The standard way of thinking about decisions is backward, says Ralph Keeney: People focus first on identifying alternatives rather than on articulating values. A problem arises and people react, placing the emphasis on mechanics and fixed choices instead of the objectives that give decisionmaking its meaning.
Keeny shows how recognizing and articulating fundamental value can lead to the identification of decision opportunities and the creation of better alternatives. The intent is to be proactive and to select more attractive decisions to ponder before attempting any solutions.
To assess the trade-offs between the alternatives we need to know more information about the cost to achieve the alternative and the date that alternative will be available for use. Without knowing the cost and availability date, the value cannot be determined.
An alternative - based on value - that arrives late and costs more than we can afford is not an Alternative.
All three pieces of information are needed. Of course, all three of these are operating in the presence of uncertainty and therefore require estimates to be made.
Estimates of the aleatory and epistemic uncertainties that create risk to the delivered Value need to be handled. The handling of the risks created by these uncertainties and the residual risk still present after the handling is complete need to be part of the assessment of the alternatives.
Care is needed in this Value Focused approach [1]
- When defining values, do not think about their measurability.
- Only once the values have been defined think about measurability of the bottom ones – often requires defining attributes.
- Natural attribute measures directly the achievement of a value (e.g. the cost the alternative compared to the budget for the Value needed)
- Proxy attribute measures indirectly the achievement of a value (e.g. time the alternative will arrive compared to the time it needs to arrive to meet the Value goal).
- Constructed attribute measures directly the achievement of a value when there isn’t a natural attribute (e.g. usability defined by a set of qualitative levels).
When selecting these measures there are four common mistakes [2]
- Excluding hard-to-measures values.
- Including non-essential values that have easy-to-measure attributes.
- Making a proxy attribute, when a natural attribute is available.
- Tryin to measure every consequence from the choices between alternatives.
There is no principle of Managerial Finance, Probabilistic Decision-Making, or Microeconomics of Software Development, in the presence of reducible and irreducible uncertainties that create risk, by which a credible decision can be made, while spending other people's money, without first estimating the outcomes of that decision and its impact on the probability of success of the project.
[1] "Selecting Attributes to Measure the Achievement of Objectives," Ralph L. Keeney and Robin S. Gregory, Operations Research, 23, 2005.
[2] Modified from Gilberto Montibeller, "7 Sins of assessing performance of Strategies," Jyväskylä International Summer School, 2013, Modelling Strategic Decisions, contained in "Value-Focused Thinking as a Problem Structuring Methods," MarkusHartikainen, Postdoctoral Researcher, University of Jyväskylä
[3] "Applying Value-Focused Thinking," Ralph L. Keeney, Militarty Operations Research, Volume 13, Number 2, 2008, pp. 5-16.
[4] "Decision Making using Probabilistic Inference Methods," Roos D. Sjacter and Mark A. Peot, Proceedings of the Eighth Conference on Uncertainty in Artificial Intelligence (UAI1992).
[5] "Decision Theory: A Formal Philosophical Introduction," Richard Bradley, London School of Economics and Political Science, March 9, 2014.
[6] "Lecture Note for Introduction to Decision Theory," Itzhak Gilboa, March 6, 2013, https://itzhakgilboa.weebly.com/teaching-material.html
[7] "Decision Making Under Uncertainty: Think Clearly, act Decisively and Feel Confident - Unilever's Story," Sven Roden, 2009 Palisade Conference, Risk Analysis, Applications, and Training, 21-22 October 2009.
