Decision Tree: The Ultimate Guide to Using Decision Trees

Making decisions can be an anxiety-filled process and even outright confusing. Examining your choices in an organized way can help you determine potential outcomes, gauge the associated risks, and ultimately increase your likelihood of success.

Decision trees come in handy in such scenarios. This guide will walk you through the basics of decision trees and guide you to create them. It also looks at some of the software tools that will help you make efficient decision trees.

What is a decision tree?

A decision tree is a flowchart that you can use to visualize the decision-making process. It helps you map out different courses of action and their potential outcomes. Decision trees help you predict your chances of success depending on the path of action you choose.

You might be tempted to decide based on your gut feeling, but decision trees are more effective. The formalized and calculated approach that decision trees provide is necessary to improve the likelihood of success of your decisions.

A decision tree is generally made of three key components.

Root node

This top-level node represents the big decision or the ultimate objective you're trying to achieve.

Branches

Branches stem from the root node and represent the different courses of action available to you when making a particular decision. Branches are primarily indicated with an arrow line. They can include the associated costs of that option and its likelihood to occur.

Leaf node

The leaf nodes are attached at the end of the branches and represent possible outcomes for each course of action indicated by the decision tree branches. Generally, there are three types of leaf nodes:

  • Circle leaf nodes – these indicate an unexpected event or an unknown outcome.
  • Square leaf nodes – these represent another option or another decision you can make.

When combined, these three elements, i.e., the root node, branch nodes, and leaf nodes, loosely resemble a tree, which is where this flowchart gets its name.

How to make a decision tree

#1. Start with your major decision at the root node

The root of the flowchart should carry your main objective. In other words, the preliminary decision that you are trying to make should be on top of your diagram.

#2. Draw your arrows to indicate the different branches

Starting from the root node, draw arrow lines for every possible option. Remember to factor in the costs associated with each course of action, as well as the chances of success.

#3. Attach leaves at the end of your branches

What are the results you can glean from each option in the branches? Draw a square leaf node to represent another decision you have to make. Draw a circular node if the result of a course of action is uncertain.

#4. Determine the probability of success of each decision

Doing adequate research is crucial when creating a decision tree as it can help you reliably predict your chances of success. This research might entail assessing your previous projects or data from your industry.

#5. Calculate risk vs. reward

Evaluate the value that you expect from each decision in the diagram. Risk vs. reward analysis will help you manage risk and maximize the odds of reaching a rewarding outcome.

#6. Decision tree software

Numerous software tools can help you create a decision tree. These decision tree makers will give you access to decision tree templates to tweak to suit your needs. These software tools also come with decision-making examples to help you create effective decision trees that will boost your chances of success.

MindManager, which is one of the best tools in the market, even offers you a complimentary 30-day free trial before you can commit your cash. It can also help you identify connections and their different outcomes to minimize risk when making decisions.

Conclusion

Decision-making need not be a daunting task. A decision tree can improve your decision-making skills and mitigate undesirable outcomes. This tool can help you visualize your decision-making process effectively and factor in things you would not otherwise have considered.

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