Some of your decisions will yield to careful analysis. If you're trying to decide between two suppliers, for instance, or maybe two different investment or tax arrangements, a spreadsheet and some math can probably lead you to a sound and definitive answer.

But for entrepreneurs, questions like that are rare. More often you're pondering where to locate a new store, whether to launch a particular product, or which candidate to hire. And for these decisions -- while spreadsheets and pro-and-con lists can help -- your final call is going to rely pretty heavily on your gut.

Does that make formal analysis useless? Nope, argues a recent, fascinating article by University of Virginia business professor Robert Carraway. In the face of uncertainty, he argues, decision-making can devolve into analysis paralysis, or it can go the other way and end up being a blind bet on your experience and intuition. The first alternative is endless and unfruitful, the second prone to costly errors. But there is a better way. He suggests this simple, three-step process:  

1. Embrace your intuition

"A far more constructive alternative approach is possible, one that permits useful analysis in support of intuition and judgment," he writes. Step one is "acknowledging and embracing what your gut is telling you about a particular course of action."

"Jettison the old 'stay objective' maxim. It's too late. As soon as you hear of or consider a course of action, you have already jumped to a conclusion, even if you are not aware of it. By attempting to ignore your intuition, you are simply driving it underground," he instructs. Once you've accepted the big role your intuition plays in your decision-making, it's time to interrogate exactly what your gut is contributing -- and whether that contribution is helpful.

2. Unearth your assumptions

The idea is to get your intuition -- and the assumptions that underlie it -- out into the open. "Unfortunately, assumptions don't feel like assumptions; they feel like facts, and hence not necessary to challenge," writes Carraway, so you need "to flesh out the assumptions behind one's intuition."

How do you do this? Caraway suggests asking yourself this: "If I knew right now that despite my intuition this course of action was doomed to fail, what would be the most likely reasons?" The answer is probably the most critical assumption underlying your intuition.

3. Then ask this

That question is a pretty clever way of getting at which of your assumptions is shakiest, but it's still not the most important question to ask before you decide. Not only do you need to acknowledge intuition, uncover assumptions, and discover which are most fundamental, but you also need to test out those assumptions.

Assume you're deciding where to locate a new store, for example. Your gut tells you location one is a surefire winner. The assumptions behind that might be that foot traffic will boost sales and that location one seems to have tons of people going past compared to location two. Great, you ask yourself which of these assumptions is most likely to fail you and discover that your sense of this particular spot being highly trafficked is more of an assumption than a fact.

Now you're well armed to do some meaningful analysis to test that assumption, but before you begin ask yourself this: "If you do this analysis and it shows this, then I am going to be willing to acknowledge that my intuition is possibly wrong and hence consider changing my mind." Carraway calls this "the most important and least asked question in business."

Why is it so essential? By asking it in advance of any analysis -- in our example, say, sitting outside the location and counting pedestrians -- you get buy-in that the results will actually be able to sway the decision. That both saves time and pointless effort and ensures that you've designed a test that might actually influence your thinking. If you can't honestly say that a particular investigation could conceivably change your mind, you can rethink and design something that might.

Time saved. Decision improved. It's a win-win.

Published on: Nov 18, 2015