The problem managers face is not a lack of appropriate tools. A wide variety of tools—including case-based decision analysis, qualitative scenario analysis, and information markets—can be used for decisions made under high degrees of uncertainty. But the sheer variety can be overwhelming without clear guidance about when to use one tool or combination of tools over another. Absent such guidance, decision makers will continue to rely solely on the tools they know best in an honest but misguided attempt to impose logic and structure on their make-or-break decisions.
In the first half of this article, we describe a model for matching the decision-making tool to the decision at hand, on the basis of three factors: how well you understand the variables that will determine success, how well you can predict the range of possible outcomes, and how centralized the relevant information is. We make a strong case for increased use of case-based decision analysis (which relies on multiple analogies) and qualitative scenario analysis under conditions of uncertainty.
Inevitably, the model we propose simplifies a very complicated reality in order to uncover some important truths. (That’s what models do.) In the second half of the article, we explore some of the most common complications: Most executives underestimate the uncertainty they face; organizational protocols can hinder decision making; and managers have little understanding of when it’s ideal to use several different tools to analyze a decision, or when it makes sense to delay a decision until they can frame it better.