Decision making and decision trees

• key influences on business decision-making

  • business objectives / budgets
  • who makes the decisions
  • attitude to risk
  • availability and reliability of data
  • external environment
• two approaches to decision making

  • intuition
  • scientific
• making decisions using intuition

  • based on gut feel and experience
  • quick!
  • hard to justify for decisions involving significant risk
• making decisions scientifically


  • based on data and analysis
  • time-consuming and expensive
  • no guarantee of right decision
• why is scientific decision making becoming more popular?


  • more availability of data
  • better data analytics + skills + experience
  • expectation that data will be used wherever possible, particularly where a decision is significant to the business
• opportunity cost


  represents the benefits that could have been gained by taking a different decision
• why is opportunity cost important?


  • for most businesses, resources are limited
  • when resources are scarce, significant decisions about what to spend and where to focus become more risky
  • managers take calculated risks and weigh-up the potential opportunity costs before choosing the options they believe are best
• big data


  huge, unstructured data sets that exceed the processing capacity of conventional database systems