Designing a Decision Architecture
Does a year at work feel like one long run-on sentence…?
Leadership navigates the evolution of information, and punctuates it with decisions.
Leaders make a lot of decisions, each week, every month, every quarter. And most of the time, they’re good at it too! But collectively, these leaders wish for something better - something that can help them improve their effectiveness when making difficult choices, especially when facing uncertainty.
This challenge of choosing is most visible when leaders set strategy. And it affects leaders up and down the organization, and across different domains:
- Enterprise strategy - satisfying stakeholders, ranging from employees to shareholders
- Business strategy - winning in markets, across the business lifecycle
- Product strategy - delighting users and getting customers, across the product lifecycle
- Program strategy - delivering outcomes, at cost, on a date
- Portfolio strategy - balancing investments, to rationalize, consolidate, and improve
There are many great resources on strategy. While they do a great job of providing sets of questions to pursue, and guidance on the outputs to produce, they tend to leave some practical details, like aligning stakeholders and minimizing emotion and politics, as an “exercise for the reader”. Ugh.
Why is strategic decision making so difficult?
The environments we work in are complex and uncertain. We study the markets in which we compete, the trends in technology and consumer behavior, and also what’s happening inside our own organizations. The truth is that what we know pales in comparison to what we don’t know. Yet, it’s uncomfortable to even admit that sometimes, right?
Strategy-building asks us to anticipate the future (which is unknowable), and to forecast with the data we have (which is often incomplete and out-of-date). We are asked for data-driven decisions, but the data puzzle is usually missing a lot of pieces!
So it’s hard. But it is essential. Teams need direction and teams need resources. We can’t be afraid of the hard choices - a good strategy is built upon them! We just need to get better at working with uncertainty.
“The way to improve decisions in an organization is to improve the decision making practices in the organization.” - Olivier Sibony
What is needed?
Good leaders: (1) make decisions, and (2) decide how to decide, within their organization. So good leaders hold themselves accountable to:
“Alter the environment in which decisions are made so that people are more likely to make choices that lead to good outcomes.” - John Beshears and Francesca Gino (HBR, May 2015)
When “deciding how to decide”, a leader forges a decision architecture: a set of practices that support decision makers as they encounter difficult choices.
And they do more than just steering the choice itself. Dr. David Ullman, author of “Making Robust Decisions”, explains that strong decision architectures improve the quality “of what is done during the decision-making process and the buy-in for the results, since both directly affect the resources used to make the decision and all downstream efforts.”
Decision architectures also incorporate risk management into decision-making. The navigation of uncertainty starts with acknowledging both what is known, and what is unknown. Making uncertainty more visible helps us make decision risks more transparent.
Good decision architectures ask us to distinguish between situations with high and low uncertainty. At one end, they steer low-uncertainty situations into decision making practices governed by decision models and rules. On the other end, they steer high-uncertainty situations toward human intervention with an emphasis on collaborative techniques.
In these high-uncertainty situations, good decision architectures can:
- Bring stakeholders in as part of the decision-making process (since a decision is only as good as the buy-in)
- Provide a systematic approach that makes decisions more rational (and less emotional or political)
- Help manage information that is uncertain, incomplete, evolving, or conflicting (so that decision-makers can arrive at the most robust decision possible)
- Make decision risks transparent to stakeholders (as they set out to implement the resulting actions)
As leaders shape a decision architecture, they examine how decisions get made from three different perspectives, or “lenses”:
- Organizational alignment lens - considering the impact of decision authority, leadership styles, incentives
- Decision intelligence lens - considering the impact of data analytics and corporate memory
- Behavioral economics lens - considering the impact of cognitive biases and heuristics in decision making
Bringing a Decision Architecture to Strategic Decision Making
The Uncertainty Project is exploring how good decision architectures help leaders navigate uncertainty while building, adapting, refining, aligning, and connecting strategy across the enterprise. This gives us an opportunity to experiment with applications of the concepts and findings (shared in past newsletters) in a practical setting.
Much of the material (terms and concepts) will likely be familiar, since strategic planning is a well-covered topic. We aim to augment this material with new terms and concepts that sharpen a leader’s ability to navigate uncertainty throughout the process.
Let’s start with a simplified model for strategic planning - one that allows us to discuss uncertainty and decision making across four layers of refinement, at different altitudes.
These four layers can describe the integrated decision-making and refinement of strategy that connects to execution:
- Explore Futures - explore different ways the future could play out, as scenarios
- Explore Directions - explore different levers to pull, to achieve goals for a given scenario
- Explore Opportunities - explore initiatives (changes) to pursue, that refine the levers
- Explore Work - explore what actions to take, in teams’ plans, to reduce uncertainty and risk
Each layer feeds back into the previous, from top (more abstract choices) to bottom (more specific choices). What they have in common is that each layer must navigate some uncertainty via exploration, collaboration, discussion, and choice.
Each layer seeks to explore a range of options, then converge upon a choice:
- Explore Futures - which scenario emerges as the “official future”, to form the vision?
- Explore Directions - which levers emerge with the strongest case to achieve the goals?
- Explore Opportunities - which change ideas emerge as the most promising to fund?
- Explore Work - which work items emerge in the teams’ plans, to reduce risk?
What is interesting here is that each layer gives us a chance to explore various elements of good decision architecture. We can listen to the experts, collect good practices, and experiment with guidance like this (Credit to Olivier Sibony):
Four questions that separate good decisions from the bad ones…
- Did you have an explicit discussion about the risks and uncertainties of the proposal?
- In the discussion, were points of view that contradicted those of senior leaders aired?
- Did you deliberately seek out information that would contradict the thesis?
- Were the criteria for approval predefined and transparent for all those taking part?
There’s much to cover! Hope you will join us.
Let’s start building decision architectures…
If you are a leader that sees the value in building a strong decision architecture for your organization, then join the conversation in The Uncertainty Project around the new Playbooks (for navigating uncertainty in strategic decision making):
- Product Strategy Playbook
- Program Strategy Playbook
- Business Strategy Playbook
- Strategic Portfolio Playbook