Making Decisions Strategically
Dr. Jason R. W. Merrick
Department of
Statistical Sciences
& Operations Research
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Strategic Decisions
 Decision: An irrevocable allocation of resources
 R1-1
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What is the one essential element of a decision?
What are the two usual additional elements?
 Which element is the most fundamental?
 Strategic Decision
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Important
Long range
Conflicting objectives
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Strategic Approach
 R1-2
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Describe the steps presented in this chapter for a strategic
decision making process
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Specify objectives and scales of measurement
Develop alternatives to achieve the objectives
Determine how well each alternative achieves the objectives
Consider tradeoffs between objectives
Select alternative that best achieves objectives, taking into
account the uncertainties
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Quantitative Approach
 R1-3
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Give advantages and disadvantages of a
quantitative approach to decision making.
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Value Focused Thinking
 Decide what you want – Values
 Decide how to get it – Alternatives
 Decision aren’t problems, they are
opportunities
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Create better alternatives
 Once you get good at making decisions, go
looking for them!!
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Uses of Value Focused Thinking
Uncovering
Hidden
Objectives
Evaluating
Alternatives
Creating
Alternatives
Identifying
Decision
Opportunities
Guiding
Strategic
Thinking
Thinking
About
Values
InterConnecting
Decisions
Improving
Communication
Facilitating
Involvement
Guiding
Information
Collection
Keeney, Ralph L., Value Focused Thinking: A Path To Creative Decisionmaking,
Harvard University Press, Cambridge, MA, 1992, pp. 3-28.
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Applications of Decision Analysis
 Private
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Automotive
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General Motors
Ford
Chevron
Phillips Petroleum
Eli Lilly
R&D Portfolios
etc.
DoD
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Air Force
Army
Navy
DOE
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Pharmaceutical
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Oil & Gas
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 Public
Nuclear Waste
Hazardous Chemicals
Public Utilities
NASA
etc.
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Project
 Analyze a business or personal decision with
multiple objectives and significant
uncertainties
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> 3 alternatives
> 3 evaluation considerations
Significant uncertainty about > 1 attribute
> 2 outside expert data sources
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Business Decisions
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Process Improvement
or Re-engineering
Facility Siting
New Ventures
New Products or
Services
Acquisitions
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Divestments
Capital Expenditures
Lease-Buy
Personnel Planning
Technology Choice
Research/Development
Planning
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Personal Decisions
 Career Choice
 Change Career
 Buy a Car
 Buy a House
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Prepare for Wednesday
 Presentation outlining
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Summary of decision to be analyzed
Preliminary list of alternatives
Preliminary list of evaluation considerations
Proposed expert data sources
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Course Objectives
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Understand and apply the multi-objective
decision analysis approach and Value-Focused
Thinking
Understand assumptions of multi-objective
value and utility models
Identify and formulate a problem as a multiobjective model
Use decision analysis and VFT techniques to
generate alternatives
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Course Objectives
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Implement multi-objective models in
spreadsheets
Implement multi-objective models in specialized
software
Perform sensitivity analyses on critical
parameters
Be able to clearly and concisely present the
decision analysis results to senior decisionmakers
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