Decision-making in business: Mastering the new world of IT, uncertainty & complexity
Business decision-making was never easy. In today’s fast paced, data driven world, it’s just got a bit harder for those rusted onto 20th Century approaches.
An executive’s role is to make decisions that will benefit the organisation. The reality is often different.
Decision-making is frequently done under time pressure and with limited or untested information, and the consequences for the organisation and its people can be profound – either positively or negatively.
When faced with business and technological decisions involving underlying complexity – we feel more comfortable in dealing with a reduced number of variables, where the cause and effect linkages are well understood, and our underlying assumptions have stood the test of time (some call this ‘experience’). For the most part, this approach is manageable in environments that are not changing rapidly.
It is also well known and widely accepted fact that for the most part, digital technologies are driving profound change at every level – be they societal, business, globalisation of trade, privacy, personal and employment.
Making decisions in these fast-changing environments (or decisions that result in fast changing environments) has the potential to ramp up the challenge of making the right decision for your organisation.
For those in the IT game, dealing with rapid technological change is second nature to accomplished IT leaders and professionals alike – after all, that’s the good thing about the ICT industry – never boring, anything but predictable, always challenging and constantly changing!
However, when it comes to strategic and tactical business decision-making processes within an organisation, the question is:
What proportion of important strategic business decisions are made within an organisation without due consideration of IT from the start?
Has the complex has just become more complex?
It is an accepted fact that the complexity of decision-making rises exponentially with an increase if the number of inter-dependent variables to be taken into account. (This is sometimes known as the combinatorial problem – a well known challenge in the field of operations research – that discipline that uses advanced analytical methods to help make better decisions under situations of uncertainty and complexity.)
In addition to the conventional raft of traditional factors that business executives and managers have to deal with on a regular basis – such as financial, regulatory, marketing, sales, operational, staffing and the like – things are now getting a bit more complex thanks to the inclusion of factors such as:
- The rate of technology-induced change across whole industries and markets – globally – is increasing. In our competitive world, if your organisation is standing still, your competitors are not.
- Businesses have an increasing absolute dependency on IT. The highway to business success is littered with the wrecks of failed or poorly performing IT projects that have had profound impacts on their organisations which have more to do with poor decision making than with the technology per se.
- The diversity of cloud (and other new) technology solutions available to the enterprise that require limited IT department involvement. This has the potential to dramatically transform your business’ value proposition if optimally deployed. It could also harm or seriously damage your business if poorly done.
- The increasing diversity of opinions, perspectives and perceptions held by influential business executives and stakeholders in specific digital technologies can make it much harder to arrive at the ‘right’ technology decision for your business, for now. In the eyes of the Board and CEO: Who do you trust? The consultant? Your vendor(s)? The CIO?
- The pervasive Shadow IT phenomenon – Will the ‘quick fix’ at a local level turn into a technology nightmare down the track?
- Potential lack of clarity over the ownership of the architecture, operation and governance of your enterprise’s IT and digital strategy. What is the probability of achieving the promised tangible business benefits of the ‘digital organisation’?
Ignoring complexity in decision making carries its own risks. These risks result in outcomes that can vary from missed opportunities to harming the business.
21st Century opportunity stuck in 20th Century decision-making processes?
Many (if not most) established organisations are based on structures that have not changed for decades – these include functionally aligned (e.g. departmental) silos built around clearly defined hierarchies and related organisational structures.
These structures, for the most part, have served us well thus far when it comes to decision-making in environments that were not subject to constant, volatile and rapid change.
However, when exposed to the fundamental changes arising from today’s fast-paced digital and business world, where disruption can and is simultaneously occurring on many levels , the suitability of our traditional, relatively inflexible, hierarchical organisational structures remains to be seen.
Facing up to the real decision: How to change?
Trying to develop cross-functional, adaptive and multi-disciplinary decision-making capabilities across the whole organisation within siloed, hierarchical organisations can present a real challenge for executives.
This is where a your organisation’s own CIO and IT team may be able to play a key contribution in facilitating and guiding the transformation within your business to meet the new challenges for a number of reasons. These include:
- A cross-functional perspective across the whole business: In many established organisations, the information architects and analysts often have an ‘end-to-end’ perspective on the business as a whole at an operational an tactical level. This granular, ‘horizontal’ view of the interaction between the various departments, business units, information flows, data transformation, business processes and data structures is ‘stock-in-trade’ for competent IT departments.
- Evidence based decision making: By providing senior decision makers with a rapid initial assessment of the implications of a range of business decisions in terms of innovation, value, risks and costs may assist and de-risk the overall decision making process with a dependency on technology. This may counterbalance the undue influence of inappropriate opinion based decision making based on poor advice.
The question every executive and manager in the organisation should be asking is:
Are you engaging with, and expecting the CIO and their IT team to play an active part in assisting in the upstream strategic decision-making process at the earliest opportunity? If not, how certain are you of the downstream consequences for decisions in the face of constant change, where there is a key reliance on information technologies to achieve the outcomes?
If your IT department is tucked out of harms way (eg as a service center, possibly under a shared services structure, where the primary focus is cost minimisation, not value realisation), the first task at hand is the transform your internal IT capability so that it can play an active and (positively) challenging role in the business’ strategic decision-making processes.