Coach’s Guide to the Decision Analysis Process
This 63-page slidedoc will help decision engineers and decision coaches explain the decision analysis(DA) process to their teams or clients.
The DA process combines decision theory, systems analysis, and applied probability in a normative way. The DA process was originally developed by Professor Ron Howard at Stanford University. This process has been used by professional decision engineers for the last half century. It is used by corporations around the world, the military, and at all levels of government.
We compare the life cycle costs of the Chevrolet Volt and the Toyota Prius to explain the phases of the process. The simple comparison illustrates how popular tools are used by practicing professional decision engineers.
The decision analysis process proceeds from a deterministic modelling phase to a probabilistic phase. In the deterministic phase a spreadsheet model is used to capture key physical and economic relationships and to prioritize issues. In the probabilistic phase the top uncertainties are treated using probabilities.
Case study highlights include the following:
- Framing the problem,
- Gathering the data at hand and building a model,
- Using good financial practices to deal with cash flows (Net Present Value),
- Doing sensitivity analysis to learn what is important.
- Identifying the key uncertainties and expressing them as probabilities,
- Generating probability distributions on the NPV, and
- Calculating value of information.
It’s all there and easy to follow.