By Greg Silverman, Jul 06, 2020
Picture this: A snowstorm or hurricane is forecasted within the next few days. People rush to the grocery store to stock up on emergency supplies — we’re all familiar with the empty bread and milk shelves before a major weather event. Big-ticket items like generators are also in high demand.
The sudden need for these items is due to a perceived necessity, and stores don’t need to market their supplies for them to be scooped up by customers. So, why would the CEO of a generator company decide to run television ads in this situation? Likely, he is making this choice because he has the resources available to do so. Hubris guided his decision because even though the advertisements may not increase sales, he wanted to be on TV.
This is just one example of making a decision based on personal vanity. Today, we will explore what drives decision making to identify a process that helps ensure the next choice your business makes is a good one.
The scenario described above is just one extreme form of decision-making. When organizations have excess resources, they can afford to make rash or riskier decisions because they believe the consequences of failure are less severe. In other words, these decision-makers may choose a course of action that does little to progress the goals of the business but have enough sales so that one poor decision won’t make or break their organization. Yet, basing decisions on hubris is often a leader’s fatal flaw, according to Toastmasters.
On the opposite end of the spectrum of this irrational exuberance is a complete decision-making shutdown. This happens when a business simply can’t afford to fail. They must make the most strategic decision to save their organization — to be a hero. In these scenarios, it may be difficult to know which decision is best, and the weight of responsibility takes its toll on having a clear mind.
Of course, no matter if resources are plentiful or scarce, business decision-makers should always strive to make the best choice possible for their organization. While situations may not be dire enough to warrant a hero, making good decisions starts with putting hubris aside, engaging in critical conversations with other departments, and utilizing analytics tools to help turn insights into strategic action for business growth.
When it’s time to make a decision, you never want to react to the situation at hand; you need to respond. Medium explained how reactions are rooted in instinct. When you base a decision on a gut feeling, you’re relying on intuition, which allows fear or self-gain to cloud your judgment. A decision based on a measured response is more thought out. If an event occurs at an unexpected time, and you have a plan in place for how to respond, the odds of a desirable outcome increase.
Here are the five steps to follow for making a good decision:
1. Define the question
Vision alignment is the first crucial step in the decision-making process, yet it’s often overlooked in the grand scheme of things. Bringing together different departments and having conversations around the question being asked engages every stakeholder in the decision. Agreeing on the timeline and definitions surrounding data and strategic options ensures everyone involved is on the same page.
Collaborating on the framework behind the decision not only encourages conversation between teams who don’t work together often, but it ultimately creates a consensus to agree upon the results of the decision. Dedicating enough time to this first step allows the rest of the process to be streamlined and strengthens trust within your organization.
2. Collect information about the decision
With the questions agreed upon by all stakeholders, it’s time to begin collecting relevant information on the topic. Even though the market is typically stable, it’s still essential to reevaluate the size and demographics of your target audience. After a significant emotional event, the market may look drastically different, but even small changes may have impacted your market size over time.
Create an analytics plan for the information you collect that shows how the market has changed. An analytic element is to compare how your product or service performs against a new set of consumer behaviors and preferences. By testing assumptions about the market, specifically about the utility consumers associate with your product, you are able to see how your market has changed (or remained consistent) and what alterations are needed to make your strategy truly effective.
3. Determine how you will validate your decision
Of course, conclusions about your market and subsequent strategy must be validated before turning insight into action. When decisions are made based on pride, the validation process is typically messy. The decision-maker may say they will know which strategy is correct when they see it, but this process is counterintuitive. Without articulating validation measurements to others involved in the decision-making process up front, it inhibits the flow of data and disrupts the overall response plan.
Considering that models need to shift very quickly as the market changes, it’s necessary to use a mix of historical data about real market results, like sales reports and primary research to validate your data collection aligns with the reality in the market.
4. Diagnose what caused things to happen
After running a hypothesis or making a decision, it’s time to diagnose why things played out the way they did. By understanding which strategic levers make an impact, decision-makers will identify the changes that may lead to good decisions. By acknowledging the new realities in the customer journey and using simulation tools to run what-if scenarios, business users can pinpoint which of their actions enact positive change.
5. Create new opportunities for improvement
Making a good decision is never done in a day. Businesses must continuously improve their models, actions, and the decision itself over time to achieve their goal. A decision is never static; it requires a level of flexibility, so new opportunities for improvement may be identified and included in the strategy.
A decision is not a single action; it’s a continuous process that is neither focused on hero nor hubris. The steps you take to diagnose, attribute, and iterate the decision to create new opportunities is what drives a good choice of action.
Concentric not only provides a platform for better decision-making, but it also promotes this process for internal collaboration and growth. Contact us today to learn more.