Analysis vs. Process

I’m currently reading a very nice book (so far) by Dan Heath called Decisive: How to Make Better Decisions in Life and Work, where I came across the following passage on analysis vs. process:

When the researchers compared whether process or analysis was more important in producing good decisions—those that increased revenues, profits, and market share—they found that “process mattered more than analysis—by a factor of six.” Often a good process led to better analysis—for instance, by ferreting out faulty logic. But the reverse was not true: “Superb analysis is useless unless the decision process gives it a fair hearing.”

I suppose this isn’t given enough attention is it? First time I read about something that didn’t praise analysis, Alleluia!

The thing about analysis is that it’s easy to say that you’ve analysed something, and so due diligence has been carried out, end of story.

And without a proper process in place, that’d be true. The process could just mean, you have a hypothesis (maybe to increase prices), and you want to see if it makes business sense, so you analyse what carrying out the action stated in the hypothesis might do (will increasing prices lead to higher revenues?)

You ask the analysis team (that’d be me) to model the possible scenarios. In scenario one it doesn’t make sense. So we tweak the numbers a little and come up with scenario two. Someone’s not happy with it, so we come up with scenario three. And so on until everyone’s happy with it, and the decision goes through.

But the decision was essentially made when the hypothesis was dreamt up. The moment it was brought up to be analysed there was no way back — there wasn’t a process in place to oppose the idea, and the longer the analysis went on the more involved everybody became. Just like how the legend can get bigger than the man, the idea can get bigger than the reality.

Here’s a great analogy, also from the book:

Imagine walking into a courtroom where the trial consists of a prosecutor presenting PowerPoint slides. In 20 pretty compelling charts, he demonstrates why the defendant is guilty. The judge then challenges some of the facts of the presentation, but the prosecutor has a good answer to every objection. So the judge decides, and the accused man is sentenced. That wouldn’t be due process, right? So if you would find this process shocking in a courtroom, why is it acceptable when you make an investment decision?

Now of course, this is an oversimplification, but this process is essentially the one most companies follow to make a decision. They have a team arguing only one side of the case. The team has a choice of what points it wants to make and what way it wants to make them. And it falls to the final decision maker to be both the challenger and the ultimate judge. Building a good decision-making process is largely ensuring that these flaws don’t happen.