{"id":9387,"date":"2021-07-14T06:53:45","date_gmt":"2021-07-14T11:53:45","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=9387"},"modified":"2021-11-24T10:51:33","modified_gmt":"2021-11-24T15:51:33","slug":"5-decision-support-tools-for-strategic-decision-making","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/5-decision-support-tools-for-strategic-decision-making\/","title":{"rendered":"5 Decision Support Tools for Strategic Decision Making"},"content":{"rendered":"

\"\"Do people always follow a rational linear process to come to a decision?\u00a0 Studies have suggested that a combination of Decision Making Models<\/a> are used by people to reach quality decisions.<\/p>\n

Strategic Decision Making<\/a> is a complex process with a lot riding on those decisions.\u00a0 Eliminating risk from Decision Making<\/a> is unthinkable but radically enhancing chances of success is a realistic goal.<\/p>\n

In making Strategic Decisions, executives tend to rely only on those Decision Support Tools they know best.\u00a0 The usage of non-optimal Decision Support Tools is, in part, due to lack of knowledge about which tools work best in a particular scenario and, in part, due to lack of information regarding what tools are available out there.<\/p>\n

Having access to a variety of Decision Support Tools<\/a> increases the likelihood of making a successful decision provided the decision maker has knowledge of which tool to employ or a combination thereof in various scenarios.<\/p>\n

The following 5 Decision Support Tools or their combination is applicable in a variety of Decision Making scenarios:<\/p>\n

    \n
  1. Conventional Capital-Budgeting Tools<\/strong><\/li>\n
  2. Quantitative Multiple Scenario Tools<\/strong><\/li>\n
  3. Qualitative Scenario Analysis<\/strong><\/li>\n
  4. Case-based Decision Analysis<\/strong><\/li>\n
  5. Information Aggregation Tools<\/strong><\/li>\n<\/ol>\n

    \"\"<\/a><\/p>\n

     <\/p>\n

    In some cases, just one tool is needed while in others an assortment of tools makes for the best combination.<\/p>\n

    Let us delve a little deeper into some of these tools.<\/p>\n

    Conventional Capital Budgeting Tools<\/strong><\/h2>\n

    Projected Incremental Cash Flows are used from likely investments to ascertain whether a project merits being funded through the firm\u2019s Capitalization Structure. \u00a0Included in it are Discounted Cash Flow, Expected Rate of Return, and Net Present Value models.\u00a0<\/strong><\/p>\n

    Quantitative Multiple Scenario Tools<\/strong><\/h2>\n

    Decisions are analyzed by completely specifying possible outcomes and their probabilities. Mathematical, Statistical, and Simulation methods are employed to distinguish the Risk and Return properties of prospective choices. \u00a0The tools include:<\/p>\n

    >\u00a0 Monte Carlo Methods<\/p>\n

    >\u00a0 Decision Analysis<\/p>\n

    >\u00a0 Real Options<\/p>\n

    Qualitative Scenario Analysis<\/strong><\/h2>\n

    These techniques are beneficial to decision makers who encounter excessive levels of uncertainty about outcomes because the techniques do not assume a conclusive and entirely specified set of possible outcomes.<\/p>\n

    Real-life business Decision Making often comprises of judgments that are based on incomplete and uncertain information.\u00a0 This can be mitigated by using appropriate Decision Support Tools.\u00a0 However, which tools are appropriate will depend on the answer to the following critical questions:<\/p>\n

      \n
    1. Do I know what it will take to succeed?<\/li>\n
    2. Can I predict the range of possible outcomes?<\/li>\n<\/ol>\n

      The Causal Model question\u2014combination of Critical Success Factors (CSFs) and economic conditions leading to success\u2014needs settling before we can proceed to answer the 2nd<\/sup> question regarding Outcome Prediction.<\/p>\n

      Managers need to ask the following in order to clarify the state of the Causal Model hence the answer to the question:<\/p>\n

        \n
      1. Do I comprehend what combination of Critical Success Factors will decide if my decision leads to a successful outcome?<\/li>\n
      2. Do I recognize what metrics need to be met to guarantee success?<\/li>\n
      3. Do I have an accurate understanding of how to attain success?<\/li>\n<\/ol>\n

        The other question to answer is: Can I predict the range of possible outcomes?<\/p>\n

        Managers should ask the following in scenarios predicting various outcomes and probabilities:<\/p>\n

          \n
        1. Can I outline the range of outcomes that may result as a consequence of my decision, both as a whole and for each Critical Success Factor?<\/li>\n
        2. Can I measure the probability of each outcome?<\/li>\n<\/ol>\n

          Even where the CSFs and Model for Success are understood, it sometimes becomes difficult to predict range of outcomes and their probabilities due to uncertain conditions.<\/p>\n

          Interested in learning more about Decision Support Tools? \u00a0You\u00a0can download\u00a0an editable PowerPoint on Decision Support Tools<\/strong> here\u00a0<\/a>on the\u00a0Flevy documents marketplace<\/a>.<\/p>\n

          Do You Find Value in This Framework?<\/h2>\n

          You can download in-depth presentations on this and hundreds of similar business frameworks from the\u00a0FlevyPro Library<\/a>.\u00a0\u00a0FlevyPro<\/a>\u00a0is trusted and utilized by 1000s of management consultants and corporate executives.\u00a0 Here\u2019s what some have to say:<\/p>\n

          \u201cMy FlevyPro subscription provides me with the most popular frameworks and decks in demand in today\u2019s market.\u00a0 They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions.\u00a0 I strongly recommend FlevyPro to any consultant serious about success.\u201d<\/p>\n

          \u2013 Bill Branson, Founder at Strategic Business Architects<\/p><\/blockquote>\n

          \u201cAs a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power.\u00a0 For us, it is an invaluable resource to increase our impact and value.\u201d<\/p>\n

          \u2013 David Coloma, Consulting Area Manager at Cynertia Consulting<\/p><\/blockquote>\n

          \u201cFlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients.\u00a0 In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over!\u00a0 The quality of the decks available allows me to punch way above my weight \u2013 it\u2019s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.\u201d<\/p>\n

          \u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

          Do people always follow a rational linear process to come to a decision?\u00a0 Studies have suggested that a combination of Decision Making Models are used by people to reach quality decisions. Strategic Decision Making is a complex process with a lot riding on those decisions.\u00a0 Eliminating risk from Decision Making is unthinkable but radically enhancing… 5 Decision Support Tools for Strategic Decision Making<\/span><\/a><\/p>\n","protected":false},"author":110,"featured_media":9394,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[408,81],"tags":[2606,2603,1136,2508,2602,2607,2605,2604,1285],"class_list":["post-9387","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-management-leadership","category-strategy","tag-case-based-decision-analysis","tag-conventional-capital-budgeting-tools","tag-decision-making","tag-decision-making-models","tag-decision-support-tools","tag-information-aggregation-tools","tag-qualitative-scenario-analysis","tag-quantitative-multiple-scenario-tools","tag-strategic-decision-making"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9387","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/110"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=9387"}],"version-history":[{"count":11,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9387\/revisions"}],"predecessor-version":[{"id":9400,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/9387\/revisions\/9400"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/9394"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=9387"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=9387"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=9387"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}