Decision engineering

Decision engineering framework

Decision Engineering is a framework that unifies a number of best practices for organizational decision making. It is based on the recognition that, in many organizations, decision making could be improved if a more structured approach were used. Decision engineering seeks to overcome a decision making "complexity ceiling", which is characterized by a mismatch between the sophistication of organizational decision making practices and the complexity of situations in which those decisions must be made. As such, it seeks to solve some of the issues identified around complexity theory and organizations. In this sense, Decision Engineering represents a practical application of the field of complex systems, which helps organizations to navigate the complex systems in which they find themselves. Decision Engineering can also be thought of as a framework that brings advanced analytics techniques to the desktop of the non-expert decision maker, as well as incorporating, and then extending, inductive reasoning and machine learning techniques to overcome the problems articulated in Black swan theory.

Despite the availability of advanced process, technical, and organizational decision making tools, decision engineering proponents believe that many organizations continue to make poor decisions. In response, decision engineering seeks to unify a number of decision making best practices, creating a shared discipline and language for decision making that crosses multiple industries, both public and private organizations, and that is used worldwide.^[1]

To accomplish this ambitious goal, decision engineering applies an engineering approach, building on the insight that it is possible to design the decision itself using many principles previously used for designing more tangible objects like bridges and buildings. This insight was previously applied to the engineering of software—another kind of intangible engineered artifact—with significant benefits.^[2]

As in previous engineering disciplines, the use of a visual design language representing decisions is emerging as an important element of decision engineering, since it provides an intuitive common language readily understood by all decision participants. Furthermore, a visual metaphor^[3] improves the ability to reason about complex systems^[4] as well as to enhance collaboration.

In addition to visual decision design, there are other two aspects of engineering disciplines that aid mass adoption. These are: 1) the creation of a shared language of design elements and 2) the use of a common methodology or process, as illustrated in the diagram above.

Motivation

The need for a unified methodology of decision making is driven by a number of factors that organizations face as they make difficult decisions in a complex internal and external environment.

Recognition of the broad-based inability of current methods to solve decision making issues in practice comes from several sources, including government sources and industries such as telecommunications, media, the automotive industry, and pharmaceuticals.

Examples:

• The outcomes of decisions are becoming more complex, going well beyond next quarter's revenues or other tangible outcomes to multiple goals that must be satisfied together, some of which are often intangible:

The car is becoming an expression of identity, values, and personal control in ways that move far beyond traditional segmentation and branding. For example, fuel efficiency will be only one consideration for a socially responsible vehicle (SRV). What percent of the parts are recyclable? What is the vehicle's total carbon footprint? Are there child labor inputs? Toxic paints, glues, or plastics? How transparent is the supply chain? Is the seller accountable for recycling? What methods are used? Are fair labor practices employed?

— Shoshana Zuboff, The GM Solution: Life Boats, Not Life Support. Business Week, November 18, 2008

• Global increase in complexity:

We live in a dynamic world in which the pace, scope, and complexity of change are increasing. The continued march of globalization, the growing number of independent actors, and advancing technology have increased global connectivity, interdependence and complexity, creating greater uncertainties, systemic risk and a less predictable future. These changes have led to reduced warning times and compressed decision

cycles.

— Director of National Intelligence, Vision 2015: A Globally Networked and Integrated Intelligence Enterprise Also see this Vision 2015 summary

Transferring engineering principles

Unlike other decision making tools and methodologies, decision engineering seeks to bring to bear a number of engineering practices to the process of creating a decision. These include requirements analysis, specification, scenario planning, quality assurance, security, and the use of design principles as described above. During the decision execution phase, outputs produced during the design phase can be used in a number of ways; monitoring approaches like business dashboards and assumption based planning are used to track the outcome of a decision and to trigger replanning as appropriate. One view of how some of these elements combine is shown in the diagram at the start of this article.

Like related engineering disciplines before it, decision engineering promises improvements in the quality of decisions made, the ability to make them more quickly, the ability to align organizational resources more effectively around a change in decisions, and lowers the risks associated with decisions. Furthermore, a designed decision can be reused and modified as new information is obtained.

Bringing numerical methods to the desktop

Although many elements of decision engineering, such as Sensitivity analysis and analytics are mature disciplines, they are not in wide use by decision makers. Decision engineering seeks to create a visual language that serves to facilitate communication between them and quantitative experts, allowing broader utilization of these and other numerical and technical approaches.

In particular, dependency links in a decision model represent cause-and-effect (as in a causal loop diagram), data flow (as in a data flow diagram), or other relationships. As an example, one link might represent the connection between "mean time to repair a problem with telephone service" and "customer satisfaction", where a short repair time would presumably raise customer satisfaction. The functional form of these dependencies can be determined by a number of approaches. Numerical approaches, which analyze data to determine these functions, include machine learning and analytics algorithms (including artificial neural networks), as well as more traditional regression analysis. Results from operations research and many other quantitative approaches have a similar role to play.

When data is not available (or too noisy, uncertain, or incomplete), these dependency links can take on the form of rules as might be found in an expert system or rule-based system, and so can be obtained through knowledge engineering.

In this way, a decision model represents a mechanism for combining multiple relationships, as well as symbolic and subsymbolic reasoning, into a complete solution to determining the outcome of a practical decision.

Origins

It is interesting to note that, despite decades of development of decision support system and methodologies (like decision analysis), these are still less popular than spreadsheets as primary tools for decision making. Decision engineering seeks to bridge this gap, creating a critical mass of users of a common methodology and language for the core entities included in a decision, such as assumptions, external values, facts, data, and conclusions. If a pattern from previous industries holds, such a methodology will also facilitate technology adoption, by clarifying common maturity models and road maps that can be shared from one organization to another.

The decision engineering approach is multidisciplinary, unifying findings on cognitive bias and decision making, situational awareness, critical and creative thinking, collaboration and organizational design, with engineering technologies.

Decision engineering is considered an improvement upon current organizational decision making practices, which include the use of spreadsheets (difficult to QA, hard to collaborate and discuss), text (sequential in nature, so is not a good fit for how information flows through a decision structure), and verbal argument. The movement from these largely informal structures to one in which a decision is documented in a well understood, visual language, echoes the creation of common blueprint methodologies in construction, with promise of similar benefits.

Decision engineering is both a very new and also a very old discipline. Many of its elements—such as the language of assessing assumptions, using logic to support an argument, the necessity of critical thinking to evaluate a decision, and understanding the impacts of bias—are ancient. Yet the realization that these elements can form a coherent whole that provides significant benefits to organizations by focusing on a common methodology is relatively new.

Visual decision design

Because it makes visible the otherwise invisible reasoning structures used in complex decisions, the design aspect of decision engineering draws from other conceptual representation technologies like mind mapping, conceptual graphs, and semantic networks. The basic idea is that a visual metaphor enhances intuitive thinking, inductive reasoning, and pattern recognition—important cognitive skills usually less accessible in a verbal or text discussion. A business decision map can be seen as one approach to a formal decision language to support decision engineering. See, e.g., Waring, 2010^[5].

Explicit representation of intangibles

Decision engineering recognizes that many aspects of decision making are based on intangible elements, including opportunity costs, employee morale, intellectual capital, brand recognition and other forms of business value that are not captured in traditional quantitative or financial models. Value network analysis—most notably Value network maps—are therefore relevant here.

Notes

• Enterprise Decision Management (EDM) is a closely related discipline that focuses on automating decisions across an enterprise. Decision Engineering is from this point of view a superset of EDM, since it encompasses both manual and automated decision making processes, unifying them into a common methodology that, when effective, breaks down barriers between quantitative analysis / analytics tools and departments and those with a more qualitative / strategic / management focus.
• The term "Decision engineering" is used in several industries with more specific meaning than the framework described here. For instance, the Australian Software Research Centre has an IT evaluation approach called Decision Engineering; Idea focuses on emergency management under the heading of "Decision Engineering Analysis"; and the National University of Singapore includes an organization called the Biomedical Decision Engineering Group. Each of these has a meaning that is distinct from what is discussed in the present article.
• In behavioral economics, "Decision engineering" can mean the deliberate manipulation of consumer choices, as in this Journal of Consumer Research study: People choose healthy meals, if given more choice: Study. In this use of the term, Decision Engineering is roughly analogous to Soft paternalism - a quite different meaning than is covered in the present article, referring as it does to the engineering of decisions made by consumers, rather than the use of engineering principles to aid in complex decision making. Although distinctly different, this practice draws on much of the same decision-making research as does decision engineering (such as, for the example, the work of Richard Thaler as described in this article about Barack Obama's University of Chicago connections to this school of thought).
• Cost engineering applies engineering principles to measure the costs associated with engineering projects. Cost engineering is sometimes grouped into the broader context of other engineering decisions, such as product engineering and design optimization, in which context it is sometimes referred to as "Decision Engineering". This can be distinguished from the broader framework of this article, which goes beyond the arena of engineering decisions to all decisions faced by organizations.^[6]
• Operations research is a largely quantitative approach to decision making that attempts to identify optimal or near-optimal solutions to decision making problems.

See also

• Amos Tversky's seminal work on cognitive bias and the irrationality of human economic choices.
• Nobel Laureate Daniel Kahneman, who continues to study the impact of associative cognitive bias on decision making.
• Peter F. Drucker.Harvard Business Review on Decision Making. (2001) ISBN 1578515572
• John S. Hammond. Smart Choices: A Practical Guide to Making Better Decisions. (2002) ISBN 0767908864
• Edward Russo. Decision Traps. (1990) ISBN 0385248350
• Paul J.H. Shoemaker. Winning Decisions: Getting It Right the First Time. (2001) ISBN 0749922850
• Scott Plous. The Psychology of Judgment and Decision Making (1993) ISBN 0070504776
• Janusz Bucki and Sylvain Roth, Decision engineering in a strained industrial and business environment
• Applied Management Science: Making Good Strategic Decisions is a good overview of a number of quantitative decision making methods.
• Are You Ready to Reengineer Your Decision Making? Interview by Michael S. Hopkins with Thomas H. Davenport.
• Are you ready to re-engineer your decision making? adapted from article in the MIT Sloan management review, above
• Springer Book Series on Decision Engineering
• Smart (Enough) Systems
• Mark Sh. Levin, Composite Systems Decisions, Springer, 2006 Discusses decision decomposibility into sub-decisions, along with decision quality metrics for composable decisions.
• Effective Decision Making in the Midst of Complexity: LinkedIn Discussion group covering visual decision modeling, combining qualitative with quantitative information, and other decision engineering related topics.
• The Black Swan (Taleb book). Decision Engineering can aid a decision making team in reducing these unexpected outcomes, because it allows a decision making team to reason effectively about complex situations and risk, using an approach that takes into account feedback loops and recursive constructs, supplementing simpler models of uncertainty and data from the past that may or may not predict the future.
• Master in Decision Engineering from the University Rey Juan Carlos I (Spain).

External links

• Computer and Decision Engineering at Université Libre de Bruxelles
• Decision Engineering Centre at Cranfield University
• Decision Engineering Workshop by Craffiti Consulting
• The Decision Science and Decision Engineering Laboratory at Michigan Technological University

• Decision Sights is a decision engineering specialist offering different tools and services
• Quantellia, LLC offers decision engineering consulting, training, and its World Modeler(tm) software solution
• Integrated Decision Engineering Analysis, Inc. offers software and services supporting disaster preparedness program development, decision engineering, planning, risk and threat analysis; business decisioning analysis and strategic planning
• Navigating the telecom ship: The CEM Control Center Catalyst is a collaborative case study describing a decision engineering proof-of-concept developed by Vodafone, Netezza, Nokia Siemens Networks, N-Pulse, Quantellia, and Subex.

References

1. ^ Lorien Pratt and Mark Zangari: The new science of decision engineering. Telecom Asia, September 2008.
2. ^ Benefits of CMMI
3. ^ Metaphors and the User Interface
4. ^ Lorien Pratt and Mark Zangari: [http://www.telecomasia.net/content/leading-way-complex-business-models Leading the way to complex business models.] Telecom Asia, August 10, 2009.
5. ^ Joseph Waring: Understanding Telecom Complexity through Visual Analysis Telecom Asia, January 04, 2010
6. ^ See, e.g. Roy Rajkumar: Cost Engineering: Why, What, and How? and other publications from The University of Cranfield UK's Decision Engineering Centre