Do you have specific decisions in mind when you invest in IT?

Tom Davenport (author of Competing on Analytics) had a nice post today called Back to Decision-Making Basics in which he talked about some of the issues raised when one considers IT investments in the context of better decisions. He quoted an academic colleague who asked:

“these companies you work with have some specific decisions in mind when they put all these information systems in place, right?”

To which Tom replied “No, actually, they don’t.” As he said:

“We have lost much of the connection between the supply of information and the demand for it in decision-making”

Although better decision-making is often one of the reasons stated for IT investments, the two are rarely connected. It is as though we hope that having more information that is more current and more up to date will somehow make everything better. Of course, this is by no means certain. There is a tendency to think (for instance) that “he who knows first, wins”. This fails t take decision making into account. In fact, those who act first, win (provided the action is smart enough). What good does knowing something before your competitors do if you don’t act on? What if you know first but take so much longer to decide what to do than your competitors that they respond before you do? If you cannot reduce the time from when you could know what to do to the point where you actually do something then you are not going to win.

Tom suggests what I have heard him call a decision audit as a first step. What decisions do you have? What are their characteristics and who takes them now? Indeed this kind of decision discovery is an explicit service we are developing here at Smart (enough) Systems LLC. However, this is just a beginning. Here are some other thoughts:

• Start with the decision in mind
  A variant of the old “start with the end in mind” comment this is about focusing on the decision you are trying to improve before gathering or cleaning data, conducting analysis, collecting rules or building models
• Grab the decision by the throat and don’t let go
  A wonderful phrase from one of the founders of Fair Isaac who was making the point that a decision can only be improved if you focus on it separately from the systems and processes that use it.
• Think about different kinds of decisions
  Decisions can be one-off, repeated high-volume, customer-facing, supply-chain facing etc. and you need to treat them differently. Some require decision automation and some require decision support. Be sure you know which is which.

As for measuring the effectiveness of a decision, try the Decision Yield approach (see this blog post for an introduction). Decision Yield involves comparing your decisions with those of the market average and best competitor in 5 dimensions – Precision or accuracy, Consistency – over time, over channels), Agility in terms to time/cost to change the way you decide, Speed of decision making and Cost of the decision. Considering these different dimensions can be a very effective tool when improving decisions.