Can Decision Governance Be a Source of Competitive Advantage?

Decision governance puts constraints on how decisions are made: e.g., assess impacts of decision options before picking one, estimate probabilities of outcomes of options, elicit preferences of decision makers, and so on. In other words, explain the reasons for a decision before deciding.

If these constraints are a source of competitive advantage, then this means that they lead to decisions with outcomes which are somehow superior to those of others, who govern their decision making in a different way. 

While it may seem reasonable to think that to govern decisions is better than not to, your position on this depends on your ability to see how specific requirements that constitute your decision governance influence the outcomes of your decisions. This is challenged by the usual problems of establishing cause and effect, and trusting that your decisions led to what they did precisely because of requirements on how decisions were made.

To develop and use decision governance requires specific values. You need to believe that it matters how you make decisions. This could be because you also believe that if you make them the ‘right’ way, they will lead to outcomes you wanted. And/or you may simply consider that important, a value on its own, e.g., to demonstrate diligence, because, perhaps the outcomes of decisions are consequential. You may also believe that it is important to be able to explain decisions later on, and do it better than saying something as vague as that the decision you made seemed like the right one at the time.

I intentionally used the word ‘believe’ a lot above. It can happen that a decision made in some very loose way leads to excellent outcomes. At the other end of the spectrum, you may spend a lot of resources to find and analyze all information that looks relevant to a decision, only to suffer consequences you wanted to avoid by doing so. 

In organizations, decision governance matters because it can ensure, for example, that knowledge available is in fact matched with decisions where it is relevant. Obviously, regulations and industry standards can impose specific requirements on how decisions are made, because of continuous improvement, i.e., the need to learn from errors, to avoid them in the future.

Back, now, to competitive advantage. Since decision governance influences how decisions are made, it influences decisions themselves. Since the success of an organization depends on what it does, e.g., about products and services it designs and sells, it should be possible for decision governance to be a source of competitive advantage.

For example, product portfolio management decisions, in organizations having many products, are often the result of documented decision processes. Selecting which products to develop and offer influences business performance. Consequently, having a unique approach to portfolio management decisions can, or should be a competitive advantage. 

The challenge, of course, is how to build and sustain that competitive advantage, which in turn begs the question of how to design decision governance so that it leads to decisions which result in superior performance relative to others.

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