Influence Diagram

A decision analysis tool mapping decision variables, uncertainty factors, and value objectives to evaluate risk.

🎯 What Problem It Solves

When making high-stake decisions (e.g., new venture, land purchase), uncertainty is overwhelming. This diagram separates choices from risks to assess value mathematically.

🧠 Thinking Logic & Core Concepts

It defines: 1. Decision Nodes (blue rectangles, things we control), 2. Chance Nodes (orange circles, uncertainty we don't control), and 3. Value Nodes (green octagons, our final utility/cost goal).

📋 Newbie Step-by-Step Guide

1. Set Value: Place the utility goal at the far right.
2. Place Decisions: Add your choice nodes.
3. Add Chance Nodes: Add uncertain variables that affect the outcome.
4. Connect Influences: Use arrows to show dependencies.
5. Calculate EV: Choose the path with the highest expected value.

💡 Classic Example

[Product Launch Decision Case]

• Decision: Launch nationally vs. Launch in sandbox test first.
• Uncertainties: Sandbox feedback (Good/Average/Bad); National demand (High/Low).
• Value: Net Profit.
• Influence: Sandbox decision yields feedback, which informs national launch decision; demand and choices determine profit.