Types of Decision Problem and Applications of Decision Support and Analysis

Types of Decision Problem and Applications of Decision Support and Analysis

Simon [email protected]

2

Types of Decisions

3

Players

Decision Makers

Experts

Science

Forecasts of what might happen

Stakeholders

Values

Accountabilitiesand responsibilities

Analysts

Processexpertise

4

Strategy Pyramid (1)

• Strategic

• Tactical

• Operational

5

Strategy Pyramid (2)

• Strategic

• Tactical

• Operational

• Instinctive(recognition primed)

unstructured, long time spans of discretion

very structured, short time spans of discretion

6

Planned, Orderly Activities

Strategic thinking ….. Tactical thinking …. Implementation

Operational, structured decision making

Strategic, unstructured decision making

7

Responsive Activities & Emergent Strategy

Immediate response …… regain of control

Instinctive, (rehearsed?) decision making

Strategic, unstructured decision making

8

The interplay between rationalistic and emergent strategy

Rationalistic decision making

brings coherence to parts of

the strategy

So decision analysis is usually made against background of some inconsistency and in recognition that this will continue

Savage’s ‘small world’

9

Organisational Levels

• Strategic Corporate

Strategic

• Tactical General

• Operational Operational

• Instinctive Hands-on Work

(recognition primed)

10

Levels of Decision SupportLevel 0: Acquisition, checking and presentation of

data, directly or with minimal analysis, to DMs Level 1: Analysis and forecasting of the current and

future environment. Level 2: Simulation and analysis of the consequences

of potential strategies; determination of their feasibility and quantification of their benefits and disadvantages.

Level 3: Evaluation and ranking of alternative strategies in the face of uncertainty by balancing their respective benefits and disadvantages.

11

Business IntelligenceData Mining

DSS by levels and domains

Domain of Activity

Level of Support

Hands-on work

Operational General Corporate Strategic

Level 3

Level 2

Level 1

Level 0 EIS

AI/ExpertSystems

ORmodels

Forecasting

DecisionAnalysis

Softmodelling

12

Cynefin: a Welsh habitat

Cause and effect can be determined with

sufficient data

K nowable The realm of

Scientific Inquiry

Complex The realm of Social Systems

Cause and effect may be determined after the event

Chaotic Cause and effect not discernable

K nown The realm of Scientific

Knowledge Cause and effect understood

and predicable

D. Snowden (2002). "Complex acts of knowing - paradox and descriptive self-awareness." Journal of Knowledge Management 6 pp. 100-11.

13

Cynefin and decision making


Scientific Inquiry


Chaotic


Knowledge

categorise and

respond

Senseand

respond

probe,sense,

respond

actsense

respond

14

Cynefin and solutions


Scientific Inquiry


Chaotic


Knowledge

Databasesexpert systems, neural

nets, deterministic optimisation

data assimilation and fitting

then optimisation

Judgementcollaboration

knowledge mgmt

Explore and seek insight

Eval

uatio

n an

d

valid

atio

n

data

driv

en

Eval

uatio

n an

d

valid

atio

n

judg

emen

t bas

ed

15

Cynefin and statistics


Scientific Inquiry


Chaotic


Knowledge

Repea

tabl

e

even

ts

Uniqueevents

Events?

Estim

atio

n an

d

confi

rmat

ory

stat

istics

expl

orat

ory

stat

istics

16

Cynefin and investigation


Scientific Inquiry


Chaotic


Knowledge

Expe

rimen

ts

and

trial

sCase

stud

ies

and

surv

eys

17

Do preferences exist?

• DeFinetti famously said – “Probabilities do not exist”

• Do preferences exist?

• or better

– When do preferences come into existence?

18

Cynefin and Values


Scientific Inquiry


Chaotic


Knowledge

Repea

tabl

e

even

ts

Uniqueevents

Events?

Value

s/pr

efer

ence

s

unde

rsto

od &

rehe

arse

dValue

s/pr

efer

ence

s

not f

ully u

nder

stoo

d

Applications:Simpler than you think!

Simon French

20

Decision support means• Helping the decision makers and the other players

understand Working at their cognitive level

• Need simple models usually to convey ideas• Analysts may need complex models • but more likely they need diagnostics for simple models

• Paradoxically decision support and analysis drives to simplicity

• Requisite modelling• Start simple and build in necessary complexity until

there is sufficient understanding to ‘make the decision’

21

Chernobyl

• The world’s worst nuclear accident

• Complex event at a complex time in Soviet Union’s history

• Many people affected

• Vast swathes of land contaminated

22

Hierarchy used in 5th Conference

Normal Living

Effects

Resources

Radiation

Stress

PublicAcceptability

Affected Region Rest ofUSSR

FatalCancers

Hereditary

Related

Related

Health

23

Decisions based on Intervention Levels

Measure of Dose

Above this level, relocation would be advised and offered

Below this level, there would be little need to do anything except reassure the population

In between these levels, many countermeasures would be implemented to clean up the area and protect the population

24

Details of the Countermeasure Strategies

25

Framing Issues

Imagine that you are a public health official and that an influenza epidemic is expected. Without any action it is expected to lead to 600 deaths. However, there are two vaccination programmes that you may implement:

• Programme A would use an established vaccine which would save 200 of the population.

• Programme B would use a new vaccine which might be effective. There is a 1/3rd chance of saving 600 and 2/3rds chance of saving none.

26

Framing Issues

Imagine that you are a public health official and that an influenza epidemic is expected. Without any action it is expected to lead to 600 deaths. However, there are two vaccination programmes that you may implement:

• Programme A would use an established vaccine which would lead to 400 of the population dying.

• Programme B would use a new vaccine which might be effective. There is a 1/3rd chance of no deaths and 2/3rds chance of 600 deaths.

27

Pareto Plots

28

Sensitivity analysis

29

Chernobyl

• The ‘world’ was a complex as it comes

• The analysis and presentation was really rather simple– And hugely effective.

30

Fast and Frugal aids

• Simple heuristics have been shown to help substantially reduce psychological biases

• For instance, Gigerenzer has shown that ‘frequency’ presentations can reduce the issue of ‘forgotten base rates’

31

Probabilities as frequencies

32

Other fast and frugal ideas

• Consider the opposite– Challenge your thinking– Calibrate yourself against past decisions

• Over-define some parts of the model– Beware of framing effects

33

Other fast and frugal ideas• Consider the opposite

– Challenge your thinking– Calibrate yourself against past decisions

• Over-define some parts of the model– Beware of framing effects

• Positive emotions encourage divergent thinking– Brainstorm and formulate issues when you are

happy!

34

Applications of decision support and analysis is usually about bringing together various simple ideas to help decision makers evolve their understanding, preferences and beliefs.

35

The process of decision analysis

Formulate

Evaluate

Review

Requisite?

Decide

Yes

No

36

Business IntelligenceData Mining

DSS by levels and domains

Domain of Activity

Level of Support

Hands-on work

Operational General Corporate Strategic

Level 3

Level 2

Level 1

Level 0 EIS

AI/ExpertSystems

ORmodels

Forecasting

DecisionAnalysis

Softmodelling

37

Linear programming models• Huge and complex

• But actually rather simple with respect to the world

• Algorithms are complex (though idea is easy)

• But models are simple to explain in principle

38

Business Intelligence and Analytics• Is data mining based on simple or

complex models

• Algorithms are complex

• But representation to managers is usually simple– Flags and warnings saying ‘check this!’

Documents

Types of Decision Problem and Applications of Decision Support and Analysis