5.4 Rational Decision Making
What could be better than rational decision making?
Rational Decision Making Process
- Recognize and define the problem. Sometimes it is hard to see the real problem. It is amazing how many times a solution is proposed without knowing what problem is to be solved. We get a solution looking for a problem.
- Identify the alternatives.
- Evaluate the alternatives.
- Select the best alternative.
- Implement the choice.
- Evaluate the result. This is also an often over-looked step. A solution will be implemented and yet no one goes back to see if the original problem is solved. For example, a firm may find that it is hard for customers to order a product on their website. The website gets changed and implemented. But no one tests the new website to see if it actually makes it easier for customers to order a product.
Rational Decision Making in Practice
While it sounds like a ‘rational’ decision making process will yield good results, that is not always the case. One ‘classic’ example is that of Coke. Pepsi ran TV ads showing that customers preferred the taste of Pepsi over Coke and Coke was losing sales. That was the problem statement. After evaluating alternatives, Coke changed the Coke formula and introduced New Coke. Rational, the taste was improved. But the response from customers was furious. How could they tamper with the taste of Coke?! Coke was forced to bring back the original formula as Coke Classic. For a period of time, every version of Coke came in two types, New Coke and Classic Coke. Eventually, the New Coke was discontinued.
