Uncertainty and Risk in Decision Making
One of the defining characteristics of product development is making decisions and judgements, in the face of uncertainty. Exploratory Product Development (ExPD) is based on the premise of reducing risks and uncertainty. We’re defining uncertainty as having imperfect or limited knowledge about something, resulting in the potential for surprise or unpredictability in the future. You’ll notice that uncertainty can be caused by:
- Lack information
- Lack of experience (or being new to something)
- Decisions that have not yet been made
- Outcomes that cannot be known or controlled by the project team
- Outcomes that can be described by a probability distribution
- Unknown unknowns or unks-unks (surprises/things we don’t know we don’t know)
At some point in time, uncertainties will be resolved: Information is gathered, decisions are made, outcomes occur, and surprises are dealt with. It is extremely rare, that a project team can reduce a project’s total uncertainty. If the uncertainty remains to be too great, an informed decision needs to be made on whether to proceed with the project or to kill it.
Better Decisions Using Product Risk Framework™ (PRF)
This is where the Product Risk Framework® (PRF) comes into play. The PRF is a business intelligence SW tool that helps project teams to make better product development decisions. It enables product teams to identify, evaluate and prioritize the most significant sources of uncertainty and risk associated with a product idea. It employs a variety of behavioral economics approaches to root out uncertainties and risks, including a risk framework, reference class forecasting, and nudges.
The PRF also monitors the reduction of product uncertainty and risk throughout the entire product development process, from idea through launch. Risk profile ‘snapshots’ easily communicate progress in reducing a product’s risk and allow risk evaluation of the entire product portfolio.
In product development we want to gain more understanding on the unknowns, so moving those Unknown Knowns to either Known Knowns or Known Unknowns (see blue arrows).
Request a Product Risk Framework (PRF) demo at https://www.productdevelopmentrisk.com/get-started/ or call Mary Drotar at 708.829.7470.
Reference Preston Smith, Flexible Product Development: Building Agility for Changing Markets. (Jossey-Bass, San Francisco, CA) page 193.