The term decision architecture was first coined in a paper by Aviva Sheth back in 2008. Since then, it has seen an explosion in popularity. It originated from psychology where researchers studied how people make decisions.

Decision making is an integral part of our daily lives. Whether you are deciding what restaurant to eat at or whether to accept a job offer, thinking about strategies and processes helps us navigate the world more effectively.

It also helps develop skills that can be applied in other areas, such as leadership.

In this article we will discuss the three main components of decision architecture – value, ability and time - and how they influence your decisions. We will look into how you can apply these concepts in your everyday life, and what situations may require special attention.

Value

Value refers to the importance or significance of something. In business, value can be defined as the worth or cost of a product or service.

Ability is related to the quality or potential of a thing. For example, if you have ever watched a professional sports game, you would know that some teams just do not seem to play together.

Time is another key factor in defining value. This includes factors like how long it takes to prepare for a activity, and how much time it consumes once ready.

When values, abilities and times are aligned, meaningful action can occur. For example, studying hard is important so you can achieve your goal.

Types of decision architecture

So what is decision architecture? That’s a great question! Decision making or decision framework comes in many different forms, with each form emphasizing certain qualities. Some are better than others depending on the situation, but we can learn something from all of them to improve our own decision-making processes.

The most basic type of decision framework is called parallel processing. This is when you make decisions independently of one another without any influence from past experiences or conversations.

If you have ever seen a movie where an action sequence was filmed very quickly, then slowed down, you used parallel processing. An example of this would be watching a movie that has lots of exciting scenes with fast paced actions.

A less known version of parallel processing is referred to as chunking. Chunking works by breaking large tasks into smaller pieces which are processed separately. For instance, if your job requires you to read a book, you could instead break it into shorter segments (chunks) such as reading several pages in one setting, then moving onto the next batch of pages.

Both versions of parallel processing emphasize independence and separation of duties, which are good things for teamwork and efficiency. More experienced people can help newer ones bring order to chaos by giving clear instructions and guidance.

Influencing factors in decision architecture

There are many different types of decisions that need to be made, and most don’t have direct consequences for one person alone. Decisions such as whether or not to buy new clothes, what kind of car to invest in, where to live, how much money to spend on food, etc., all affect only you but also have an overall influence on the world around you.

These kinds of decisions can be categorized into three main groups: financial decisions, value-based decisions and lifestyle choices. All three categories contain internal and external influencing factors.

The internal factors relate to your personal beliefs, emotions and perceptions. Internal factors include things like fear, hope, confidence, motivation, desire and willpower.

External factors refer to those things outside of yourself that can impact your behavior. Things such as cost, timing, availability and effectivity determine if and when you make a choice.

With so many variables at play it is easy to get confused and overwhelmed.

Decision levels in decision architecture

Beyond just having a goal, there are several other components of decision making that make up your day to day decisions. These include the level at which you decide to make a choice, what type of choices you have, and how much influence each option has on your future actions.

The first component is deciding where in the process of choosing or rejecting a choice you will make a decision. This is called the decision level- some people call it the threshold for action. For example, when faced with choosing between going shopping or staying at home, someone who needs to get work done might choose to stay at home instead. Or perhaps they need to do something more important later like research or writing, so they go out and buy supplies.

Another term for this is the boiling point. A person with a low boiling point would take very little time to reach their decision, whereas someone with a higher boiling point could spend hours thinking about it before reaching theirs.

There are three main types of decision levels used in decision making. The most basic is binary decision — either I am going to do something or I’m not. More advanced versions include trinary (or ternary) decisions, where we can opt to do nothing, one thing, or another.

With binary decisions, things often come to a head quickly. You may be given a job offer and must decide whether to accept it within the next hour.

Key decisions

Another important part of decision architecture is deciding what types of decisions you will have in your business. There are three major category choices: product, location, and service.

Decision makers often get confused about which one to choose, so it makes sense to understand the differences between them.

The most basic distinction comes down to how long the services provided by this element last.

A product company sells products that people can use directly without any additional support. For example, if you like buying new clothing, you would be a buyer for stores or online shopping sites/applications that sell clothes.

A location company offers services at a specific place. A restaurant does not make up its own menu, they source their ingredients from elsewhere and cook them there.

A service company provides a good or a tool that other companies make use of to carry out their jobs. Technology firms create software, while technology consultants help businesses install and configure the software.

Risk management

Beyond just having adequate resources to carry out your plans, how well you manage risk is an important part of ensuring that your business succeeds.

Running a business means there are going to be some major setbacks or failures. This can include things like shutting down due to lack of funds, not being able to find enough willing volunteers to help with project X, or investing in equipment that doesn’t work properly and needs to be replaced.

All too often, entrepreneurs try to avoid these risks by sticking to what they know and have done before. This is usually a good thing as we all need to learn from past mistakes, but it also limits the potential success of their business.

By incorporating strategies for risk management into your business, you will begin to cultivate an environment where failure is accepted and even encouraged.

Lessons learned

The term decision architecture was first introduced in Paul Daugherty’s book titled Make Fast Money (And Keep It). He uses it to describe his systematic process for creating products that make money under you, not against you.

Decision architecting is all about making the best decisions for your company by considering cost-benefit analysis, risk assessment, return projections, and more.

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