Transforming Decision Making

Why Optimization?

In many organizations, decision makers at all levels look at computer screens that present data in spreadsheets or similar forms.  They are expected to make tough decisions in six core decision areas: work assignments, production/acquisitions, scheduling, routing, pricing and policy creation.  Sometimes the screens offer visual aids such as color coding, graphs and maps.  These tools share a key deficiency: They continue to rely exclusively on the “computer on top of the shoulders” to make the call.

And what’s wrong with that?  After all, people have been doing a good job of making decisions with these systems for quite some time.  Here are some of the challenges:

• Good isn’t good enough anymore. As more and more competitors enter virtually every market, small slips in decision making can quickly add up to large dollars and make  the difference between success and failure.  Optimization, which means “choosing the best,” is the science of moving decisions from merely good to the best they can be.
• The amount of data and the speed required to make decisions are increasing and show no sign of slowing down.  In just about every business, the amount of data has begun to overwhelm decision makers, while the competitive pressure to make decisions and commitments faster and faster continues to increase.  Optimization is the only cost-effective answer to data overload.
• The rules of the game are changing—constantly.  People typically use rules of thumb to make repetitive decisions.  Often, these rules follow the familiar pattern of “this worked for us before.”  By contrast, optimization employs rigorous scoring systems that the users define to make the very best possible decisions.  This is particularly vital when the competitive, internal or regulatory rules of the game are shifting.
• Human decision making is subject to systematic flaws like fatigue and bias, which can negatively affect outcomes, as Nobel Laureates and other scientists have proven.  However, too many organizations continue to believe that they don’t need or aren’t ready for optimization, as they benchmark their decision making against what they did last week, last month or last quarter.

With the help of optimization software, the same decision makers, who previously might have analyzed dozens or hundreds of combinations in minutes, now effectively consider billions of combinations in seconds.  Adding to this benefit, the scoring of each choice is done by replicating the very best thinking in the organization: effectively bringing every decision maker up to the level of the best of the best.

In comparing pre- and post- optimization, organizations often discover their improved decision making is worth millions or tens of millions of dollars, completely resetting the expectation of what great performance means.