BUSINESS SIDE OF GEOLOGY

By ELLEN M. COOPERSMITH
and PETER C. CUNNINGHAM

Now What Problem Are We Solving?

Editor's note: Coopersmith and Cunningham are with Decision Frameworks, a decision analysis training and consulting firm based in Houston and Aberdeen, Scotland. Coopersmith is a reservoir engineer, and Cunningham is a geologist and AAPG member.

"It isn't that they can't see the solution. It is that they can't see the problem."

-- G.K. Chesterton (1874 -- 1936)

It is human nature to encounter a problem and jump to a solution. That is how we make life manageable on a daily basis. It even seems efficient.

Unfortunately, many inefficiencies are born from this very reasoning, from our tendency to jump to the answer before standing back and asking ourselves:

"What are the questions we need answered in order to make a decision?"

That is what decision framing is all about -- posing the right questions, and structuring any necessary evaluation to address those questions.

Teams frame decisions when faced with complex problems, ranging from field developments, to enhanced recovery projects, to production sharing agreements, to exploration strategy. Framing helps get clarity of action.

Why promote this behavior?

Because with a "bit of framing," unnecessary repetition of both technical work and "marathon" meetings can be avoided. The decision process will be more orderly.

Overall, decisions will turn out to be better.

The decision frame is the anatomy of a decision problem -- the issues, focus, alternative solutions, key risks and uncertainties associated with each solution. It is the bounded viewpoint of a problem -- a function of both the decision-maker(s) and team of experts assisting any necessary evaluation.

Just as a surgeon will never operate without understanding the anatomy of his patient, a sound decision-maker will never make a decision before understanding the anatomy of his problem. We see this repeatedly, when a decision is not taken, even after numerous evaluations and meetings -- the root dilemma is almost always unanswered questions and nagging concerns.

Decision frames are constructed with teams and tools. Just as a surgeon needs his team to develop his operating plan and surgical instruments to perform his operation, likewise a decision-maker needs his team to frame his problem, and tools to construct and evaluate his choices. As a result, decision problems are often framed in a meeting environment, using a series of facilitation, or efficiency, tools and a team of people familiar with the opportunity.

This often causes a natural frustration amongst some "technical folk," however, who feel "talking" is not "working," or getting started and tackling the problem "head on."

In decision framing, not all issues are created equal. Some issues are within our control, while others are not.

Of those not within our control, some are facts -- nothing will change them -- while others are uncertainties: They cause us concern (when we think about the various ways in which they might eventually play out).

Hence, one of the most notable attributes of decision framing is the way it encourages teams and decision-makers to consciously separate aspects of their decision problem into those that can be controlled (decisions) and those that cannot (uncertainties).

The goal is to eventually choose the best course of action (things within our control -- decisions), given the range of possible outcomes we face (due to things beyond our control -- uncertainties).

So how should decision problems be framed?

• Begin by clarifying the decision problem -- making sure that everyone is on the same page, before plunging in.
• Once the problem is clarified, raise issues -- an issue is anything of concern about the decision problem.

The issues are then categorized as a "fact" (a known piece of data), a "decision" (an action within our control) or an "uncertainty" (a variable whose outcome is unknown).

Focus the problem by further categorizing the decisions -- as decisions already made, focus decisions, or later decisions.

This allows teams to begin to navigate the evaluation of their decision problem, by becoming consciously aware of the decisions behind them, those immediately in front of them and those on the horizon.

At this point, the team should clearly understand what is within their control, and be able to focus their effort on evaluating alternatives within that space.

However, this begs the question: How do you best consider a wide range of viable options, so as to avoid "tunnel-vision" while defining the alternatives to evaluate? This is a real problem in that the human mind is selective in what it normally allows itself to choose from.

To promote the generation of a wide range of alternatives, the "strategy table" framing tool is used.

Figure 1 -- Example Strategy Table

The strategy table is simply a "menu" of alternatives, from which a team can define solutions to consider (figure 1). It is developed by taking each "focus" decision and making it the top of a column of the table. Alternatives are brainstormed beneath each focus decision in the table to generate the "menu" of choices from which to select.

Once the "menu" of choices is exhaustive, the team is ready to define a few distinctly different strategies to consider. In this context, the word "strategy" is defined as a coordinated set of decisions, or actions, with a common intent, or approach, to address the decision problem.

However, with a literal "matrix" of choices to choose from, how can various options be combined to define just a few compelling strategies for the team to evaluate?

The team members must stand back and ask themselves, "what are the real questions we are trying to answer?" Those questions are then listed, and strategies developed, that, when evaluated, will answer those compelling questions.

The strategies themselves are developed by linking one or more of the choices listed under each focus decision, in each column of the strategy table.

The final step in framing is to identify and structure the key uncertainties to be incorporated into the evaluation of each strategy being considered.

Two different framing tools can be used to do this, depending on the type of decision problem -- an "influence diagram" and/or a "decision and risk timeline." Both tools relate and describe the key uncertainties (variables beyond our control) with the different strategies under consideration (actions we can take) to help the team evaluate its best course of action.

Figure 2 -- Example Influence Diagram

The influence diagram (figure 2) is a "map" of the economic model of the decision problem. For a given strategy, it illustrates the relationship between each uncertain variable and asset revenue, cost and the other important variables.

Alternatively, the decision and risk timeline (figure 3) lays out the order in which decisions will be made on the asset, and uncertainties will be resolved. For valuing information decision problems, it is the key framing tool.

Figure 3 -- Example Decision and Risk Timeline

Remember, teams consciously frame decisions so as to "work smarter," not "harder," to answer key questions and make quality decisions efficiently. Decision framing is a collective tool that teams can use themselves to make their work together more effective.