Alice got to a fork in the road. Ahead of her lay three paths, one straight ahead, the other turning to the left and another to the right. She stopped and muttered, “I wonder which road to take?”
“Well where do you want to go?” asked a cat, who suddenly appeared from the branch of a tree next to the road.
“I don’t know,” answered Alice.
“Well then, it doesn’t matter which road you take,” replied the Cheshire cat.
However, Alice was not one to toss a coin to make a decision. She knew about decision sciences, especially scenario planning and expected value. So she plotted the different scenarios for each path, taking note about the angle of the road, its initial direction, the chances for each path to double back, and then played out the best case, worst case and most likely case scenarios. She then laid out the probability for each case, calculating the expected value for each of the paths. She finally came to the decision to take the yellow brick road, and that was how Alice finally got to the wizard’s castle, returning to Kansas from Wonderland.
Have you ever felt like Alice at the fork of the road? How do you know which path to take? Do you go ahead as planned, or do you double back? Do you continue pouring in money into a non-performing business unit, or do you shut it down? Do you make way for a bigger deal or stick to your guns?
In business, we are constantly challenged to think about the future and to map the path down the one less travelled. But you don’t have to guess. You can use these two tools of decision-making that help give you greater clarity in the face of uncertainty.
For each decision option, paint the three scenarios, and what each might return to your objective in dollar-value terms. Then, put in your best guess for the probabilities of each outcome. This is the tricky part, because you might be tempted to put in lofty probabilities for an outcome that you are partial to. Don’t. You need to use your best guess for an outcome that is in the future. Yet this is not a pie-in-the-sky type thinking, but one grounded on your experience, your knowledge, your intellect. (Remember, the total probability of the three scenarios needs to add up to one.) Then you multiply the expected outcome with the probability for each scenario, adding them up to give you the total expected value for this option.
The best option is the one that gives you the highest positive value (or the least negative value, although in this case, you should actually turn back and not proceed down any of your options). And there you are. This is how Alice really got to the wizard’s castle, and how you can too, when you are faced with uncertainty in your decisions.