• February 4, 2016

You Can’t Always Trust Your Gut: Drive Decisions With Hard Evidence

So your organization recognizes that data and analytics hold enormous potential. But harnessing those information assets to drive decision-making is another story. You’re in good company.

Leaders commonly make decisions that instead capitalize on their personal strengths, or rely on personal experience, gut, or organizational consensus. While these can be important factors, we now have advanced data-gathering and analytics processes to back them up. These tools help enterprises decipher complex business processes and tease out crucial interdependencies that traditional decision-making patterns often missed.

It’s called evidence-based management, and it’s not new. Put simply, it’s the process of gathering the best available evidence to drive decisions and guide actions. It prioritizes facts over strongly held beliefs and past patterns, and encourages experimentation and learning by doing. Those organizations that effectively employ it possess a decisive competitive edge. But using data-derived evidence to drive critical enterprise decisions has inherent risks.

Is Evidence-Based Management an Illusion?

The enterprise environment is drowning in data. Yet data is not the same as facts. Data promises objectivity, but generating solid, actionable facts from data requires a different analytics discipline. Modern analytical practices—from data hygiene to presentation—are replete with subjective interpretation that can support a variety of perspectives and competing analyses, all from the same data points.

For example, analysts can focus on subsets that support favored results or filter out data points that run counter to current thinking. This is how data can be massaged to support pre-existing patterns and beliefs, a process otherwise known as confirmation bias. This tendency to put more faith in information that agrees with what we already believe can lead to critical management errors. It can cause enterprise leaders to reflexively dismiss information that runs counter to prevailing mindsets.

Driving Evidence-Based Cultures

Establishing an effective evidence-based culture means being comfortable with facing cold facts. It dissuades decision-making based on untested but strongly held beliefs or on uncritical benchmarking of what “winners” have done. It’s open to trial programs, pilot studies, and small experiments. Competitive agility often means getting something out there, testing reactions, and fixing it on the fly as opposed to perfecting it in the lab or conference room.

Enterprises with evidence-based cultures relentlessly cull for new insight both inside and outside the organization. They ask for proof and efficacy every time a change or new initiative is proposed and parse the logic behind them. This process gets attention and leads to more disciplined thinking throughout the organizational ranks.

At the same time, these cultures encourage a shared understanding and unifying frame of reference of data. For example, how do you define terms like fast, sales, effective, value, potential customers, and returns? How do these terms fit into your enterprise objectives? You want to invest time in executing decisions, not discussing terms from different reference points.

To avoid confirmation bias traps, encourage critics and contradictions. Aggressively seek out and understand information that runs counter to prevailing orthodoxies. From these processes, solid facts—and better decisions—can flow.

Like this story? Read more about insights from data in Today’s Enterprise Must-Have: Data-Driven Marketing.