By Dr. Ben Gilad, ACI Faculty
There is no doubt that data-driven decisions in many areas of companies’ operations are superior to decisions without data to back them up. Can you improve quality with a statistical data collection?
Of course. W. Edward Deming showed it more than 60 years ago. No news here.
Is customer segmentation and targeting of marketing (advertising, promotion, pricing, new product features, etc.) more accurate with more data? For sure, for sure. So is everything improved by the concept of data-driven?
Not by a long shot. What’s more, the term is in danger of becoming as meaningless as “synergies” or “insight” or “customer satisfaction.”
What Data is Driving Data-Driven Decisions?
Which type of data qualifies a company or a decision to be called “data-driven”? Christopher Elliot, A travel columnist at USA Today recently wrote the following insightful line: “Airlines, car rental companies and hotels claim they can divine our future travel desires with data. But crunching numbers isn’t the same as listening to customers.”
Every customer survey of airline fliers reveals the same complaints. The latest, according to Elliot, gives airlines a score of 69 out of a 100. If my son brings a grade like that from school, he will have to explain what happened and stands to lose at least one hour of electronic privilege (out of the 26 he uses in a typical 24-hour day).
Travel actually keeps growing, with airlines at last making profits again. So which data are more significant?
- The BIG customer data, forum discussions and endless whining on social media from frustrated travelers who were seated in seats suitable for behinds of a 4 years old.
- The bottom line
You know the answer, and don’t tell me, “Just wait, it will take time for the travelling crowd to punish the offenders.” It has been like this for many years, and it is getting worse. Data-driven? Yeah. Sure. After years of mismanagement of capacity, airlines at last wised up. The public may not like it, politicians may make noise, but the reality is overcapacity brought bankruptcies.
Data-Driven Doesn’t Mean Insightful
Name ten entrepreneurial successes that started with data-driven visions. Go ahead. I can name ten that didn’t without even thinking: Google, Microsoft, Facebook, Apple, Uber, Mars, Procter and Gamble, Wal-Mart, Ford, and Coca Cola. Shall I continue?
Entrepreneurial vision is based on early identification of opportunities in the environment and if it is early it can’t have data to begin with, only a keen eye for a missing offering, a need not yet recognized or not yet addressed provide the vision. Read the story of Strictly Bicycles to understand what I am saying.
Good Decisions Sometimes Go Against the Data
The majority of business situations are ambiguous, where data is far from unidirectional or even clear. Uncertainty is not the same as risk where the probabilities are known, and data that point in one direction may not signify more than… data that pointed in one direction. When it comes to mechanistic tasks such as quality control, production scheduling or shipping optimization, data-driven modelling is unambiguously superior to gut feeling.
When it comes to needs and wants, and customers and markets, data-driven is not superior to a decision makers’ sense of what’s right and what’s wrong. Ninety five percent of all new consumer food products launches fail. Sixty-five percent of all new drug launches fail. Do you know how much market research and data “culling” go behind the scene?
Obscene amounts, costing millions.
So, when a manager comes up before a senior executive board and makes a presentation with a slew of data-driven research (“Income growth has exceeded our threshold for entry; customers tell us they want…” etc…), but the executives’ internal compass of where strategy should go points elsewhere, do not rush to judge these executives as short sighted.
Yes, they might be. However, they might be more strategic than the data show. Ryanair’s Michael O’Leary ignored every bit of data about what flyers “wanted,” except his belief in their price sensitivity and Ryanair, the most hated airline in history is now the biggest airline (by passenger volume) in Europe. O’Leary still ignores the data.
Data-driven is important. Data-driven, though, is not a panacea or even a clear solution to business problems. There are important decisions based on strategic thinking which actually, at times, ignore data. And I am not mentioning Steve Jobs. Not even once.