the essence of decision

Conscientia Research • Pasadena, CA 1

THE ESSENCE OF

DECISIONHow information can keep you

competitive

…Ever wondered:- How some sports teams win consistently,

while others languish at the bottom of a table?

- How the worst house on the street can be sold for the highest price?

- How price has everything to do with how much you pay?

- Why outcomes matter?


“Decisions are necessarily a function of information” – Kenneth Arrow (Nobel Laureate, Economics 1972)

“Strategy is a pattern in a stream of decisions” – Henry Mintzberg (1994)

“Quality of decision making is reliant upon the knowledge workers access to good information – Peter Drucker (1955)

“Know your enemy and know yourself, find naught in fear for 100 battles” – Sun Tzu (Military Strategist – 6th Century BC)

“I have always found that plans are useless but planning is indispensable” – Dwight D. Eisenhower


Strategy


The high level planning of goals and objectives under conditions of uncertainty and maintaining a position of advantage


Uncertainty…?


What are the Top 5 Reasons Small Businesses Fail?

• Unknown Market Clarity (Why, How, What, Where, When, Who)

• Growth (Wrong geography; Too Quickly; Too Slowly)

• Competitor Knowledge (Who are they and what are they doing?)

• Organization (Poor planning; Operational inefficiencies; Poor accounting; Bad Management; Failure to delegate)

• Failure of Market to ReactConscientia Research • Pasadena, CA 10

We live in a business world where…

- The business environment is clouded with seemingly contradictory information

- We are bombarded with new information constantly- We don’t always know what constitutes the right

information…or how it effects how we make decisions- We need to stay current and informed about our

direction- We lack the tools for information symmetry, to remain

competitive- We need to plan ahead

WE NEED INFORMATION Conscientia Research • Pasadena, CA 11

Information…• Reduces risk• Increases certainty• Is the creator of goals and objectives• Increases the ability to plan• …To execute• …To DECIDE


Consumer Decision Making• Five Step Decision Making Process

• Dependent values: how involved the consumer is in their commitment to the process

• Corporations can manipulate the process at any stage



Gala Honey Crisp Braeburn MacIntosh Fuji

Using Fallacy of Demand• Mostly consumers choose products based on value, quality

and availability• Consumers get used to purchasing certain products at a

certain price - Anchoring• Anchoring is how one associates value to an arbitrary

product• Demand therefore can be easily manipulated and made

false• The value of a product is related to how it is associated to

supply and demand, and…• Demand is dependent upon supply and it is based on

memory rather than preference


Bias• Corporations decision making invariably

takes advantage of cognition, belief and confirmation biases

• Think of the Brands as “proprietary antonyms” in common useage:

• Kleenex (instead of tissue)• Q-Tip (Cotton swab)• Zipper (originally a brand by BF Goodrich)• Band-Aid (Elastic Plaster)• Champagne, Cheddar, Tequila


Word Use in Decision Making• “Climate Change” – 1972 paper; 1998 common usage• An analysis of the language used in real-estate ads shows

that certain words are powerfully correlated with the final sale price of a house - Five of them have a strong positive correlation to the ultimate sales price, and five have a strong negative correlation

• Common: Spacious, State-of-the-art, granite, charming, great neighborhood

• Positive: Granite, State-of-the-art• Negative: Spacious, charming, great neighborhood


Do Top Football Teams Always Win?

• 2009 Univ. Maryland study• Looked at top seeded teams expected to win 2006

World Cup• Top teams only have a 28% chance of winning• Why? What accounts for this?

• Predictors…• Outcomes: 58% determined by goal order• Team 62% more likely to advance from deficit win• However: if first goal is scored later in the match,

scoring team 80% more likely to win (RMC Kingston, ON 2009/McGill)


Outcomes Matter• Information is important• Create models• Can justify and clarify goal setting• Determine realistic expectations• Mitigate hazards and barriers to growth• Use information to increase chances of

success and beat the information asymmetry war

• Better Outcomes = Better Payoffs


THANK YOU

Questions?


the essence of decision

Business

information symmetry

contradictory information

new information

outcomes matter information

growth use information

quality of decision

consumer decision

essence of decision