When uncertainty is high: 4 techniques for making a better decision

While there is no magic crystal ball to solve the uncertainty challenge, there are several techniques from the Decision Mojo™ learning lab you can apply to improve the quality of your decision.

One of the challenges that often surfaces in the Decision Mojo™ learning lab is how to make good decisions when there is a high degree of uncertainty – an all-too-frequent occurrence in today’s organizations.   The acronym VUCA, popularized by the military, has been used to describe an environment of volatility, uncertainty, complexity and ambiguity.

We often see two quite different, less-than-ideal responses when people face decisions in VUCA environments.

The most common response is to freeze from fear of making a mistake.  To reduce uncertainty, we often delay a decision to allow time to collect more information, analyze data, consult others, etc. This is a reasonable strategy when we have the luxury of time and there is additional data available.  However, often this luxury doesn’t exist nor does sufficient reliable, affordable data.

Even so, we are skilled at tricking ourselves into thinking that if we just had a bit more data and time, the answer will magically appear.   We believe we are making progress and avoiding uncertainty even though the cost of delay may outweigh any benefit we get from additional information.  (See the Information Overdose Trap)

An opposite and equally problematic response is to make a quick – perhaps even rash –decision to escape the discomfort of the uncertainty – in essence saying, “It’s too complicated; it’s impossible to know what’s going to happen, so I’ll choose this and get on with it.”  (See Snap Judgment Error).

So, what do you do when you’re facing a decision clouded in uncertainty that could lead you down the Information Overdose or Snap Judgment Error paths?  While there is no magic crystal ball to solve the uncertainty challenge, there are several techniques you can apply to improve the quality of your decision in situations of high uncertainty.

One technique is to ask, “What’s not going to change?”  Jeff Bezos, the founder of Amazon, talked about using this technique when navigating product development decisions during unprecedented technological disruption:

"I know in our retail business at Amazon, 10 years from now, customers are still going to want low prices. I know they’re still going to want fast delivery, and I just know they’re still going to want big selection. So it’s impossible to imagine a scenario where 10 years from now where a customer says, “I love Amazon, I just wish the prices were a little higher,” or, “I love Amazon, I just wish you delivered a little more slowly.” (1)

In other words, it’s virtually impossible to predict exactly what the technology landscape will look like in 10 years, but there are some things that aren’t going to change.  Bezos calls these the “big things.”  As a decision-maker, we can use these “big things” as a north star to guide our decision-making.   At Amazon, teams are assigned to work relentlessly on the big things that aren’t going to change.  For these teams, some decisions will fail, not all their experiments will be successful, but through iteration and course correction, the organization will make steady, continuous progress toward addressing the big things.

A second technique is to do a bit of scenario planning, where you use your experience and the readily available data to identify best-case, worst-case, and most-likely scenarios, and then think through contingency plans for each outcome.   You can also combine this with deliberately choosing an option that performs well across a range of possible scenarios rather than trying to optimize for one uncertain outcome.

A third technique is what is sometimes called “RMT,” which is short for the Regret Minimization Technique.  Essentially, you ask yourself, “Which decision would I regret the least in the future?”  In our Decision Mojo™ learning lab, we teach several techniques for doing this, with one of our favorites being the 10-10-10 technique described in the book by the same name:  “How will I feel about this decision in 10 minutes, 10 months, 10 years?” (2)

And a fourth technique is what we call “try before you buy,” or what author Annie Duke calls “date before you marry.” (3) Take a big decision with lots of unknowns (whom to marry) and break it down into a number of smaller experiments (dates) that you learn from and can test the waters with. Consider each date a mini experiment that can inform the bigger decision you may eventually make.  In other words, invest in learning and keep things flexible before making a big, difficult-to-change commitment.

The reality is that a decision exists because there is some level of uncertainty, ambiguity, or subjective judgment involved, and you  have to choose between alternatives where the outcome is not fully known.  If all uncertainty is eliminated, it stops being a decision and becomes a mechanical action or an execution of a predetermined result.

In today’s VUCA world, we will never fully eliminate uncertainty in most decisions we need to make.  As long as we are aware of the potential decision traps that uncertainty can cause and we have a few techniques to mitigate the impact of those traps, we can make better, more strategic decisions without fear.

Sources:

(1)  Interview of Jeff Bezos on the Lex Freidman Podcast (01:37:38)

(2) 10-10-10, Suzy Welch (2009) Scribner, New York

(3) The Good Life Podcast with Host Sean Murray: Episode 43 – Mastermind Group on Decision Making with Annie Duke, Jake Taylor & Brent Snow.