Operation Management
Problems Solving Tools: Decision Trees, Pareto Analysis and Fishbone Diagram

Decision Trees are excellent tools to choose between several courses of action. They provide a highly effective structure within which you can lay out options and investigate the possible outcomes of choosing those options. They also help you to form a balanced picture of the risks and rewards associated with each possible course of action.


Pareto analysis is a statistical technique in decision making that is used for selection of a limited number of tasks that produce significant overall effect. Pareto analysis is a formal technique useful where many possible courses of action are competing for attention. In essence, the problem-solver estimates the benefit delivered by each action, then selects a number of the most effective actions that deliver a total benefit reasonably close to the maximal possible one.


The fishbone diagram identifies many possible causes for an effect or problem. It can be used to structure a brainstorming session. It immediately sorts ideas into useful categories. It is useful in identifying possible causes for a problem, especially when a team’s thinking tends to fall into ruts.


Compared to other method, decision trees is better in providing the decision makers a probability based calculation on all of the possible solution or actions. Thus, this method is best used to judge the risk and reward associated with a particular decision compared to other method. However, the key advantage of Pareto analysis is that it will identify the most important or effective tasks to be performed. The analysis is better than other method if lastly, the fishbone diagram is useful for brainstorming purposes, where it can identify the largest amount of possible causes, issues or effects. This method is generally more powerful in deciding the possible actions or results from a particular scenario, but it is not used to for determination of a final decision.


All Decision Trees, Pareto Analysis and Fishbone Diagram are problem solving tools. It is important to differentiate them to other tools or techniques. For example, within the context of project management or innovation management, they are different often confused with idea generation techniques.


Generally speaking, both problem solving techniques and idea generation techniques are similar in the sense that they assist the decision maker to solve a problem. In fact, idea generation is simply one of the many techniques utilized in the problem solving process. For example, people try to generate ideas because they believe that the various ideas generated may be useful towards solving a particular needs, demands or problems currently they are facing. Idea generation techniques usually come early in the problem solving process. Usually, it is useful and practical to generate as many ideas as possible before the decision maker try to solve a problem. As more ideas are generated, decision maker will have more and better options to solve a particular problem.


The comparison of problem solving techniques to idea generation is as follow:

  • Compare decision trees to ‘idea generation’ technique: Decision tree is used to judge the inherent risk and rewards in the decision making process. In contrast, idea generation technique is used to create the possible actions or decision to be made.
  • Compare Pareto analysis to ‘idea generation’ technique: Pareto analysis is used to select the most effective actions to be taken (after the various possible and viable actions to be taken are known). However, idea generation technique is used to generate the possible effective actions that could be taken by decision makers.
  • Compare fishbone diagram to ‘idea generation’ technique: Fish bone diagram is highly similar to idea generation technique. In fact, fishbone analysis can be perceived as one of the idea generation technique.
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