BEE Solving Problems Web

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<ul><li> 1. Sources Solving Business Problems do goodofSourSnnovation: Where ideas come from? Professor Ed BarrowsBabson College April 13th , 2011For more information:ebarrows@babson.edu2011, Babson Executive Education - All Rights Reserved</li></ul><p> 2. Goal for TodayImprove your ability to solve problems2011, Babson Executive Education - All Rights Reserved 3. Lets Work the ProblemThe fact is every organizationfaces problemssome morechallenging than others. But acool head and a structuredapproach will do a lot more for usthan simply engaging inguesswork. 2011, Babson Executive Education - All Rights Reserved 4. Agenda Problem solving versus decision-making Discussion questions Data on decision-making Basic definitions Common Biases Two critical processes Problem solving process Step 1: Define the problem / Exercise Step 2: Identify potential causes / Exercise Step 3: Analyze potential causes Step 4: Draw conclusion Step 5: Implement and reviseNOTE: This presentation was developed from Professor Gaurab Bhardwajs Presentation, Question-Driven Problem Solving, August, 2009, Babson College.42011, Babson Executive Education - All Rights Reserved 5. Some perspective on decision-making and problem solving 52011, Babson Executive Education - All Rights Reserved 6. Discussion Questions1. Are decision-making and problem-solving the same things? If not, whats the difference?2. Can you make decisions without solving problems and vice versa?6 2011, Babson Executive Education - All Rights Reserved 7. Some data to provide contextEconomist Intelligence Unit/Business Objects Survey ofExecutive Decision Making (2007) Poor data leads to poor decisions; As organizations grow, decision-making becomes morechallenging; Decision support tools need to be easier to use; Decisions today may involve too much art and not enough science. 55% of respondents noted that decision processes are largelyinformal. 77% of respondents said decisions made by senior management wereeither sometimes or frequently wrong.Source: Economist Intelligence Unit, In Search of Clarity-Unraveling the Complexities of Executive Decision-Making, EIU Report, 2007.7 2011, Babson Executive Education - All Rights Reserved 8. Some more data to provide contextBain survey of 760 companies from across all industries withrevenues over $1 billion (2008): Companies in the sample that were most effective at decision-making and execution generated average total shareholder returnsalmost six percentage points higher than those of other firms. They also found that the average organization they examined hadthe potential to more than double its decision effectiveness.Source: Blenko, Mankins, and Rogers, The Decision-Driven Organization, Harvard Business Review, June 20108 2011, Babson Executive Education - All Rights Reserved 9. Basic Definitions Problem: Perceived gap between the existing state and a desired state, or a deviation from a norm, standard, or status quo. Although most problems turn out to have several solutions (the means to close the gap or correct the deviation), challenges arise where such means are either not obvious or are not immediately available. Decision: Choice made between alternative courses of action in a situation of uncertainty. Although too much uncertainty is undesirable, manageable uncertainty provides the freedom to make creative decisions.A problem solving process should help us identify the sources of the gap.A decision-making process should help us choose among alternative courses of action.Source: www.businessdictionary.com9 2011, Babson Executive Education - All Rights Reserved 10. Common biases limit our ability tosolve problems and make decisions Bias DescriptionAvailability Bias Too much importance is placed on information or data that is recentor available.Anchoring BiasThe scope or extent of the analysis is limited by the starting point.Commitment Bias Adherence to a previous decision increases despite the knowledgeof information contrary to the prior decisionConfirmation Bias The solution has been decided or is known before any data iscollected or analysis is completed.Hindsight BiasThe belief that the occurrence of an event or outcome was causedby a previous action that in fact had little to do with the outcome.Overconfidence Bias The practice of being overly optimistic often time is the face of datato the contrary.Representative Bias The practice of assessing the likelihood of an event or outcome bydrawing parallels to other events or outcomes that are unrelated. 10 2011, Babson Executive Education - All Rights Reserved 11. Other Challenges Framing: When decisions are presented as gains instead oflosses evidence shows people make different decisions. Plunging-In: People tend to dive into problem solving (gatheringinformation, reaching conclusions) without determining whetheror not they are solving the right problem or following a properprocess.This last point we are concerned with today11 2011, Babson Executive Education - All Rights Reserved 12. There are two basic processesProblem-Solving ProcessDecision-Making Process Our focus will be the problem solving process 122011, Babson Executive Education - All Rights Reserved 13. Why Bother to Use A Process? Improves the quality of problem solving/decision making byteams and individuals. Makes business problemswhich often seem intractabletractable by applying structured, logical thinking. While there is not always one right answer, there are oftenseveral bad answers. Using a process helps eliminate the latter. Helps improve communication, teamwork and team processes.13 2011, Babson Executive Education - All Rights Reserved 14. Step 1: Define the Problem This is the most important step in theprocess because it drives the analysis. Deal with facts, what is known to betrue about the problem you are dealing 1with. Challenge assumptions.Define Problem Separate symptoms from the actualproblem(s). Develop a main question. Questionsare the most useful way to structureproblems.14 2011, Babson Executive Education - All Rights Reserved 15. Defining the Problem with the SCQFrameworkSITUATION Where are you now vs. where you want to be? What makes the situation unsatisfactory? Why is there a need forchange?COMPLICATION What is stopping you from getting to where you want to be? Consider the hurdles, constraints, and trade-offsQUESTION What is the one main question you need to answer? o The question should be analytical and action-oriented o It should be a problem, not a symptom o It should be more important and urgent than other questions o Frame the question such that it is answerable with a yes or no2011, Babson Executive Education - All Rights Reserved15 16. Framing Questions Questions should be phrased clearly and precisely Use full but succinct sentences Do not use compound questions; avoid the word and in a question If possible, phrase questions so that they have a yes or a no answer Not ButWhat level of inventory do I need?Are my inventories too high?What should I do about my loan to Co. A?Should I continue lending to Co. A? 2011, Babson Executive Education - All Rights Reserved16 17. Why Use Yes/No Questions? It forces you to analyze both possibilities rather than making animplicit yes choice by framing a question as how Yes/no questions tend to be more specific, forcing a boundaryaround the question, making the problem more tractable They prevent prior hypothesis or confirmation bias; Yes/No questions are balanced and thus help prevent decision-making biases due to framing. 2011, Babson Executive Education - All Rights Reserved 17 18. Blank SCQ FrameworkProblem Name:Situation (current): Situation (desired):Complication (barriers):Main Question:Conclusions/Recommendations 18 2011, Babson Executive Education - All Rights Reserved 19. Failure is Not an OptionHaving a clear definition of theproblem will help us ensure thatfailure isnt one of our options. 2011, Babson Executive Education - All Rights Reserved 20. Step 2: Identify Potential Causes We want to take our main questionand identify more specific questions. Each of these questions can be furtherbroken down into more granularIdentify 2questions. These questions can thenPotential Causesbe analyzed. A mutually exclusive, collectivelyexhaustive (MECE) approach should beused for completeness purposes.20 2011, Babson Executive Education - All Rights Reserved 21. Analyzing the Problem with an IssueTree An issue tree is a hierarchy of questions and sub-questions thathelps identify the data and analyses necessary to answer the mainquestion. The questions are inter-connected logically. Starting with the main question identified using SCQ, everyquestion is decomposed into a set of sub-questions, ideally with ayes/no answer. Continue decomposing questions into sub-questions until the finalset of sub-questions can be answered with data.21 2011, Babson Executive Education - All Rights Reserved 22. Issue Issue Tree ExampleRevenue Total market size?potential? Will 1st time buyersOur likely market share? be profitable?Incremental sales andmarketing costs?Costs to serve?Should we pursuethe 1st time buyermarket in PCs?Incremental operatingcosts?Aligned with brandimage?Differentiates us in Is a 1st timethe marketplace? buyer strategy Keeps us aligned competitive? with our corporateBrings us to parity with strategy?competitors?Matches our targetsegments?22 2011, Babson Executive Education - All Rights Reserved 23. Issue Trees Can Be Rather ComprehensiveSource: www.deloitte.com4/17/20112010, Babson Executive Education - All Rights Reserved 23 24. Issues and Sub-IssuesTo develop sub-issues from an issue, you could think in terms of:1. what whole does the issue represent and so what would be its parts or sub-issues?2. an effect (issue) and its causes (sub-issues)3. an action (issue) and its benefits and risks (sub-issues)4. frameworks and formulas that can be used to analyze the issue5. factors that drive the issue you are analyzingBecause an issue can be decomposed in many ways, try afew before settling on the one that best meets your needs 242011, Babson Executive Education - All Rights Reserved 25. Three Rules for Building and Issues Tree1. All sub-questions grouped together at the same level contribute answers to the broader question one level above2. A set of sub-questions [emanating from a single question] should have the same level of abstraction [e.g., revenue and cost, but not profit and cost, not revenue and volume] or be of the same type [e.g., actions, causes, 5-Forces]3. A set of sub-questions must be mutually exclusive and collectively exhaustive (MECE). (e.g. cutting a cake into smaller pieces 252011, Babson Executive Education - All Rights Reserved 26. Can This Issue Tree Be Improved? Low quality?PoorproductNot trendy enough?design? Not sleek enough? Lack of advertising dollars?Why are new Inadequatepromotion? Benchmark bestproduct salespoor?practices? No buy-in by headSmall salesof marketing?force? Product came out late?Ineffectiveplacement? Couldnt find right channels? 262011, Babson Executive Education - All Rights Reserved 27. MECE ExamplePermanent members ofthe UN Security Council? 272011, Babson Executive Education - All Rights Reserved 28. MECE ExampleUSAUKPermanent members ofthe UN Security Council RussiaFranceChina 28 2011, Babson Executive Education - All Rights Reserved 29. Thoughts on Applying MECEApplying MECE does not mean that you put everythingconceivable to ensure that the branches are collectivelyexhaustive. Some of the issues may be irrelevant or tangential.Think using the idea of CE and then drop those issuesthat are of little use. Or, lump them under an other category.29 2011, Babson Executive Education - All Rights Reserved 30. Blank Issue Tree Sub Question Sub Question Sub Question Sub QuestionMain QuestionSub Question Sub Question Sub Question Sub Question Sub Question302011, Babson Executive Education - All Rights Reserved 31. Step 3: Analyze Potential Causes Once the questions are formulated,pick one (or more) of the subordinatequestions to address. Identify a list of data sources that can 3be used to research your question.AnalyzePotential Causes Seek secondary (i.e. published) datafirst. Time and cost permitting, seekprimary data. Develop a work plan and assign thequestions to different members of yourteam where possible.31 2011, Babson Executive Education - All Rights Reserved 32. Data Analysis FormatQuestion Analysis Required Data Sources Price of current products Internal pricing summarySub QuestionCan Prices Be Prices of key competitors Competitor pricing summaryIncreased? Price increase history within Industry pricing trends report industry Assessment of buyers Review of key customer willingness to accept price accounts increases322011, Babson Executive Education - All Rights Reserved 33. Step 4: Draw Conclusions After all of the primary and secondary data is collected it must be synthesized. Raw data typically comes in various forms (e.g. qualitative narratives and quantitative analytics) and must be interpreted.4 Team members need to develop a common DrawConclusions point of view regarding their research findings so they should work together to synthesize the findings. A summary of the pertinent data (one document) should be developed that incorporates all of the research especially conflicting viewpoints.332011, Babson Executive Education - All Rights Reserved 34. Drawing Conclusions Example IndustryPricingPricing Analysis Findings ReportOver the past 10 years industry prices haveincreased a total of 12.3%. Increases weremost aggressive in the 2002-2004 time period .CustomerPrices actually declined in briefly in 2006.AccountReview of our accounts show that priceReviewsincreases failed to keep pace with the industry.Over the same time horizon, industry our pricesincrease 9.8% following the identical trend ofCompetitorthe industry. Competitors pricing power was Summarymixed 342011, Babson Executive Education - All Rights Reserved 35. Step 5: Make Recommendations The data summary should be paired withthe question. The main question should be addressedusing the findings from step three.NOTE: if the findings are not able to Make5 address the question there has been anRecommendations error in the data collection and collectionmay need to be expanded.) Where gaps exist, make assumptions butbe sure to document them as such. Be sure that your answer to the questioncan be substantiated using the data. 352011, Babson Executive Education - All Rights Reserved 36. Make Recommendations Example Pricing Analysis Findings Over the past 10 years industry prices have increased a total of 12.3%. Increases were most aggressive in the 2002-2004 time period . Prices actually declined in briefly in 2006. Review of our accounts show that price increases failed to keep pace with the industry. Over the same time horizon, industry our prices increase 9.8% following the identic...</p>