Harvard Business School Working Knowledg e Archive

Strategic Decision Making: Applying the Analytic Hierarchy Process

Analytic Hierarchy Process: Not just any old ROI.
5/10/2004
This book is expensive—almost $120—but worth knowing about, we think. The authors describe the decision-making framework known as the Analytic Hierarchy Process, which is used worldwide, and discuss how it works in business, defense, and governance. In a nutshell, AHP helps structure the complexity, measurement, and synthesis of rankings for making decisions related to forecasting, resource allocation, benchmarking, et cetera. The section on business lays out theory and then applies it to examples of wireless adoption strategies, software vendor evaluation, and software application development. Bhushan and Rai also briefly discuss the strengths and weaknesses of other common decision analysis tools, including Net Present Value (NPV), Economic Value Added (EVA), Total Cost of Ownership (TCO), and the more generic Return on Investment, otherwise known as ROI, the umbrella term for several forms of decision analysis.