“The Art of Achieving Sound Choices as a Product Manager” by Brandon Chu

Making Effective Decisions: The Importance of Information and Speed

Importance of Good Decision Making

Making the right decisions matters in almost all aspects of life, including business. However, factors outside of our control frequently determine outcomes, which can sometimes negate otherwise good decision-making efforts. In such a fast-paced environment, objective analysis of one’s decisions is critical to success. Therefore, good decision making should be accurate and made as quickly as possible.

Making Decisions Using the Right Amount of Information

Recognizing the Importance of a Decision

Understanding the importance of a decision is critical to sound decision making. Every decision has varying degrees of importance, ranging from low to high. Therefore, establishing clear criteria for assessing decisions is crucial. In the Amazon 2016 shareholder letter, Bezos describes two types of decisions: type 1 and type 2. Type 1 decisions are irreversible, while type 2 decisions are reversible. The stakes for Type 1 decisions are high, and as such, require more effort to make than type 2 decisions. So, assessing the impact of a decision helps guide its level of importance and determine the amount of effort needed.

Framework for Determining Decision Importance

Decision importance can be assessed by plotting resource investment, the impact of positive and negative outcomes, and other relevant factors against one another. This framework helps determine the overall importance of the decision. For example, when changing a “Sign-Up” text-link on the homepage to a button, the decision is low importance. Conversely, creating a “moonshot” project to open up a new market for the company is a medium to low importance decision that can consume significant resources.

Making Decisions as Quickly as Possible

Less Important Decisions Require Less Information

Gathering information can be time-consuming and expensive, especially if the decision is not essential. Therefore, decision-makers should aim to collect the right amount of information, depending on the decision’s importance. The more critical the decision, the more information you should aim to get to increase confidence levels. Furthermore, gaining significant insight into a low importance decision is often unnecessary. Thus, assessing decision importance is vital for determining the amount of information to gather.

Effort for Information Gathering Follows the Pareto Principle

The Pareto principle states that roughly 80% of the effects come from 20% of the causes. Similarly, the effort required for gathering information follows the Pareto principle. Gathering 80% of the information you need typically requires less effort than getting the remaining 20% required. As a result, decision-makers can use this principle to balance the time invested in information gathering against the decision’s importance.

Conclusion

Good decision making is critical in business. However, it is essential to determine the importance of a decision accurately, which helps guide the amount of effort required to make it. Additionally, decision-makers should gather the right amount of information based on the decision’s importance and make decisions as quickly as possible. By adopting these practices, decision-makers can make better decisions quickly, ultimately yielding greater success.