How often do we watch romantic movies that tell us to follow our hearts, meaning to make decisions based on our emotions? But is that really the best way to decide?
Some people think that being able to make quick decisions is a valuable skill, but sometimes relying on feelings or intuition alone without thinking about the consequences can make things worse.
What if I told you that making decisions based on data is three times more effective than making decisions based on your gut? That is what a recent survey of over 1,000 senior executives by PwC found out.
Decisions based on emotions are like gambling, where you think you have a 50% chance of being right. But the truth is, you might have a much lower chance. And if you look at the data, you can take calculated risks and know your odds of success.
So, What is Data-driven Decision Making?It means that you use data, such as facts and metrics, to make decisions that help you achieve your goals or objectives. But not just any data, you need to choose the right data that matters. It also means that you use a method that promotes critical thinking, where data is more important than emotions, to make decisions that help you achieve your goals. For instance, if you want to increase your sales, you can use data to identify the best products, prices, and channels for your target market.
One of the best examples to understand the benefits of data-driven decisions could be trading in the stock market. Consider this scenario: you are deeply fond of a brand or company, let us call it ABC. This company holds a special place in your heart due to the nostalgia associated with it. Even though you do not frequently use its products, your affection for the company remains strong. Suddenly, news breaks that another company, let us say XYZ, is acquiring ABC. Impulsively, you believe this is a positive move and decide to invest in XYZ’s shares. However, the data tells a different story. ABC has been registering significant losses, and according to the data this acquisition will also hamper XYZ’s profits for a certain period.
Investors who act on their emotions rather than the data may face substantial losses. On the other hand, those who analyze the data are aware of this potential pitfall and would choose to sell their holdings in XYZ. This example illustrates the importance of data-driven decision making in stock trading.
Data-driven decisions are not only limited to the stock market, but also have a wide range of applications across different domains. They can also help businesses in many other areas, such as marketing and sales. Data can help businesses understand their customers better, optimize their campaigns, and increase their revenue. How? By using data to segment their customers into different groups based on their behavior, preferences, needs, and value. This way, businesses can tailor their messages, offers, and products to each customer group and in turn, create a loyal customer base and maximize customer satisfaction. Plus, businesses can use data to measure how well they are doing with key metrics, such as conversion rates, return on investment (ROI), and customer acquisition cost (CAC). Data can also help businesses find new opportunities and trends in the market; analyze their competitors and customers; and discover new customer segments, niches, or markets that they can reach with their products or services.
Is Data Always Beneficial?There are many experts who through their research have discovered that data is not always as helpful as it seems. While many companies have invested significant amount of money in data tools and technology, much of the data available with them in the systems is of low quality and uninterpretable, and even if the data is accurate, there is simply far too much of it to quantify and interpret into real insights and results. While these experts agree that the attention to raw numbers and metrics is useful, their concern is the complexity of studying the data, and thus, delaying making decisions or putting off decisions altogether.
“In several studies I’ve conducted over the past eight years looking at high-stakes decisions, such as surgeons making life-or-death emergency room decisions, or early-stage investors deciding how to allocate millions of dollars in startup capital, I found that the role of gut feel is often to inspire a leader to make a call, particularly when the decision is risky.”
— Laura Huang, associate professor of business administration at Harvard Business School
While I acknowledge the points from the experts, and that data is not always a magic bullet that can solve all problems. Sometimes, data can be unreliable, incomplete, or overwhelming. And sometimes, data can make us overthink or procrastinate on making decisions. But that does not mean we should ignore data altogether. It just means we need to be smart about how we use data.
Some Tips on How to Use Data Effectively:Data can be a powerful ally if you use it wisely. Data can help you make informed, confident, and effective decisions that can improve your performance and outcomes. But as we discussed, data cannot be the only factor that will help you make decisions effectively. You also need to use your intuition, experience, and judgment to complement your data-driven decisions.
Superlative responsiveness and creativity. The professionals with whom we have worked have been significantly responsive.
