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Decision Analysis for Managers by David Charlesworth

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Chapter 8

Tornado Diagrams

Figuring Out What Is Important

We now have a working deterministic model that gives us a single-point estimate of our measure of value. The next tool we’ll look at is called a tornado diagram or tornado graph, which is designed to show which uncertainties are important and which are less important. This is especially valuable if people you are working with disagree on the assessments you have—if the uncertainty is low on the tornado, it isn’t worth more time to discuss the disagreement. But if it is near the top of the tornado, you’ll have to take the time to work through it.

For example, with one new product line I worked on, the owner was very concerned about reusing abandoned equipment from a former project that ...

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