Decision analysis
Why do we need specific approach to decision-making?
"In just a few short weeks on the job, I had already realized that because every
tough decision came down to a probability, then certainty was an impossibility —
which could leave me encumbered by the sense that I could never get it quite
right. So rather than let myself get paralyzed in the quest for a perfect solution,
or succumb to the temptation to just go with my gut every time, I created a sound
decision-making process — one where I really listened to the experts, followed
the facts, considered my goals and weighed all of that against my principles.
Then, no matter how things turned out, I would at least know I had done my level
best with the information in front of me.ˮ
Barack Obama
Disney+ Debut November 2019
In November 2019, Disney launched its new Disney+ streaming service. Hastings
Netflix CEO underestimated the threat claiming they would have secured at best
20 million subscribed in the first year but Disney+ had other plans:
In the first year they secured more the 70 millions subscribers
Family also are more likely to switch from Netflix to Disney+ because there are
more cartoons on Disney.
So now its important to identify coherent actions in order to switch families from
Netflix to Disney:
Implement more cartoons
Creating family accounts
Offer discounts to family
Decision analysis 1
, Godrej ChotuKool: A fridge for millions
Introduced by Godrej in India
Targeted at people without regular electricity
Affordable price point for everyone
Everyone was really happy about this project (harvard advisor was happy as well)
and they espected to earn a lot of money selling millions of copies in the first
years, so they invested a lot of money in the product
In 2 years they sold only 15.000 of that refrigerator and they lost a lot of money
Introduced in India as an affordable cooling solution for low-income households
without regular electricity access, the ChotuKool faced significant challenges in
achieving its sales targets.
Initial Challenges:
Market Reception: Despite initial enthusiasm, the ChotuKool did not resonate
as expected with its target demographic. Consumers were hesitant to adopt
the product, leading to lower-than-anticipated sales figures.
Consumer Insights: Feedback indicated that potential customers had
reservations about the productʼs utility and value proposition. However, these
concerns were not fully addressed during the productʼs development and
marketing phases.
Strategic Pivot:
In response to the initial market resistance, Godrej reevaluated its approach:
Target Audience Shift: The company expanded its focus beyond low-income
households to include small businesses and urban users who could utilize the
ChotuKool as a portable cooling solution.
Marketing and Distribution: Godrej explored alternative distribution channels
and marketing strategies to better reach and educate potential customers
about the benefits and applications of the ChotuKool.
Outcomes:
While the ChotuKool did not achieve the massive sales volumes initially projected,
it garnered recognition for its innovative design and social impact:
Decision analysis 2
, Awards: The product received accolades, including the Gold for Social Impact
at the Edison Awards, highlighting its potential to address refrigeration needs
in underserved markets.
Market Presence: By 2012, over 100,000 units had been sold, indicating a
measure of success in niche markets and among specific user groups.
Lessons Learned:
The ChotuKool experience underscores the importance of:
Understanding Consumer Needs: Thorough market research and
responsiveness to consumer feedback are crucial in product development,
especially in diverse and economically varied markets.
Flexibility in Strategy: Adapting marketing and distribution strategies in
response to market realities can help in finding alternative pathways to
success.
In summary, while the ChotuKool did not meet its initial ambitious sales goals, it
stands as a testament to innovative thinking and the complexities of addressing
the needs of emerging markets.
We also deal with uncertainty
Which weather forecast is more informative?
Decision analysis 3
, Second picture is definitely better because it provides also the percentage of the
event to happens (because of curse meteo prediction are not always accurate at
100%.
This is the lesson in which we learn how to make predictions using probability ans
updating our beliefs to make better decisions
A scientific approach to strategy
In science a new idea or theory is called hypothesis (a fancy word for a testable
explenation of something that happens)
A strategy is like a scientific hypotesis. Its like an educated prediction of how the
world might work
At chotokul they had this hypothesis: “if we bring low-cost refrigerators to poor
indian families, the vast majority of them will buy it. Hence we will sell millions of
refrigeretorsˮ
Summary statistics
Used to describe data. There are 2 important summary statistics:
Decision analysis 4
Why do we need specific approach to decision-making?
"In just a few short weeks on the job, I had already realized that because every
tough decision came down to a probability, then certainty was an impossibility —
which could leave me encumbered by the sense that I could never get it quite
right. So rather than let myself get paralyzed in the quest for a perfect solution,
or succumb to the temptation to just go with my gut every time, I created a sound
decision-making process — one where I really listened to the experts, followed
the facts, considered my goals and weighed all of that against my principles.
Then, no matter how things turned out, I would at least know I had done my level
best with the information in front of me.ˮ
Barack Obama
Disney+ Debut November 2019
In November 2019, Disney launched its new Disney+ streaming service. Hastings
Netflix CEO underestimated the threat claiming they would have secured at best
20 million subscribed in the first year but Disney+ had other plans:
In the first year they secured more the 70 millions subscribers
Family also are more likely to switch from Netflix to Disney+ because there are
more cartoons on Disney.
So now its important to identify coherent actions in order to switch families from
Netflix to Disney:
Implement more cartoons
Creating family accounts
Offer discounts to family
Decision analysis 1
, Godrej ChotuKool: A fridge for millions
Introduced by Godrej in India
Targeted at people without regular electricity
Affordable price point for everyone
Everyone was really happy about this project (harvard advisor was happy as well)
and they espected to earn a lot of money selling millions of copies in the first
years, so they invested a lot of money in the product
In 2 years they sold only 15.000 of that refrigerator and they lost a lot of money
Introduced in India as an affordable cooling solution for low-income households
without regular electricity access, the ChotuKool faced significant challenges in
achieving its sales targets.
Initial Challenges:
Market Reception: Despite initial enthusiasm, the ChotuKool did not resonate
as expected with its target demographic. Consumers were hesitant to adopt
the product, leading to lower-than-anticipated sales figures.
Consumer Insights: Feedback indicated that potential customers had
reservations about the productʼs utility and value proposition. However, these
concerns were not fully addressed during the productʼs development and
marketing phases.
Strategic Pivot:
In response to the initial market resistance, Godrej reevaluated its approach:
Target Audience Shift: The company expanded its focus beyond low-income
households to include small businesses and urban users who could utilize the
ChotuKool as a portable cooling solution.
Marketing and Distribution: Godrej explored alternative distribution channels
and marketing strategies to better reach and educate potential customers
about the benefits and applications of the ChotuKool.
Outcomes:
While the ChotuKool did not achieve the massive sales volumes initially projected,
it garnered recognition for its innovative design and social impact:
Decision analysis 2
, Awards: The product received accolades, including the Gold for Social Impact
at the Edison Awards, highlighting its potential to address refrigeration needs
in underserved markets.
Market Presence: By 2012, over 100,000 units had been sold, indicating a
measure of success in niche markets and among specific user groups.
Lessons Learned:
The ChotuKool experience underscores the importance of:
Understanding Consumer Needs: Thorough market research and
responsiveness to consumer feedback are crucial in product development,
especially in diverse and economically varied markets.
Flexibility in Strategy: Adapting marketing and distribution strategies in
response to market realities can help in finding alternative pathways to
success.
In summary, while the ChotuKool did not meet its initial ambitious sales goals, it
stands as a testament to innovative thinking and the complexities of addressing
the needs of emerging markets.
We also deal with uncertainty
Which weather forecast is more informative?
Decision analysis 3
, Second picture is definitely better because it provides also the percentage of the
event to happens (because of curse meteo prediction are not always accurate at
100%.
This is the lesson in which we learn how to make predictions using probability ans
updating our beliefs to make better decisions
A scientific approach to strategy
In science a new idea or theory is called hypothesis (a fancy word for a testable
explenation of something that happens)
A strategy is like a scientific hypotesis. Its like an educated prediction of how the
world might work
At chotokul they had this hypothesis: “if we bring low-cost refrigerators to poor
indian families, the vast majority of them will buy it. Hence we will sell millions of
refrigeretorsˮ
Summary statistics
Used to describe data. There are 2 important summary statistics:
Decision analysis 4
