Decision Making with Insight

By Dr. Sam Savage
Published by Brooks/Cole Publishing Company

 

Dr. Seuss meets Dr. Savage.

No, this isn't the a new Austin Powers movie. There is nothing evil about the way Dr. Sam Savage explains decision-making techniques. Quite the contrary, in Decision Making with Insight, Dr. Savage teaches the fundamentals of making better decisions even if your knowledge of statistics is limited to Thing 1 and Thing 2.

Most marketing people relate to statistics and analytics like green eggs and ham — not in a boat, not with a goat, not in a tree, not for me. But most also appreciate the value of the discipline in helping to solve marketing problems. Let's face it, they are all around us everyday and we need to be more conversant in the basics to continue to create value for our organizations.

Nearly 20 years ago, while teaching statistics courses to MBAs at the University of Chicago, Dr. Savage had an epiphany his students weren't getting it. Try as he might, he wasn't connecting with emerging managers in a way that facilitated the easy absorption and retention of the basic scientific principles of decision making. Then one day while taking flying lessons in a sailplane over the soybean fields of Illinois, it occurred to him that the theory of aerodynamics he'd had to learn was only made truly relevant when he could correlate the reading with experiencing the resistance of the controls in his hands and feeling the movement of the plane through his seat. And instantly he understood what had been missing from his teaching — a "seat-of-the-pants" experience in statistics.

In the years since, Sam has experimented with hundreds of examples and mindles (think handles for the mind) to find the most effective ways of teaching decision-making to non-scientists. And with terrific results.

Decision Making with Insight is a book written to be understood and appreciated by any liberal arts major. No previous experience with statistics is required (although you should know the basics of creating and manipulating an Excel spreadsheet). In fact, people looking for a technical explanation of how advance mathematics are applied to solve complex problems will likely be disappointed by the absence of any heavy theory here. Instead, the book uses clever examples of everyday common business problems (like inventory management, budgeting limited resources, and gauging advertising effectiveness) to help the reader understand the most common mistakes managers make in their current decision processes. And while it is not written specifically for marketing people, it is full of examples that marketers will recognize as challenges in their daily lives.

Working with the assumption that most managers will have little more than Microsoft Excel at their fingertips with which to develop business cases, Dr. Savage walks the reader through the most practical tools in decision making, including risk assessment, forecasting, time series analysis, decision trees, and optimization. Along the way, he employs such sophisticated concepts as Mother Goose nursery rhymes and the "interocular trauma test" (a.k.a. graphs that hit you right between the eyes) to help the reader not just understand but truly relate to the value of the techniques and the degree to which the decisions are improved. He also employs dozens of simple, interactive exercises to encourage the reader to test his or her instincts on how problems might be solved — an approach which can't help but to illuminate for the marketing reader the poor instincts with which most of us have somehow managed to get by.

But if this were just a well-written book with excellent examples, it would still miss its mark as a learning tool. Fortunately, the "Insight" in Decision Making with Insight refers to the simple yet powerful software bundled inside the back cover that easily loads a series of plug-ins for Microsoft Excel. Each topic explored is then a very interactive interplay of reading the background analogies and then opening simple Excel files to guide you on a point-and-click tour of how various tools and techniques on your desktop can be applied to solve some incredibly complex problems.

The effect is that you learn by doing, not just reading. And it's amazing what you can learn to do in just a few hours. True, most of the time we were simply using statistical macros based in advanced mathematics that only our scientists understood. But the experience is analogous to getting in our car in the morning. We're not mechanics, yet we know how to drive and we understand the basics enough to avoid hurting the car.

It is also true that, like most marketers, we don't aspire to become analysts and we derive relatively little joy from staring at an Excel spreadsheet when there are brands to be built and customer relationships to be nurtured. Fine. We can leave the really messy stuff to the professionals. But along the way, we will now feel much more confident in our ability to make more informed decisions. And it is likely that we will find it time-saving to build our own simple models rather than waiting for someone in the analytical group to come up for air and get us on their priority list. But most of all, after reading this book, we are confident in our ability to recognize when the right techniques will lead to more profitable decisions, even if we occasionally have to refer to the book again to refresh our memory on exactly how.

Bottom line, we do so like green eggs and ham. Thank you, thank you, Sam I am.

Read an interview with Dr. Sam Savage.

If you are interested in ordering a copy of Decision Making with Insight, click here.

Sam Savage is senior research associate at Stanford University, where he directs the Industrial Affiliates Program for the Management Science & Engineering Department.