What is an Influence Diagram?
An influence diagram is a compact graph of a decision situation: decisions (squares), uncertainties (circles), and outcomes (diamonds), with arrows showing what influences what. It's the executive summary of a decision tree — the tree enumerates every path; the diagram shows the causal structure at a glance.
Use it early, to agree on what drives what before anyone argues numbers; quantify later with trees or simulation once the structure is settled.
Worked example
Deciding plant capacity, the team diagrams it: capacity choice (square) → capital cost and unit economics; demand (circle) and competitor entry (circle) → revenue (diamond); a regulation uncertainty influences both demand and cost. Drawing it exposes the real fight — two directors disagree about the demand-competitor arrow, not about capacity — and the Monte Carlo that follows models the right argument instead of the loud one.