Decision Making for KM and BI

A June 10th article "Knowledge Management and Business Intelligence" tries to tease apart KM and BI. In the piece the author, Richard Herschel, refers to Gartner's definitions of the two terms:

• BI= a set of all technologies that gather and analyze data to improve decision making
• KM = a systematic process of finding, selecting, organizing, distilling and presenting information in a way that improves an employee's comprehension in a specific area of interest Specific knowledge management activities help focus the organization on acquiring, storing and utilizing knowledge for such things as problem solving, dynamic learning, strategic planning and decision making.

What has always amazed me about these and other fields such as Analysis of Alternatives (AOA), Data Mining and even most Decision Support Systems (DSS) is that they are all about developing and managing information to support and improve decision making, yet none of them actually support the decision making process.

The decision making process requires 1) framing the problem, 2) evaluating the alternatives, 3)fusing the evaluation and 4) deciding what to do next. All of the methods listed above help gather and organize information that is vital to good decisions, but all stop short. Decision making requires more than the availability of database information. In fact, as mentioned in the article "up to 80% of business information is not quantitative or structured in a way that can be captured in a relational database". This non-quantitative information is the basis on which many business and technical decisions are made.

Two cases support this. First, a manufacturer of rocket engines uses our Accord software because many of their key early decisions are qualitative and Accord can manage fusing the qualitative and quantitative evaluations. Second, a Fortune 100 company received 20 proposals in response to an RFP for a piece of electronic equipment. In the RFP were over 60 quantitative specifications for size, functionality, reliability, etc. When they reviewed the proposals, they sorted them into two piles, those that met the specs and those that didn't. Then they began to use the unstated, usually qualitative measures to differentiate the acceptable proposals so they could decide how to award the contract.

The point is, most best practices focus on generating and managing information so decisions can be made. They don't spend enough effort on framing, fusing and managing what to do next. Framing and evaluation fusion are the social interactions occur that develop buy-in, accountability and robust decisions. It is these areas that are the hard part, that are not covered in school and are not well supported.

Gut decisions don’t work well in many situations

There has been a recent spate of best-selling books that support the notion that you should go with your gut when making a decision (e.g. Blink: The Power of Thinking Without Thinking by Malcolm Gladwell, Gut Feelings by Gerd Gigerenzer and Gary Klein's The Power of Intuition: How to Use Your Gut Feelings to Make Better Decisions at Work).

The authors of these books state that for many decisions there is no need to formally identify the issue, develop multiple alternatives, and itemize criteria — just go with your intuition. Of course, they are right — for some decisions. We make decisions in two very different ways. Sometimes we reach conclusions unconsciously — our minds quickly and silently sorting through the available information and drawing an immediate judgment. This may be in a blink — so quickly and so far below our level of awareness that we may have no consciousness of where our conclusions came from. If we are trying to decide what to do in an emergency, how to walk through a doorway, or many other simple or no-time-to-think situations then this is the right approach.

One study of decision-making methods (see Payne, Bettman, and Johnson, The Adaptive Decision Maker) found that

1. People use a variety of cognitive strategies, dependent on task and context factors.
2. Given that people have limited cognitive abilities, strategy selection is a compromise between accuracy and the desire to minimize cognitive effort.
3. People are opportunistic; they change their strategies on the fly.

The study indicated that intuition follows a strategy in which we compare the first alternative solution for the situation to the most important criterion. If our evaluation shows that the alternative satisfies that criterion, we accept it and move on. If it doesn’t, we generate another alternative and try again. If there is more than one alternative that satisfies the most important criteria, we move to the next most important criterion to try to zero in on the one to choose. Of course, this strategy may be modified if we are out time, there are too many alternatives, or there are others involved.

Research I did in the early 1990s showed that designers who pursued their first idea generally ended up with concepts that needed much patching to make them work, if they could be fixed at all. Another study of design engineers showed that the quality of design results linearly improved with the time and effort spent on developing alternatives and criteria (this work is in an obscure German dissertation but the results can be read in a paper I wrote "The Ideal Engineering Decision Support System."