with simpler decisions like the vacation.

People are always asking, “Why should I use DA? What are the benefits? I know how to make the best decision!” Granted, the traditional approach can result in value added solutions, but DA brings the potential of creating solutions with higher value and lower risk. I have seen it many, many times.

In my view, value is created in three basic ways

• Achieve organizational alignment for a specific strategic issue on:
  • Decision scope and set of boundaries to address a specific strategic issue
  • Clear definition of the decision criteria and trade-offs used to judge various alternatives
  • Identification of a broad set of alternatives as potential solutions to consider
• Manage risk to create maximum value
  • The optimum strategy is developed by evaluating a broad set of options
  • Sources and level of risk are well understood and risk mitigating strategies preserve value
  • Positioned to capture the upside potential
• Enables organizational efficiency
  • Organizational alignment in strategy development and execution
  • Effective resource utilization
  • Minimizes recycle

I have been applying DA principles for the last 25 years. It is truly in my DNA. Experienced Decision Makers will typically have a potential solution in mind for what they consider to be the right answer. When I work with a client on a strategic issue, I get a great deal of satisfaction applying the DA process which most often results in a solution that is of higher value than the intuitive answer.

• Future blog contributions with deal with how to:
• Define the Strategic Question (Opportunity Statement)
• Identify all the boundaries to define the Scope
• Define the Objectives and establish the Decision Criteria
• Frame alternate solutions to the Strategic Question
• Achieve Decision Maker endorsement of the Strategic Question, Scope and Objectives and Alternative Solutions
• Apply the appropriate process and analytical tools for the evaluation of alternative solutions
• Optimize the solution by developing hybrid alternatives