research paper

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Problem Solving Framework 7

Context & Background

Problem Analysis & Description

Solution Development

Evaluation & Decision- Making

Communication & Implementation

Problem Solving Framework 8

Context & Background

Problem Analysis & Description

Solution Development

Evaluation & Decision- Making

Communication & Implementation

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Understanding Decision Making 9

Three Steps To Decide 10

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The Impact Of Thinking Style 11

Two Different Styles

 Rational thinking

 Using knowledge, skills and experience

 Applying logic to reach conclusions

 Analyzing issues to understand the whole picture

 Intuitive thinking

 Conclusions by hunch

 Being led by emotion and sensitivity

 Using imagination to create new ideas

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Rational or Intuitive 13

Are You Right Brained Or Left? 14

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Are You Right Brained Or Left?

It Can Be Good To Trust Your Instincts 16

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It Might Be Simple

 Programmed Decisions

 Things that have occurred often enough such that you

can have rules and guidelines.

 Examples?

 Non-programmed Decisions

 Situations that are unique, poorly defined, unstructured,

have important consequences, or all of the above.

 Examples?

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Organizational

Problem

Low Possibility of failure High

Certainty Risk Uncertainty Ambiguity

Programmed Vs. Non-Programmed

Programmed Nonprogrammed

Decisions Decisions

Problem

Solution

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BA 301

Research & Analysis of Business Problems

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Problem Solving Framework 20

Context & Background

Problem Analysis & Description

Solution Development

Evaluation & Decision- Making

Communication & Implementation

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Problem Solving Framework 21

Context & Background

Problem Analysis & Description

Solution Development

Evaluation & Decision- Making

Communication & Implementation

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Smart People, Bad Decisions

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Cognitive Bias 23

 Cognition is the process of thought.

 To become acquainted with…

 Cognitive Bias is our tendency to make errors in

judgment based on cognitive factors – things we

know or understand, or think we know or

understand.

 Cognitive Bias might distort the way we perceive

reality.

Cognitive Bias 24

 Cognitive Bias

can lead to

errors in

judgment.

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What Can We Do To Avoid it? 25

 Recognize how easy it is to make simple mistakes by

using intuition alone.

 Learn to spot the most common decision-making

biases.

 Learn simple methods for combating these biases in

judgment.

Judgment Error #1

 The odds of dying in your lifetime from air travel is 1 in 11 million. The odds of dying in a traffic accident is 1 in 5,000.

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Or

Availability Bias

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Judgment Error #2

 I only paid $22,500. Wow, I made a great deal!

 You paid $80,000 less for your home than the initial price offering. Were you a great negotiator, or was this an example of anchoring bias?

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Anchoring Bias

Judgment Error #3

 Look at this series of numbers. It conforms to a rule. What is the rule for this set of numbers?

 The rule – any three ascending numbers.

 The tendency to seek and rely on information that will confirm what we already believe, and to avoid data that will contradict our pre-existing views.

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Confirmation Bias

4, 62,

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Judgment Error #4

 80% of students believed they were in the top 30% of safe drivers.

 A survey asked 829,000 high school students to rate

their own ability to “get along with others,” 60 percent

rated themselves in the top 10%, and 25% rated

themselves in the top 1%.

 In spelling – people were correct 80% of the time, but

were 100% confident of their answers.

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Overconfidence Bias

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Judgment Error #5

 What is the probability of tossing “tails”?

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50%

Judgment Error #5

 What is the probability of tossing ten in a row?

 0.5x0.5x0.5x0.5x0.5x0.5x0.5x0.5x0.5x0.5

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0.09%

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Judgment Error #5

 After 5 straight tails, what is the probability of

tossing another “tails”?

 A form of Representativeness bias, also called

“Gambler’s Fallacy”.

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50%

Probability Bias

Judgment Error #6 34

Hyperbolic Discounting

Now!

1 Year!

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Avoiding Bias

1. Do not jump to conclusions.

2. Do not assume a relationship is a cause; record and test your decision outcomes.

3. Do not base your conclusion only on your experience.

4. Do not just look to support your case; look for non-supporting evidence too.

5. Do not fall prey to overconfidence; get confidence evidence and ranges.

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Some Other Biases

 Selective search for evidence

 A tendency to gather facts that support certain conclusions but disregard others that support other conclusions.

 Selective perception

 We tend to screen out evidence that we do not think is relevant.

 Wishful thinking (optimism)

 We tend to see things positively – this distorts our thinking and perception.

 Groupthink

 Peer pressure to conform to the opinions of the group.

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http://en.wikipedia.org/wiki/List_of_cognitive_biases

 anchoring - the tendency to rely too heavily, or "anchor," on one trait or piece of information when making decisions.

 bandwagon effect - the tendency to do (or believe) things because many other people do (or believe) the same.

 belief bias - the tendency to base assessments on personal beliefs (see also belief perseverance and Experimenter's regress)

 bias blind spot - the tendency not to compensate for one's own cognitive biases.

 confirmation bias - the tendency to search for or interpret information in a way that confirms one's preconceptions.

 contrast effect - the enhancement or diminishment of a weight or other measurement when compared with recently observed contrasting object.

 disconfirmation bias - the tendency for people to extend critical scrutiny to information which contradicts their prior beliefs and accept uncritically information that is congruent with their prior beliefs.

 endowment effect - the tendency for people to value something more as soon as they own it.

 hyperbolic discounting - the tendency for people to have a stronger preference for more immediate payoffs relative to later payoffs, the closer to the present both payoffs are.

 illusion of control - the tendency for human beings to believe they can control or at least influence outcomes which they clearly cannot.

 impact bias - the tendency for people to overestimate the length or the intensity of the impact of future feeling states.

 just-world phenomenon - the tendency for people to believe the world is "just" and so therefore people "get what they deserve."

 loss aversion - the tendency for people to strongly prefer avoiding losses than acquiring gains (see also sunk cost effects)

 mere exposure effect - the tendency to express undue liking for things merely because they are familiar with them.

 color psychology - the tendency for cultural symbolism of certain colors to affect affective reasoning.

 planning fallacy - the tendency to underestimate task-completion times.

 pseudocertainty effect - the tendency to make risk-averse choices if the expected outcome is positive, but risk-seeking choices to avoid negative outcomes.

 rosy retrospection - the tendency to rate past events more positively than they had actually rated them when the event occurred.

 selective perception - the tendency for expectations to affect perception.

 status quo bias - the tendency for people to like things to stay relatively the same.

 Von Restorff effect - the tendency for an item that "stands out like a sore thumb" to be more likely to be remembered than other items.

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BA 301 Spring 2014 -

Data Analysis

BA 301

Research & Analysis of Business Problems

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Problem Solving Framework 44

Context & Background

Problem Analysis & Description

Solution Development

Evaluation & Decision- Making

Communication & Implementation

Problem Solving Framework 45

Context & Background

Problem Analysis & Description

Solution Development

Evaluation & Decision- Making

Communication & Implementation

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The Cuban Missile Crisis 46

Group, Or Go It Alone

 Group Advantages

 Diversity of perspective

 Deeper discussions

 More ideas

 Easier buy-in and likely support

 Group Disadvantages

 Conflict

 Groupthink

 Changing risk perspective

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Could I Be An Astronaut? 48

Perception Of Risk

 Your perspective on risk relative to gain will

affect personal decision making.

 Risk is presented in different ways:

 Dread, where you have no control (terrorism)

 Unknown, where you really don’t know what will

happen (GMO)

 Depends on the numbers.

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Think About Risk

 Final seconds of game with rival, coach must choose

a play with a.) 95% chance of a tie score or b.)

30% chance of victory

 College senior with talent must choose a.) medical

school (80% chance of success) or b.) acting (20%

chance of success)

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Evaluating The Risk

Improbable Unlikely Likely Very Likely

L o w

M e d iu

m H

ig h

N e g

a ti

v e i m

p a

c t

Likelihood of events occurring

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Evaluating The Risk

Improbable Unlikely Likely Very Likely

L o w

M e d iu

m H

ig h

N e g

a ti

v e i m

p a

c t

Likelihood of events occurring

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Evaluating The Risk

Improbable Unlikely Likely Very Likely

L o w

M e d iu

m H

ig h

N e g

a ti

v e i m

p a

c t

Likelihood of events occurring

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Think About Risk 54

Think About Risk 55

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Decision-Making Tools

 Use objective criteria and rational methods

 Weighted Criteria Matrix

 Cost/Benefit Analysis

 Alternatives Table

 Pros and Cons

 Paired Comparison

 Decision Trees

 Trade-off Table

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Ever Buy A Lemon? 57

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Decision? 58

Repair: $1,500

Replace: $12,500

Weighted Matrix Example

 Situation Analysis:

 The old heat pump was installed in 2000 – clearly a lemon!

 New heat pumps are far more efficient than the old ones.

 New heat pumps use Puron as coolant.

 Natural gas is not available in my neighborhood.

 Unknown long term maintenance costs on old heat pump.

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Evaluation Criteria

 Short term financial impact.

 Long term financial impact.

 Energy efficiency.

 Peace of mind!

 Air filtration capability.

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Weighted Matrix Procedure

 Give a weight to each of the criteria

 Total of weights must add to 1

 Rank each solution in terms of how well it satisfies

the criteria

 From 1 to 10

 Multiply the weights by the ranks for each option

and add them up

 Higher score wins

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Ranking Matrix 62

1.00

Ranking Matrix 63

1.00

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Ranking Matrix 64

1.00

Ranking Matrix 65

1.00

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Ranking Matrix 66

1.00

Ranking Matrix 67

1.00

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Ranking Matrix 68

1.00

Alternatives Table

 Weed out the bad ones.

Criteria Job 1 Job 2 Job 3 Job 4

Salary $38,000 $42,000 $41,000 $46,000

Schedule 38 hrs/wk 40 hrs/wk 50+ hrs/wk 60+ hrs/wk

Benefits Medical, Dental,

401K

Medical, Dental Medical,

Company Car

Medical, Dental,

401K,

Concierge

Service

Environment Cubicle, Relaxed Office, Relaxed Travel, Flexible,

Relaxed

Travel, Intense

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Alternatives Table

 Weed out the bad ones.

Criteria Job 1 Job 2 Job 3 Job 4

Salary $38,000 $42,000 $41,000 $46,000

Schedule 38 hrs/wk 40 hrs/wk 50+ hrs/wk 60+ hrs/wk

Benefits Medical, Dental,

401K

Medical, Dental Medical,

Company Car

Medical, Dental,

401K,

Concierge

Service

Environment Cubicle, Relaxed Office, Relaxed Travel, Flexible,

Relaxed

Travel, Intense

Trade-Off Table 71

Profits Customer Costs Time To

Implement

Internal

Resources

Alternative A Profits up by

$1,000

Costs to

customer

increases $1 per

unit

4 months 20 people

Alternative B Profits up by

$10,000

Costs to

customer

increases $0 per

unit

7 months 15 people

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Pros And Cons

 List the pros

 Score them on a +1 to +10 scale

 List the cons

 Score them on a -1 to -10 scales

 Add them up

 Positive is good, or look for a difference in the scores

for multiple options

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Paired Comparison 73

Person 1

Person 2

Person 3

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Decision Trees 79

Decision Trees 80

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My Dog’s Decision Tree 81

Effective Decision Making

 Well Defined Objectives

 Assumption Testing

 Multiple Alternatives

 Practice the five “WHYS”

 Open Debate

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