A632.1.4.RB_BorutyAlan_Multistage Decision-Making

Multistage Decision-Making

Reading the text on multistage decision-making convinced me without a doubt that assessing the future impact of a decision made today is complicated.  The model used by researchers is based on assumptions that affect the outcome, utilizes a level of mathematics well beyond the skill of the managers that are making the decisions and does not produce an absolute answer for every situation (Hoch, Kunreuther, & Gunther, 2001).  Managers use their experience, expertise and intuition to predict future performance of the market in which they compete.  Despite the limitations humans have with forward planning, changing our view of the current world based on lessons learned from the past, and our ability to accurately perceive the present, task experienced managers intuition produces surprisingly accurate results (Hoch, et al., 2001).  I see this as an illusion.  Sooner rather than later the illusion of intuitive ability will fail.  Betting on an illusion is a foolish bet.

As an Air Force leader, I was often tasked to make supply and manning decisions that were forecasted out for three to five years for planning purposes.  After gathering the applicable data, it was simple to look at demands out in the future.  The data was stable after years of averaging and produced fairly accurate results.  It was provided up the chain for leaders to plan future budget requirements ultimately for congress to fund.  However, no decisions were made on forecasted numbers.  They were updated so often by the time the decision was made, they were not forecasts anymore but near real time data.  This is a much simpler example than the manager that has to see the impact of a decision years out, but the concept still applies.  The manger is experienced with the market and has some expertise in predicting likely impacts out into the future as long as the past results are an accurate indicator for future performance and everything else remains stable.  But I would not bet the farm on it.  I would use optimal dynamic decision analysis to prepare strategy for operating in predicted future market activities as well as developing executable plans to take advantage of market changes.  However, in my opinion, committing hard resources on a prediction in today’s market is too risky unless you are driving or controlling the changes that will affect the market in the future.  Today the rate at which technology is advancing is affecting every market making accurate predictions difficult at best.

Reference:

Hoch, S. J., Kunreuther, H. C., &  Gunther, R. E. (2001). Wharton on making decisions. (1st edition.). Hoboken, NJ: John Wiley & Sons Inc.