Dynamic models for managing big decisions

Purpose – This paper seeks to describe a new approach to analyzing critical resource investment plans, Dynamic Decision Making (DDM), an A.T. Kearney innovation based on a sophisticated modeling process that can improve the quality and transparency of decision making. Design/methodology/approach – The paper explicates the five components of the novel DDM approach: formal, but narrowly focused, future modeling; improve the understanding and evaluation of risk; design a dynamic strategy; calculate “Total Value” of dynamic strategies and according probability distribution; and formalize the decision making process. Findings – In a volatile environment, this system, which promotes flexibility and maps out contingency plans, has proven exceptionally useful with clients making large capital investment decisions and “Bet the Company” strategic moves. Practical implications – Each step in the DDM decision‐making process reveals contingencies and opportunities to react to a competitor, a policy, or an environmental change – and to modify the initial plan as a result. Originality/value – The DDM total value methodology enables managers to consider both the risks and the value of flexibility when planning a capital investment project.