4 steps to making informed decisions

When Kodak filed for bankruptcy protection in 2012, it seemed like the inevitable outcome of the company’s failure to adapt to the emergence of digital photography as a disruptive force in their market. However, they had invested billions in developing their own line of digital cameras to make “Kodak moments” instant. So why did they fail?

The same reason that thousands of other companies fail each year: They made poor critical decisions.

According to research from The Ohio State University, up to 50% of companies that have failed have done so because of a flawed critical decision (Nutt, 2015). In 2015, according to the US Census Bureau, 400,000 businesses were created and 470,000 firms failed. Up to 235,000 of these businesses may have unnecessarily gone under due to one or more uninformed critical decisions. (Meszaros, 2016).

The economic, social and competitive implications of this crisis are profound for individuals, families, communities and stakeholders. Direct and indirect job losses impact between 5 and 7 million employees annually. So how can your business avoid meeting the same fate as Kodak? The answer lies in your decision-making.

Uninformed vs. informed decision-making

Uniformed decision-making is a process that relies largely on human factors to make a decision. Many executives instinctively use this method for both simple and critical decisions. Studies suggest that failure is four times (Ch, 2015) more likely when executives use uninformed decision-making, regardless of the critical nature of the decision.

This problem spans and influences the entire business community. According to a 2017 McKinsey Report, critical decision failures occur as frequently as decision successes. In addition, more than 90% of business decisions are commonly based on factors such as personal intuition, experiences, education, history, emotions and gut feelings (Marks, 2017; Elliott, 2007; Wolf, 2013).

Uninformed decision-making is appropriate for decisions that do not pose significant risks, downsides or consequences, where intuition and experience are key predictors of success.

When facing a decision with significant complexity, risk, cost or consequences, executives need to take a very different approach. They need to apply informed decision-making, which integrates the intuitive aspects of uninformed decision-making with information and logic. This provides the decision-maker with a significantly better chance of a successful outcome.

All information is not equal or important in decision-making. Gathering and analyzing the right information about your customers’ needs is critical to neutralizing competitive threats and avoiding missed opportunities.

Empirical evidence from The Ohio State study indicates that 90% of executives admit that they do not have this critical information, including how they rate against other competitors. Moreover, marketing and sales are not the only functions that need this information. Departments such as manufacturing, shipping, customer service, finance and R&D need it to better meet and/or exceed their clients’ requirements and expectations.

The Importance of Informed Decisions in High-Stakes Environments

In high-stakes industries—whether healthcare, finance, or technology—missteps can carry substantial risk. Leaders who rely on a thorough understanding of data, potential outcomes, and stakeholder needs can navigate these risks with greater confidence. For example, in healthcare settings, decisions can literally impact patient well-being, emphasizing the need for comprehensive information and clear communication. The same principle holds true for any business operating under intense competition or regulatory scrutiny: well-informed, data-driven decisions are crucial to safeguarding stakeholder interests, capturing market opportunities, and preserving a strong competitive edge.

Informed Choice: Engaging Stakeholders in Decision-Making

“Informed choice” isn’t limited to patient consent in healthcare; it’s also about ensuring all key stakeholders—employees, customers, investors—have access to the insights they need. By communicating potential risks, benefits, and alternatives, executives build a culture of transparency and collaboration. This approach empowers teams to contribute meaningful feedback, fosters trust among partners, and encourages alignment across departments. Ultimately, when stakeholders feel they have a voice in critical decisions, organizations stand to benefit from broader perspectives and more resilient outcomes.

4 Steps to Making Informed Decisions

Informed decision-making comes from integrating these four steps:

1. Acquire, organize and disseminate appropriate and accurate information

• Filter, prioritize, analyze and synthesize data or information to support or refute a decision.
• Extract and categorize best-practice insights and wisdom in an easily accessible knowledge repository.
• Communicate critical information and knowledge to the appropriate staff.

2. Create a customized decision-support team

• Provide easy access to specialists who can provide expert advice and counsel in fields such as legal, financial, regulatory, marketing, sales and operations.
• Foster a culture that promotes collaborative and systematic approaches to decision-making.

3. Establish a threat-and-opportunity early warning system

• Identify and monitor significant technology, industry and competitive challenges and opportunities.

4. Adopt a rapid decision-making process

• Define a process that works well with repetitive and unexpected critical business decisions.
• Optimize the process based on the size and type of your business.
• Triage and plan to prioritize choices, minimize risks and avoid negative consequences by evaluating the existing situation and applying the best available resources.

The judgment of an executive is only as good as their information and how they empower their team. Informed decision-making is a crucial tool to keep your business from becoming the Kodak of your industry.

Implementing Informed Decision-Making in Business

Modern enterprises thrive when leaders anchor their decisions in solid data, logical analysis, and inclusive dialogue. From exploring new market entries to optimizing operational processes, C-level executives should cultivate a culture that values research and critical thinking. This means setting up structures—like cross-functional committees, peer advisory groups, and evidence-based review protocols—that promote deeper exploration of options. By consistently integrating vetted information into strategic choices, organizations mitigate risk, enhance innovation, and position themselves for sustainable success.

Tools and Resources for Informed Decision-Making

Making data-driven decisions often requires access to specialized tools and expert guidance. AI-powered analytics platforms and interactive dashboards can illuminate trends in real time, highlighting operational efficiencies or emerging market signals. Beyond technology, leaders benefit from well-curated libraries of case studies and best practices that reveal how other companies have navigated similar challenges. Peer advisory networks, executive mentors, and industry experts also provide valuable feedback and can help identify potential blind spots. By leveraging a blend of technological and human resources, decision-makers can forecast possible outcomes more accurately and develop strategies that align with both organizational goals and stakeholder expectations.

Barriers to Effective Informed Decision-Making

Even with the best intentions, several factors can derail an informed approach. Cognitive biases, such as overconfidence or confirmation bias, may skew how data is interpreted. Time constraints and mounting pressures can lead to impulsive moves, while silos within an organization can prevent leaders from accessing the full range of available information. Overcoming these barriers requires cultivating an environment that rewards transparency, encourages diverse input, and prioritizes thorough analysis over quick fixes. By recognizing where bottlenecks occur—be it limited data access or internal resistance—executives can address those issues head-on, transforming potential stumbling blocks into opportunities for more strategic, well-founded decisions.

References

Blenko, M., Mankin, M., and Rogers, P. (2010). The Decision-Driven
Organization. Harvard Business Review. Retrieved from
https://hbr.org/2010/06/the-decision-driven-organization.

Ch, N. (2015). Decisions Making: Strategic, Tactical and Operational Decisions.
LinkedIn, retrieved from: https://www.linkedin.com/pulse/decisions-making-
strategic-tactical-operational-neeth-ch.

De Smet, A., Lackey G., Weiss, L. (2017). Untangling your Organization’s
Decision-making. McKinsey Quarterly. Retrieved from
https://www.mckinsey.com/business-functions/organization/our
insights/untangling-your-organizations-decision-making.

Elliott, T. (2007). The 5 Ingredients of Decision-making. Business Analytics
& Digital Business. Retrieved from http://timoelliott.com/blog/2007/09/ the_5_ingredients_of_good_deci.html.

Lindzon, J. (2016). Why Executives don’t trust their Own Data and Analytics
Insights. Fast Company. Retrieved from https://www.fastcompany.com/ 3065294/why-executives-dont-trust-their-own-data-and-analytics-insights.

Marks, S. (2017). Emotions vs. Decision-making in Business. Business.com,
Retrieved from https://www.business.com/articles/emotions-vs-information-
business-decision-making.

Meszaros, G. (2016), What Percentage of Businesses Fail – The Real
Number. Success Harbor. Retrieved from http://www.successharbor.com/percentage-businesses-fail-09092015/.

Nutt, P. (2015). Half of business decisions fail because of Management’s
Blunders, a new study finds. Research Communications, Retrieved from,
http://researchnews.osu.edu/archive/decfail.htm.

Wolf, T. (2013). 90% of our decision making is irrational. Conversioner.
https://www.conversioner.com/blog/90-of-our-decision-making-is-irrational.

20157 views