How to evaluate options using a Decision Tree ?
- Decision tree analysis allows a user to visually evaluate decision options and possible outcomes
- Good technique to use then edcision analysis is serial – that is one decision and alternative leads to another set of alternatives.
- Technique can be used to factor in the probabilities of each outcome as best known or historically known while evaluating options.
- A good way to start using a decision tree is to create a scenario or a story.
- The use fo scenarios is important because of their relationship to the creation of assumptions when a Business Case is being prepared to analyze a product investment or when a market share forecast is being made.
- Linkage critical because business cases and forecasts represent structured decision making techniques within the context of the new product development process, which is also a decision-making framework.
- Some examples below:
- A YouTube video showing the use of such technique is highlighted below:
An outcome based evaluation of linear decisions by factoring in appropriate probabilities for each outcome.
Source: Haines, S. (n.d.). The Product Manager’s Desk Reference.