Decision cycle
Source: By Vidya Hattangadi: The Financial Express
Decision making is the process to select a course of action from a number of alternatives. Like planning, decision making also requires features like forecasting and action plans. For any organisation, policy documents help in taking managerial decisions. But these are decisions of routine nature, which we also call operational decisions. Strategic or important decisions are obviously taken after considering different alternatives. In order to be a successful manager, one has to necessarily develop decision-making skills.
What is a decision cycle? It is a sequence of steps used by an organisation on a repeated basis to reach and implement decisions; not necessarily each decision adds to profits, but organisations must learn from mistakes made by them. For growth and sustainability, a business relies on decision cycle. The ‘decision cycle’ as the phrase is used to broadly categorise various methods of making decisions, going upstream to the need, downstream to the outcomes, and cycling around to connect the outcomes to the needs.
Understanding that organisations go through a specific decision-making process allows business firms and manufacturing-related goods and services to develop programmes designed to influence each stage of the business process.
All businesses operate around certain business process cycles. It refers to various trends that occur within an industry/sector, such as growth or withering. Many a time, management decisions are impacted by where the company stands in reference to a particular cycle. Macro economy also plays an important role in management decisions. When the economy is in a cycle of withdrawal, the management of a firm will act conservatively, whereas in a cycle of expansion, management may tend to act more aggressively to gain as much market share as possible.
Characteristics of business cycle
Usually, any business faces four distinct trends: slowdown, bottom, growth and peak. All businesses, even the most aggressive sales firms, experience these cycles. A slowdown occurs after a market has experienced a normal period of expansion. This is often followed by a period of sales maturity and product integration by the existing customer base, which is viewed as a slowdown. During a slowdown, competition enters the market that also creates weaker sales. Finally, the business hits a bottom. After this bottom and rough period, business gets aggressive and makes steps of expansion and marketing efforts to aggressively go after new market share. Following this period of expansion, business will again begin to see a peak in performance and start the cycle all over.
The examples of decision cycle are:
OODA loop: This tool was coined in the 1950s by US Air Force colonel and military strategist John Boyd as a way to illustrate the action and decision cycle that a fighter pilot goes through during an aerial dogfight; it has since been applied to disciplines as diverse as business, medicine, law and the acquisition process in the military. The quality and speed of those decisions get enhanced by new command-and-control precepts and advances in information, surveillance and reconnaissance tools, sensors and systems. As a result, military forces have been improving on their ability to observe, orient, decide and attack, better known as the OODA loop.
PDCA (plan-do-check-act): It was made popular by Dr W Edwards Deming, considered the father of modern quality control. Based on scientific method, PDCA can be better explained as “hypothesis” that can be proved under statistical control as a three-step process of specification, production and inspection. It can be specified as a scientific method of hypothesis, experiment and evaluation. According to Dr Deming, during his lectures in Japan in the early 1950s, the Japanese participants shortened the steps to the now traditional plan, do, check and act.
Herbert Simon Model: The field of decision support systems was pioneered by Herbert Simon. According to Simon and his work with Allen Newell, decision making has distinct stages. He suggested for the first time the decision-making model of humans. It has three stages: Intelligence which deals with problem identification and data collection on the problem; design which deals with the generation of alternative solutions to the problem at hand; and choice which is selecting the “best” solution from amongst the alternative solutions using some criterion. Later, other scholars expanded his framework to five steps (Intelligence-Design-Choice-Implementation-Learning).
Business Analytics: It refers to the skills, technologies, practices for continuously connecting exploration and investigation of past business performance to gain insight and drive business planning. BA focuses on developing new insights and understanding of business performance based on data and statistical methods. In contrast, business intelligence traditionally focuses on using a consistent set of metrics to both measure past performance and guide business planning, which is also based on data and statistical methods.
Design thinking: It refers to cognitive, strategic and practical processes by which design concepts, proposals for new products, buildings, machines, etc, are developed by designers. Many key concepts and aspects of design thinking have been identified through studies of design cognition and design activity in both laboratory and natural contexts. Design thinking includes “building up” ideas, with few or no limits. This helps reduce fear of failure among managers; it encompasses processes such as context analysis, problem finding and framing, ideation and solution, generating, creative thinking, sketching and drawing and portraying and evaluating.
