Do choices add value?

Every day we as leaders or managers have a multitude of decisions to make. Some we mull over, some need more information, some require consultation with others, and some we make on the spot. How do we make those decisions? What drives us to think about it or to take the dive and go for it?

I have a mostly logical way of deciding how to tackle each specific decision process. Although, sometimes I trust my gut feeling.

For this post I want to look at decisions that have multiple options, not simply yes / no decisions. For example, how do you evaluate which market segments you will strategically target in the next 3 years. The options could be

  • all of them
  • geographical specific (continent, region, country): eg
    • US only
    • Western Europe
    • Latin America
  • language dependent (individual or country)
    • English
    • Spanish
  • median income (individual or regional)
  • specific target groups, eg:
    • technology savvy people
    • energy conscious people / countries
    • independent travellers
  • specific business types, eg:
    • government agencies
    • small businesses

The list goes on and on and is a simple example of complex choices. I actually made it already easier to see one thing that helps towards the decision making process:

Categorisation

By clustering options together we do 2 things. First, we make it clearer what this cluster means. The different choices open our eyes and make us understand how you can cut and slice the market. Secondly, we can match categories to our products and services. Not all categories will make sense to our operation. And (and this is an important and) we can match categories to what our customers expect from us and understand about our products and services. The categories we choose must match how our customers see the world for this product or service. If they wouldn’t understand why this and not that, we chose the wrong categories for identifying the target market.

Reduction

Sometimes categories do not apply for the decision making process. If we have half a dozen options we must use a different approach to come to a conclusion. Most effectively is to remove the least likely options. That is assuming that not a single option stands out as the logical choice. So I use a simple 3 step process:

  1. identify a single clear winner
  2. remove the least likely option (could be 2 options)
  3. if more than 2 options remain go back to 1.

Tangibility

The reduction process may not work in all cases. We could find it hard to distinguish between options. Let’s say I’m looking to move to a new city. I have done some initial research about the local neighbourhoods and am pretty clear about my needs (eg., primary school, sports club, public transport). There are still 5 areas that fit. Nothing stands out on the positive or negative side. In these cases we need to add a real feel or some tangible items to it. Let’s say I could talk to some people in the neighbourhood, visit the school, and watch the sports team. When I like an area I could rent a house and train with the team. The same process is employed by market researchers. They explore a specific market and create pretty charts. Those charts are good but they become real when the comments people made are reported on top of them.

Summary

How many choices do you have? More choices create a more complex decision making process. It takes longer to separate the good from the not so good options. It is harder to identify the best choice due to obscurity. Hence it is important to cut away the options. If you have more than 10 options use categories and cluster your choices. Then run through a reduction process and add tangible effects to your top choices. This will help to identify a winner or set of winners.

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