Technology has found its way into every part of our lives. It guides us through the streets, connects us with our loved ones, and answers our every question.
However, technology develops at an exponential rate. Only a decade ago, computers solved problems based on strict rules. Today, various devices are able to think and come up with smart solutions that may even elude us, humans.
Technology has started playing an integral role in activities that used to be strictly in the human domain—such as decision-making.
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What Is Involved in Decision Making
Decision-making is part and parcel of everyday life, be it at the office or in the home. In business, companies have to make decisions to reach their objectives. A wrong one can make all the difference between a thriving business and a company filing for bankruptcy.
So, How Are Decisions Made?
There are several decision-making models, but let’s look at the one presented by UMass Dartmouth.
Recognizing It’s Time for a Decision
The first step is to realize a decision has to be made. This means understanding that the business is at a crossroads and that the leaders need to decide which path to take.
This stage also involves appreciating the nature of the choice before us, as well as the stakes involved.
Additionally, it’s vital to be clear on the time frame within which a decision has to be made. Some decisions can’t be delayed, while others can take more time.
Gathering Initial Data
Once they realize they have to make a decision, decision-makers need to begin gathering relevant information.
This includes figuring out the kind of information required, the best sources for said information, and the best methods for collecting it.
There are two main sources of data: internal and external. Internal information is generated by the company itself. On the other hand, external information requires research and can only be found in books, online resources, and other people outside the company.
Identifying the Options
With the relevant information at hand, companies now need to identify the different alternatives ahead of them. In other words, they have to identify the different paths their business can take.
The information collected in the earlier stages will enable the decision-makers to determine what their options are in a given situation.
Analysis
After identifying all the different options, it’s time to thoroughly analyze their advantages and disadvantages.
Decision-makers need to figure out which alternative best satisfies the goals stated at the outset. This is where the evidence for each alternative is weighed and considered.
Coming to a Decision
Now, decision-makers have to make an actual choice. They have to select the alternative with the highest chance of succeeding while still being in line with the company’s values and culture.
Interestingly, if a single option ultimately doesn’t suit the company’s needs, the best choice may be to carry out a combination of the alternatives set out earlier.
Implementation
After decision-makers settle on a particular choice or combination of choices, it is time for action. In other words, the decision-makers need to implement the choice they’ve settled on.
This means making sure all the prerequisites for the successful implementation of any necessary changes are in place, as well as the modifications themselves.
Assessment
Finally, it is important to review the results of the entire process. Decision-makers have to see whether the objectives stated at the outset have been attained or not.
If there were any shortcomings, at this stage, it’s important to figure out where they came from and how to remedy them in the future.
As you can see, decision-making is a multi-faceted process that should not be left to chance and intuition.
Potential Pitfalls of the Decision-Making Process
As straightforward as the above process may seem, it presents many challenges and leaves a lot of room for human error.
Here are some of the potential problems.
Too Much or Too Little Information
Having too much information can be distracting, especially if it isn’t collected properly. At the end of the day, decision-makers only need information that is directly related to the problem and impacts the outcome.
Moreover, even if all of the collected information pertains to the problem at hand, it can still be overwhelming.
At the other end of the spectrum, there are times when decision-makers simply lack time to collect all the relevant data. Having too little information impedes a clear analysis of the situation, forcing decision-makers to rely on their gut more than they should.
Overconfidence
People tend to overestimate their knowledge and capabilities. In psychology, this cognitive bias is known as the Dunning-Kruger effect. Even the most experienced decision-makers are not immune to it.
Being too confident in one’s abilities and choices can make decision-makers overlook the potential downsides of a particular course of action, which can result in failure down the line.
Lack of Objectivity
During the decision-making process, there are usually multiple individuals involved. As important as it is to have input from different people, it can also be a source of trouble.
For one thing, it can lead to groupthink. For another, people can stop trying to find an objective answer and start gravitating towards bad opinions simply because they like the people who expressed them.
Conversely, group dynamics can push people towards irrationally holding on to their own opinions, regardless of their objective validity.
Therefore, with so many hidden biases we may not be aware of, remaining objective is more complicated than we might like.
Mental Shortcuts
Even without the influence of others, we tend to rely too much on different mental shortcuts that make us more prone to error in certain situations.
For instance, when trying to analyze a situation, people are liable to see correlations that aren’t there.
If two events happened at the same time, we might think that they are correlated somehow, although the fact that they took place simultaneously was pure chance. This is known as illusory correlation.
Other forms of false inferences include overgeneralizing, such as saying that all waitresses are rude just because you had a bad experience with one last time you dined out.
How Technology Facilitates the Decision-Making Process
The good news is that technology can help with almost every step of the decision-making process, enabling us to overcome the problems inherent to it.
Let’s look at some ways technology can prove useful.
Helps Manage the Gathered Data
Contemporary technological solutions draw data from various sources both inside and outside the business.
For example, the software can pull information from customer records, financial records, and other internally produced documents while also analyzing competitor profiles and market trends.
A robust data management system that centralizes and safeguards important information is indispensable in this process.
If a business opts for building custom software rather than relying on generic solutions, it will be able to collect information and spot weaknesses in its operations more effectively.
Having a centralized database can improve the decision-making processes in all departments within a company.
For instance, while supply chain managers make decisions on stock levels and production based on live sales data, the marketing department will use the data to create more precise buyer personas.
However, data facilitates the decision-making process in more ways than merely helping with data collection.
Additional Uses
Much of the data that a company collects will be noisy in ways that will hinder the extraction of actionable insights.
Cleaning it to get to the useful bits is often a time-consuming endeavor, but fortunately, there are AI solutions that can considerably expedite the process.
Technology also offers visualization tools that present the information in a more intuitive way.
This helps overcome one of the main problems of having too much information: distraction. Visualization tools help keep decision-makers focused on the problem at hand and enable them to prioritize.
There are also time and activity-tracking solutions that maximize employee efficiency.
On the one hand, they let the company know where the employees’ time is being expended, providing insight into which projects are the biggest profit drivers and which offer a low ROI.
On the other hand, these tools help a company spot underperformers and analyze the reasons for their unsatisfactory results.
Most importantly, technology helps managers steer away from making decisions based on their gut feelings, pushing them towards using exact data and quantifiable information.
Enables Decision-Makers to Identify Alternatives
Technology can help decision-makers find different solutions or routes to take based on previously collected data.
To begin with, technology facilitates collaboration, which is integral to identifying as many viable alternatives as possible. Various communication solutions make it possible for stakeholders to convene and discuss different ideas regardless of the physical distance between them.
Interactive dashboards can also be very effective since they bring together information from different departments and business areas. Having a holistic view of the situation makes it easier to come up with creative solutions.
Eliminates Bias When Analyzing and Assessing Different Possibilities
With the alternatives laid out, the evidence for and against each one needs to be considered. We’ve already mentioned how weighing options can be affected by bias and lack of objectivity.
Analysis can also be impaired if the decision-makers are tired or fatigued for any reason.
Fortunately, technology provides us with several solutions to these problems.
For example, AI and machine-learning technology can draw from past experiences to help decision-makers estimate the likely success of each choice. Predictive analytics informs them how each alternative would likely play out.
In fact, machines are better suited to assess choices than we are in several respects.
To begin with, they are always impartial. Moreover, they never get tired, so you never have to worry about decision fatigue.
Allows for a More Efficient Review of Outcomes
After a decision has been taken, we need to measure the result and see how it stacks up to what we originally planned.
However, this process requires that we gather up even more data, analyze it, and draw conclusions from it. All of those are tasks today’s technology is best suited for.
Just like with assessing options, computers process gargantuan amounts of data every second, which is something any human would find overwhelming.
Technological solutions provide an overview of all the relevant data, enabling the stakeholders to focus on more substantial aspects of decision-making.
How to Implement Technologies in Modern Organizations
Trying to modernize organizations is a difficult task; one often met with plenty of resistance. However, to make the transition smooth, there are a few principles to keep in mind.
First of all, throughout the transformation, the customer must always remain the focal point of the organization’s interest.
Secondly, businesses need to avoid overcomplicating things.
Moreover, the employees have to be considered, and the effect of technology on the company’s culture must be accounted for.
The goal should be to minimize resulting perturbations as much as possible.
In any case, technological solutions help avoid the most common problems at every stage of the decision-making process so you can achieve your business goals faster and more successfully.
They eliminate psychological biases and process relevant data quickly and more efficiently.
That way, decision-makers can be sure they are basing their choices on hard data and objective reasoning rather than intuition, enhancing their chance of success.
