Yes, we’re living in the Data Age with exabytes of information at our fingertips at any point in time.
But when it comes to making decisions, many managers are doing it the old fashioned way, by glancing at Excel spreadsheets and going with their gut.
A recent survey by Epicor found 46 percent of CFOs admitted to making important decisions based only on instinct. A third of them said not being able to access internal data quickly enough as a key cause of decision-making mistakes.
Can This Be True?
But how can this be happening at the same time that bots trade a billion shares a day on NASDAQ or ad agencies bid on thousands of keywords in a minute using algorithms?
In those marketplaces the number of variables and the speed and volume of transactions are just too much for human decision makers, according to Antonio Regalado of MIT’s Technology Review. So maybe it’s by force that these organizations have found another (better?) way.
Yet it seems that the C-Suite doesn’t want to manage that way. They don’t trust data alone.
Duncan Watts, a Microsoft researcher has written that while there are dangers in relying on gut instinct, there are pitfalls in “slavishly obeying data” as well. Consider the financial crisis that, according to some, was caused by poorly designed or inaccurate quantitative models.
“Going by your gut” can be just as bad.
Watts points to Ron Johnson, the JC Penney CEO who nearly brought the company down by not only ignoring data to make predictions, but by also discounting the daily weekly and monthly reports that were staring him in the face. How is it conceivable that he didn’t realize that his modus operandi wasn’t working?
Because at one point in time, it might have served Johnson and his employer brilliantly. After all, Johnson was the mastermind behind the success of Apple’s retail operations
Your Gut or Your Data?
It shouldn’t be an either/or question. Epicor’s survey reveals that almost half of the CFOs surveyed stated that instinct has a valid role to play in the decision-making process. But it was playing too big a role according to many because there were gaps in their data.
Collaboration could be key in solving the aforementioned problem. Managers from outside of Finance, for example, might have the missing data, or at least have a sense of what it might look like. Fifty-two per cent of the respondents said that when they disseminated information to a wider audience, it aided in the decision making process.
Is Collaboration the Answer?
A scientific mindset might be worth considering as well, according to Watts. “The world is too complicated for any one recipe to apply,” he wrote.
A “scientific mindset” as he defines it, begins with asking a general question based on experience, forming a hypothesis to test it, gathering and applying the relevant data, and then evaluating it in comparison to a competing hypothesis.
This approach combines instinct and data and Social can influence both, whether it’s forming the right question, finding missing data, or helping to test results.
While much of what we read in this data-driven age evangelizes that “instinct is good, data is better," the reality is that we don’t have to choose. In fact, we can add social and the scientific method to the process as well.