Stakeholders use decision analysis to analyze a problem and make decisions in uncertain conditions.
The business analyst uses decision analysis to analyze different results in uncertain or complex situations.
Decisions are often difficult to analyze in the following situations:
- The problem is poorly described.
- The stakeholders don’t understand why the initial action was taken.
- The environmental factors influencing the decision are not fully understood.
- The outcomes of different scenarios are not understood by the stakeholders and so those results cannot be compared against one another.
There are numerous decision analysis approaches and the chosen approach depends on the degree of uncertainty, risk, quality of information, and evaluation criteria.
To successfully use decision analysis, the business analyst needs to understand the following:
- the values, goals, and objectives that are pertinent to the problem.
- the type of decision that has to be made.
- any doubt that could influence the decision.
- the results of each prospective decision.
Decision analysis approaches use the following activities:
- Define problem statement: the problem is clearly described in this step.
- Define alternatives: potential courses of action are identified.
- Evaluate alternatives: the different approaches are analyzed and
alternatives and evaluation criteria are chosen. - Choose alternative to implement: based on the result of the decision analysis the best solution is chosen.
- Implement choice: the chosen solution is implemented.
Some examples of decision analysis tools and techniques include:
- force field analysis.
- decision tables.
- decision trees.
- comparison analysis.
- analytical hierarchy process (AHP).
- totally-partially-not (TPN).
- multi-criteria decision analysis (MCDA).
- computer-based simulations and algorithms.
There are some elements of decision analysis which are:
1. Components of decision analysis:
- Problem statement: this is a description of the problem.
- Decision maker: this is the person or people in charge of making the final decision.
- Alternative: this is a potential solution.
- Decision criteria: this is evaluation criteria used to make the decision.
2. Decision matrices: A simple decision matrix checks each option against the evaluation criterion and ranks them based on their scores.
3. Decision trees: A decision tree is used to decide on the preferred outcome when there may be uncertainty.
4. Trade-offs: when there are numerous objectives, then trade offs might need to be made.
In order to make effective trade-offs the following methods can be used:
• Elimination of dominated alternatives: this involves removing inferior solutions from the list.
• Ranking objectives on a similar scale: this method, involves assigning a rating of 100 to the best alternative and 0 to the worst.
Decision analysis has both its strengths and limitations which include:
Strengths
• Business analysts use it in deciding on alternate options, especially in complex or uncertain situations.
• It helps stakeholders to assess options based on criteria and reduces bias.
• It requires the stakeholders to assess the significance they place on different outcomes in order to help avoid false beliefs.
• It allows business analysts to create relevant criteria for both financial and non-financial outcome evaluation.
Limitations
• All the relevant information might not be available to enable the stakeholders make an informed decision.
• Most decisions are instantaneous and decision analysis takes time to prepare.
• The decision maker should understand the decision analysis limitations, and due to those limitations they may not be confident in the results.
• It could lead to analysis paralysis, which is when overanalysis of a situation could lead to paralysis of the decision-making which would prevent an action being taken.
• Some of decision analysis models require expert mathematical and statistical knowledge.