Business Research Session 1 Information is Power

8/14/2019 Business Research Session 1 Information is Power

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Session 1

Information is Power


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But why do you need to makedecisions?

If you do nothing you will die Decisions are a reaction to a changed

scenario Business aims to achieve objectives which

require decisions to be taken to givedirection to the business

A business cannot function withoutdecisions being taken!


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So what are decisions trying to do?

Business Decision Making seeks to achieve twooutcomes:

Attain objectives efficiently

and

Cope with change(Change in corporate objectives/targets)

(Changes in the environment)(Changes in consumers/segments)


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CHANGE

Change has TWO dimensions:

IMPACT

PREDICTABILITY


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Predictability

Predictability is a collective perceptualmeasure of how accurate managers canbe in determining the likelihood that an

event or series of events will or will notoccur. It ranges from total predictability (seasons,

ageing, time and mortality) to totalunpredictability (natural disasters, artisticsuccess, conflicts)


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Why is Predictability important?

Predictability is the degree to which one canaccurately forecast the future.

Probability is the likelihood of an event occurring

in the future.I know that over the next year 1 in 100,000

airline flights will end in disaster, but Icannot predict which one it will be

Predictability=Planning=Manipulation=Control


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Impact. Predictability and Strategy

Proactivecontingency

planning(HurricaneKatrina)

EmergencyPlanning

(MajorIncidents)

PolicyDevelopment

(Returns policyat M&S)

Reactivity(when event

occurs)

Predictability

Impact

H i gh

L ow

High Low


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Decision Making

Business strategy is ultimately basedon a series of informed decisions,chosen from a range of alternatives

Any decision (D) has a series of alternatives(A1..An) which have outcomes

(O1..On), each of which have benefits(B1..Bn) and risks (R1.Rn). Theobjective is to maximise B and minimise R.


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Anatomy of a decision It is based on information available at the time

the decision is taken It is based on an individual or group perception

of that information It is based on the quantity and accuracy of that

information The actualisation of the decision may be a long

time removed from the decision Future decisions based on past historical data

are hard to react against (extrapolation) May be individualistic or group based


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The role of information in decisionmaking

Information reduces risk, improves thequality of decision making

The more information available at the timethe decision is taken the better

Information quality is key Information may be time dependent or an

immutable truth Information has a value (but only if it can

be capitalised upon)


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Information: Desirable andObtainable

Most decisions are made under conditionsof sub optimal information acquisition

The information you might like to havemay not be available due to time limits,cost limits, or simple inability to acquire it.

The information you have may be limitedby methodology, cost, time, or simpleavailability


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Analysis versus Creativity

Analysis is the logical interpretation of collected data. There is one correctanalytical answer to a data matrix. It is theHBS answer to a problem. There cannormally only be only one logicalinterpretation of a data matrix. Analysis is

based on objectivity a single perceptualway of viewing data


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Creativity

This is the interpretation of data which isobjectively incorrect.

Normally creativity is associated withactions which are post analysis, and arebased on a different perceptions of theassembled data.

An objective perceptual analysis mightlead to several alternative creativeinterpretations and subsequent strategies.


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Credibility, Perception &Experience

Information has two components: content (whatit says) and credibility (how far we believe what itsays)

Perception is how we interpret the information,and is based in part on our experience andtraining

Experience is how often we have been exposedto identical or similar situations and the lessonswe have learnt from these past exposures


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Transposition of experience

By training (across the age / experiencebarriers)

Through individual learning (via mistakes!)

Through peer learning (watching others)


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RiskRisk is compounded of THREE quantities:

R = f (N,C,I)Where:N = Need to take a decisionC = Level and type of commitmentI = Indeterminacy (Uncertainty)

The objective is to reduce one or all of the above components in orderthat the aggregate risk falls to an acceptable level.

What is an acceptable level of risk will vary dependent on personal,industrial and cultural variables . It will vary between risk takers andrisk avoiders


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Risk Taking and Risk Avoidance

All decisions carry an element of risk theinherent risk component, which you cannever remove

Total risk is made up of the inherentcomponent and an uncertainty element.

Risk takers make decisions under higher

levels of uncertainty than do risk avoiders. Risk takers may be more successful if theymake the correct decisions earlier


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Risk taker or Risk Avoider

Culturally: Certain cultures (Chinese,Jewish, American) are far more risk takingthan others (British)

Industrially: Certain industries / professions are more risk taking (traders,clothing, restaurants) than risk averse(banking, medicine, airline pilots)

Personally: Your individual make up andrelated risk taking


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To Summarise

Business Research provides Information Information reduces Uncertainty

Uncertainty reduction reduces Risk Reducing risk improves Decision Making Better decision making leads to Increased

Profitability Increased profitability leads to Growth and

Survival!


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Research is Information

Research information is a tool to assist indecision making

Business research is NOT about makingstrategic decisions based on the research.

Research should not be held accountablefor bad decisions unless it can be shownthe research was flawed, and the decisionwas made on incorrect information


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The value of information

Immutable truths (facts which are constantover time) have little value

Information which is constantly changing ispotentially of high value

Its value is related to the consequences ofmaking an incorrect decision

The costs of information acquisition shouldnever exceed the cost of theconsequences of an incorrect decision


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Pure or Applied Research

PURE RESEARCH (also known as bluesky research). It is research to discoverinformation which may not have an

immediate usefulness.

APPLIED RESEARCH (also known as

problem based research) seeks toanswer specific questions as an aid todecision making


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Methods of Business Research The choice of method used depends on a trade off

between FIVE criteria:Accuracy required

Resources available / Decision ValueTime constraintsData availability

Nature of the decisionMethods available can be defined along TWO dimensions:

Subjective / ObjectiveAnalytic / Experiential

Documents

Business Research Session 1 Information is Power