An Introduction To Decision Tree

An Introduction To Decision Tree

A decision tree is an effective tool in the hand of management that helps them to solve various problems. It provides the management with various options along with their outcomes that help them in making comparison and thus arrives at the most suitable option. This is a non-parametric approach used for solving various problems and is very popular because of its effective outcome for the business. They are used for taking important and strategic decisions such as operation management, project selection, and various other crucial decisions. Decision tree software is high in demand as it easily can perform such functions.

The decision tree is a graphical representation of all the outcomes that are possible that can be used to solve the issue. It facilitates the managers with the probable outcome in the given scenario. To completely understand what a decision tree is and how it is applied, it is vital to go through various terminologies related to a decision tree. These are mentioned as follows:

  • Root Node: The root node represents the whole of the decision tree. This is further divided into various multiple homogeneous variable sets. It is the first node of the tree through which other nodes are created. This is therefore the starting point of the decision tree.
  • Splitting: When a node is divided into two or more sub-nodes is known as splitting. These nodes can either further take the form of a decision node or terminal node.
  • Decision node: When a sub-node is divided into further more nodes is called a decision node. Each decision node has its branch that is connecting to the previous one.
  • Terminal node: When there is no further division of nodes into sub-nodes, then it is called terminal nodes. It is the end of the outcome. It is also called a leaf node as it does not spilt any further just like life in reality.
  • Pruning: It is a process under which one removes the sub-node. This is the exact of opposite of splitting. It is done because in various situations the decision tree becomes more complex and it leads to confusion and chaos. Due to this one might end up giving more importance to unnecessary data. It is like cutting off the branches of a tree that are useless.
  • Parent/Child Node: The node that is divided into sub-nodes is called the parent node and the sub-node is known as the child node.

These are all the terms that are related to the decision tree. This will provide clarity to the user and will aid them in arriving at the right decision. But some steps are involved in the formation of the decision tree. It will help the user of the decision tree to simplify its interpretation. These steps are mentioned as below:

  • Defining Problem: The first step is to clearly define the problem that the management is dealing with. To do this, it is vital to understand the situation and the problem area where the management solution is required. Without proper understanding, there will no fruitful result one can attain from the decision tree analysis as there will be nothing but chaos and confusion.
  • Possible solutions: After defining the problem area, the next step is to chalk out the various alternatives along with their various consequences to combat the problem. This step involves a detailed analysis of the problem so that all the possibilities to solve the issue can be identified by the management.
  • Probable Values: After the alternatives are identified then the next step is to put all the variables on the decision with their probable value.
  • Determining and Allocation Payoff: The next step is identifying the outcomes of the variables and finally representing them in the decision tree.
  • Finding EVM: Under this step, all options are analyzed properly and their Expected Monetary Value. This step will provide the user with information about the option that will yield the highest expected value.

These are steps that help to formulate the decision tree. With the decision tree softwarethe above-written steps are easily and conveniently performed and thus lead to a much faster approach to dealing with a problem.

The decision tree has a lot to offer to the manager. It is an effective management tool that provides various advantages to the management. One can avail of these benefits by selecting the best software for the decision tree. The various benefits the business can avail of are mentioned as below:

  • Comprehensive: The decision tree provides the managers with the comprehensive options along with their outcome that helps the management in arriving at the right decision. It considers all the possible outcomes of the problem thus providing a detailed analysis of the problem. One option can further be divided into sub-nodes so that all the options are exhaust and no viable option is left behind.
  • Specific: A decision tree involves assigning specific values to different options and variables. It helps the management in cost-benefit analysis of each outcome so that only the relevant options are further considered and thus eliminates the unnecessary data. This helps in reducing the confusion of management in arriving at the correct and accurate decision. It takes into consideration the financial constraint so the all the required and valid information is available to the management dealing with the problem.
  • Easy: Decision trees are easy to use and understand. They can be easily explained to others with simple math and thus there is no need for understanding any complex formulas to get a hold of the decision tree. As everything in the decision tree is visually presented, it makes it easier for a user to undertake a comparison of various alternatives. Thus one needs to put just a little effort into understanding the decision tree.
  • Dynamic: Decision trees are highly dynamic as it can deal with various problems of the business and are effective and efficient in dealing with all kinds of situations.

Hence these are some of the benefits of the decision tree by selecting the best software for decision tree.