Qualitative scenario analysis
These tools inform decisions by developing a set of qualitative, representative scenarios of how the present may evolve into the future and identifying the likely consequences of the decision under consideration. Since these techniques don’t assume a complete and fully specified set of possible outcomes, they are helpful to decision makers who face high levels of uncertainty about outcomes.
Case-based decision analysis
These tools provide a systematic approach to aggregating and synthesizing information from analogous past experiences and examples. In general, analogies that are most similar to the decision at hand are given more weight in determining the best choice. (See the sidebar “Developing Rigorous Analogies.”)
Information aggregation tools
These tools are used to collect information from diverse sources.
• Traditional approaches, including the Delphi method, gather information from a variety of expert sources, aggregate the responses, and generate a range of possible outcomes and their probabilities. Decision makers may then consult with the group again until a consensus is reached.
• Prediction or information markets are designed to gather “the wisdom of the crowd” by creating financial markets where investors can trade securities with payoffs linked to uncertain future outcomes (for example, the winner of an election or the release date of a new product).
• Incentivized estimate approaches involve surveying individuals with diverse information sources to estimate the outcomes of variables and then rewarding individuals with the most accurate estimates.
• Similarity-based forecasting methods involve asking individuals to rate how similar a decision or asset is to past decisions or assets. These similarity ratings are then aggregated across individuals using simple statistical procedures to generate forecasts (for revenues, completion times, or costs) depending on the goal. Since these methods rely on past decisions and outcomes, they are a form of case-based decision analysis as well.
Developing Rigorous Analogies: An Underutilized Tool
Although business leaders frequently use analogies to inform their decisions, many don’t do so in a rigorous, systematic way.