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Decision-Making Based On Data Analytics

Decision-making based on Data Analytics is a “new” form of management that allows us to respond more effectively to these threats and opportunities, increasing management's confidence and significantly improving the value creation capacity of the company.

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72 views

Decision-Making Based On Data Analytics

Decision-making based on Data Analytics is a “new” form of management that allows us to respond more effectively to these threats and opportunities, increasing management's confidence and significantly improving the value creation capacity of the company.

Uploaded by

JMFM
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Decision-making based on Data

Analytics.
Jesús Fajardo

Almost all decisions are made in the face of uncertainty, since on very few
occasions do we have all the information to decide without any doubt. We all
know that uncertainty is an intrinsic element in the life of any organization, it
represents a source of threats and opportunities that can destroy or create value.
However, determining an acceptable degree of uncertainty in order to maximize
value creation is one of the main challenges that managers of all time have had
to face.
Decision-making based on Data Analytics is a “new” form of management that
allows us to respond more effectively to these threats and opportunities,
increasing management's confidence and significantly improving the value
creation capacity of the company.
To understand how this “analytical” form of management works, it is important to
know two simple definitions. The first is the concept of model, which can be of
various types: business models, process models, predictive models..., but
ultimately all models have the same purpose, they are used to better understand
problems and make better decisions.
Another important definition to consider is Decision Analysis (DA). It is a
systematic, quantitative and graphical approach, generally used to evaluate
multiple and sometimes complex options. One way to deal with certain difficult
decisions is through a combination of these two previous definitions, the widely
used Decision Models, which incorporate aspects of psychology, management
techniques, statistics, and economics to define the best alternatives in a
decision.
Keep in mind that models are not representations of reality. British statistician
George E. P. Box said " All models are wrong but some are useful". This aphorism
is a great truth, since the best models are vague approximations of reality, but
they are very useful for understanding problems and analysing alternatives.
On the other hand, for the success of any Decision Model there must be two main
actors, which are not necessarily individuals, but they could be work teams. One
is the decision maker, normally represented by the manager or director of the
company, and the other is the data analyst, who is in charge of building the model
and supporting the manager throughout the decision process. Therefore, the data
analyst must be able to understand and combine the process or business model
with the appropriate quantitative methods that allow him or her to represent, as
much as possible, the nature of the decision. And as usual in business, this
should be done in a relatively short period of time.
Due to the differences between the profiles of decision makers and data analysts,
misunderstandings are very frequent when defining the models that best suit the
decision.
These drawbacks can be avoided if the manager works closely with analytics
professionals to develop a simple model that allows a preliminary understanding
of the main factors involved in the decision. After the manager has become
familiar with this model, additional details and greater sophistication can be
progressively added until the desired level of satisfaction is achieved.
Some of the most frequent factors that make it necessary to incorporate more
details into a model, is the fact of having multi-objective decisions. When there
are two or more objectives, many times they conflict with each other, that is, a
strategy can be optimal with respect to one objective, but be the worst option
with respect to the others. Such decision problems have to be evaluated through
more complex analytics models, such as " Multi-objective optimization"
Regardless of the complexity of the decision, a progressive construction of
models, that involves the main actors, is the most important factor in the
development of an agile and flexible process that leads to successful decisions.
Decision analysis used to be used exclusively to evaluate difficult decisions
involving multiple variables or having many possible outcomes or objectives.
Fortunately, new technologies now allow a large amount of information to be
available at any time, as well as the combination of multiple analytical
approaches, which facilitates the use of these techniques for any type of
decision.
Data analysis as an integral part of organizational processes and decision-
making is already a reality even at the level of new regulations. This is yet another
example of why decision-making based on data analytics represents the most
effective form of management to improve business control, increase productivity
and profits, and project more successful strategies for the future.

#dataliteracy, #analytics, #datamining, #riskmanagement,


#decisionanalysis, #strategy, #business
Decision-making based on Data Analytics

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