Every two days now we create as much information as we did from the dawn of civilization up until 2003.
– Eric Schmidt, Google CEO, 2010
Information
is being generated everyday online, within organizations, by customers
and by suppliers. Some firms are building a competitive advantage in big
data analytics and a company culture that relies on fact-based decision
making with insightful multi-contextual reporting to drive business
strategy and decisions. With the decline in the US economy since 2008
and unpredictable changes in demand, many companies are focusing on
using fact-based decision making to improve their bottom line. According
to the CEB study, “most employees are now knowledge workers, spending
an average of 36% of their time collecting and analyzing information.”
(CEB, 2011)
In
extreme cases, leadership that may have relied on gut checks to make
decisions are being replaced by information scientists that run
potential scenarios through a series of algorithms to determine the
right course of action. According to Andrew McAfee of MIT, data
scientists are better at data prediction than industry experts. In data
science competitions, rarely do the winners on predictions come from the
industry. (McAfee, 2012)
Some
believe that good data does not guarantee good decision making. MIT
wrote a fantastic article on how firms are wrongly using facts to create
evidence for bad decisions. They noted that evidence-based decisions
are appropriate when the input and output of a process are consistent,
such as location planning or supply-chain management. However, not all
decisions fall elegantly into an algorithm. For these reasons using
fact-based evidence for decisions requires due diligence from
leadership. “Executives often provide analysts with subtle signals
regarding the desired outcome of a formal, evidence based analysis.
Senior decision makers are often unaware that evidence has been shaped
by subordinates to conform to the perceptions of management.” (Tingling,
P. 2010)
There
are steps a leader can take to build fact-based decision making into
the right processes within an organization.
- Take time to understand and define how fact-based decisions are made in the organization.
- Identify who relies on specific facts for decisions, and how those facts are retrieved and validated.
- Coach your management team on techniques to avoid signaling anticipated results to analysts.
These steps will help build a healthy use of fact-based decision making into the firm’s culture.
Sources:
Corporate Executive Board (2011) Overcoming the Insight Deficit: Big Judgement in an Era of Big Data
Live Webinar viewed on May 3, 2012: http://video.webcasts.com/events/pmny001/viewer/index.jsp?eventid=42430
