Integrating insights in the decision process

Advanced Probability: Uncertainty in Data

Maarten Van den Broeck

Senior Content Developer at DataCamp

Decision-making under uncertainty

• Various ways to handle uncertainty
• How to integrate into decision-making?

Integrating insights for decision-making

1. Define the business question or problem

Integrating insights for decision-making

1. Define the business question or problem
2. Identify uncertainty factors

Integrating insights for decision-making

1. Define the business question or problem
2. Identify uncertainty factors
3. Choose the right method

Integrating insights for decision-making

1. Define the business question or problem
2. Identify uncertainty factors
3. Choose the right method
4. Analyze and interpret the results

Integrating insights for decision-making

1. Define the business question or problem
2. Identify uncertainty factors
3. Choose the right method
4. Analyze and interpret the results
5. Communicate your insights

Example: expanding into a new market

• Scenario: expanding into a new market
• Business question: is expansion viable?
• Uncertainties: customer demand, costs, competitors

Example: expanding into a new market

• Choose a method: Monte Carlo simulation
  • Simulate variable outcomes
  • Assess likelihood of different levels of profitability
• Supplement with other methods to view the problem from another angle

Example: expanding into a new market

• Analyze results
  • 60% of simulations profitable
  • 20% break-even
  • 20% loss
• Visualize probability distribution and summarize metrics
• Decision: start with a pilot program

Let's practice!

Advanced Probability: Uncertainty in Data