How does your company approach decisions
and rate innovation risk?
by Phil Phillips, PhD
Contributing Editor
phillips@chemarkconsulting.net
Rules of thumb, intuition, tradition, and simple financial analysis are often no longer sufficient for addressing such common decisions as make-versus-buy, facility site selection, and
process redesign. In general, the forces of
competition are imposing a need for more
effective decision making at all levels in organizations.
Uncertainty is the fact of life and business; probability is the guide for a “good”
life and successful business. The concept of
probability occupies an important place in
the decision-making process, whether the
problem is one faced in business, in government, in the social sciences or just in
one’s own everyday personal life. In very
few decision making situations is perfect information available. Most decisions are
made in the face of uncertainty. Chance enters into the process by playing the role of
a substitute for certainty - a substitute for
complete knowledge.
Business decision making is almost al-
ways accompanied by conditions of uncer-
tainty. Clearly, the more information the
decision maker has, the better the decision
will be. Treating decisions as if they were
gambles is the basis of decision theory. We
have to trade off the value of a certain out-
come against its. . . chance, odds, likeli-
hood, etc. Humans make decisions based
on emotions, habits, tradition and conven-
tion. These sometimes pay off but most
times do not . . . .so . . . we’re lucky when
they do turn out in our favor.
28 | Coatings World
www.coatingsworld.com
November 2012
