Finding the balance between data-driven strategies and gut instinct
Feb 05, 2020 12:09PM
By Oeidra Williams
Data-driven decisions: if you're not making them, your company is doomed—that is, at least, according to current business researchers.
In today's fast-paced, technology-focused economy, it seems that terms like "data analytics," "data strategies" and "business intelligence" are everywhere we turn. While trends and lingo in business may come and go, it appears that the data revolution and all the changes that come with it are here to stay.
The good, but potentially overwhelming, news is that no matter where your business is in terms of size, revenue, industry or location, everything that happens within (and sometimes around) your business is data. From sales receipts to search engine queries on your competitors, data is everywhere and anything that impacts your business is data.
While perhaps this has always been the case, the growth in the use of data and the reliance on building strategies built around company data has grown exponentially in the past decade.
A well-cited Seagate Technology report that highlights the growth and change in the global "datasphere" states that by 2025, digital storage transference will reach 175 zettabyte—a growth that far exceeds the current usage of approximately 33 zettabytes of data.
As the evolution of data becomes more prevalent, it stands to reason that more and more business owners, CEOs, business strategists and, of course, CIOs are asking where their companies fit along the data continuum.
Industries that lead the data-driven movement include giants in e-commerce, banking, healthcare and retail such as Amazon and Bank of America; however, economists warn small businesses not to close their eyes to the benefits of using their everyday data to either gain or retain a competitive advantage in their industry.
According to leading data analytics experts, when companies view their data as an asset that can be used for growth rather than just a byproduct of a business activity, they are better posed to not only optimize a variety of business processes within the organization, but also increase profit margins and revenue.
In short, they say that every company should use its data to develop business strategies.
Pros to a data-driven strategy
Effective data strategies within businesses are said to increase revenue and efficiency in several ways, including:
Providing "almost real-time" information to enhance operational decision-making.
Ensuring the proper use of shared data across an organization's structure.
Giving insight into customer trends, habits, and patterns.
Of course this type of information may be useful and perhaps critical to producing positive results. Because the best decisions are based on information and data is information, this approach seems to be well founded, but what if your business already performs well or has an actionable plan? Why should you change your strategy development process?
While the reliance on data-driven strategies is growing rapidly, many business executives and owners are skeptical to turn everything over to the computer to process and analyze.
KPMG International's recent Guardians of Trust study found that just 35% of executives surveyed had a high level of trust in the use of data analytics. Perhaps the remaining execs are asking, "Whatever happened to good old fashioned, gut decision-making?" Could it be that the data scientists and analytics gurus have their algorithms wrong and that data is not as big as it seems?
The cons to data-driven strategies
While the numbers and/or data can be a great place to start, many analysts agree that data alone is not always sufficient to make decisions and that there will be times when trusting instincts can have a more powerful impact than data processing. After all, the data comes from people.
Just as there are great reasons for a company to develop data-driven strategies, there are several reasons in which to hesitate, including:
Data can't replace human insights and thinking.
Data strategy creation and execution can require expensive investments in people and technology.
Data can be easily misinterpreted or manipulated either accidentally or intentionally.
Is there a balance?
Being that we are in a digital age where advances in technology grow constantly, it would seem wise for businesses to explore the potential of using data-driven strategies; however, numbers can be wrong and can sometimes only tell a portion of the story. Business leaders may find themselves questioning the best path to take between human intuition and data assessments.
Some relief may be found in knowing that there is no wrong way to choose; in fact, most companies will find the most success from balancing decisions based on both data and human intuition.
The ability to find a combination of gut instinct mixed with data analytics will be the sweet spot for successful companies, blending the two leads to an adaptive approach where problems are solved in a flexible and dynamic manner.