Optimization on Decision Making Driven by Digitalization

Abstract

The content of this paper refers to the global trend of digitalization and its implications on decision making. The question: will digitalization improving decisions in organizations be a relevant topic for all organizations?Digitalization is currently the key driver for change in business and organizations. Affected is everything, from market structures to customer behaviour over supply chain and production itself. Internal processes have opportunities for a new design, and production and logistics are possible to redesign. This massive game changing opportunity has to be steered by management and hence management decisions are a must while this transition phase; furthermore, decisions will influence this transition but decisions itself are also affected. The paper is based on a theoretical research, analysing different decision models. In the first part of the paper, typical decision models will be discussed; a rational model with first ideas of the neoclassical economists (e.g. Adam Smith or Max Weber) and scientific approaches of Pascal and de Fermat or Bernoulli, mainly focused on agents which maximize their utility. Further developed by von Neumann and Morgenstern (2004), economic decisions seem to be a strong rational and mathematical process to find utility maximization. This rational model is illustrated on the one hand to explain the traditional way and has a view on the model of homo oeconomicus. On the other hand, a strong emotional influence on decision making is obvious, because human beeings do not follow strict rational rules. In the second part of the paper, digitalization as one part of globalization will be analysed. Digitalization will change completely the business environment and the setup of organizations. New market structures, customer behaviour, and processes will change the entire operations of businesses. Then, the main discussion of the paper, the impacts of digitalization on decision making will show the trend toward the well-known model of homo oeconomicus, which is a common model in economics; but known with a lot of limitations. Automatization of processes will affect the decision process in organizations. This new decision making processes will be mainly automated in the future, hence an algorithm logic is required and enables the model of homo oeconomicus a revival, driven by machines. As a conclusion based on the above mentioned result, automated decisions will improve the result of decisions, because human emotions will not affect the decision making process anymore.

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