Building a Data-Driven Business: Data vs Gut Feel
“Trust your gut”. It’s the trademark advice of grandmothers and school sports coaches and it remains a trusted mantra for many successful entrepreneurs. When it comes to making business decisions in a data-driven world, though, is trusting your gut still a good idea? Is it time for everyone to accept that “gut feel” no longer has a place in strategic business thinking? Has data entirely usurped human intuition in guiding business decisions? The truth may not be so simple. Before we attempt to pass judgment, though, let’s hear the cases for both gut feel and data-driven decision making.
Data: From Cool Idea to Requirement
Let’s cut to the chase. If data isn’t informing your decision making in 2018, you’re not keeping up. It’s already tough to think of an industry that hasn’t been transformed by access to more, higher-quality data. Businesses in every sector are battling to win market share. In most cases, victory comes down to offering the best suited or most complete solution to your customer’s needs.
You can win these battles based on the fields of product and price. In today’s marketplace, however, competition is so fierce that dominating on those points is rarely enough. Now, customers expect personalized brand experiences from product discovery to the post-sales relationship. Staking your claim in this “experience economy” is simply not possible without access to data. It has become essential to find ways to objectively understand what your customers perceive as value, how they prefer to access that value and exactly where and how your systems are falling behind competitors in bringing it to them. So, thanks again gran, but no amount of gut trusting is going to help us compete with our data-conscious competitors.
Gut Feel: Not So Fast Young’un
Data might be the cool new kid in the room, but if it’s so important in smart decision making. How did people build empires before having access to it? Turns out, gut feel is no joke. In fact, it has become a subject of considerable study by scientists around the globe, who have come up with a more serious-sounding name for it; interoception.
While the stomach is, indeed, involved in interoception, the heart, lungs, bladder, bowels, and skin are also key players. Interoception is essentially the “feelings” you experience as a result of your body’s physical responses to stimuli. For example, if you have to tell your CEO that that new sales strategy you developed based on gut feel is a dismal failure, you’ll feel nervous. Because you’re nervous, your heart rate will increase and you’ll start to sweat, which in turn will make you feel even more nervous. It’s a positive feedback loop that will require conscious intervention to interrupt.
Even more interesting, though, is the fact that high interoceptive ability has been shown to result in good decision making. In one of the most publicized experiments in the field, Narayanan Kandasamy et al. measured whether or not the success of financial traders was associated with their ability to read the signals their own bodies were sending them. The results were astounding.
Perhaps the most revealing findings of this experiment, for our argument at least, are these:
- Interoceptive accuracy scores predicted trading success: Those with higher interoceptive accuracy demonstrated higher profitability than those with lower accuracy.
- More experienced traders showed a more uniform ability in accurately detecting internal bodily signals. Less experienced traders showed more variability.
So essentially, if you’re able to interpret the signals your body is sending you accurately and use that information. Then gut feel may indeed be as important as gran makes it out to be.
Cultivating a Data-Conscious Gut Feel
While it’s true that making decisions in the absence of data means you’re starting at a disadvantage, decisions made in a vacuum are prone to several issues:
- Some metrics are easier to measure than others. In the absence of a clear understanding of this, it’s easy to make decisions based only on data that is available, rather than a clear understanding of the situation as a whole.
- Not paying enough attention to data quality is a surprisingly common mistake. Given the huge number of data sources that you can bring to bear in the modern boardroom, it’s all too easy for data to be misleading. Decision makers should understand the situation well enough to spot anomalous, data-based insights and take steps to ensure the quality of the data involved.
So as is true in the case of so many similar discussions, it seems that the best approach applies the wisdom of both the old and new schools. A data-driven approach ensures that the picture we base decisions on is as clear and as possible. But access to information alone does not make for great decisions.
For businesses just joining the data-driven revolution, one of the biggest challenges is making it faster and simpler for decision-makers to access. Fortunately, that’s now a whole lot easier. Kloudio allows even non-IT staff to generate their own reports from your databases. Kloudio can be set to refresh reports at regular intervals, and once you’ve pulled the data you need directly into a Google Sheet, you can process in seconds, or feed it into your preferred BI Tools. Try Kloudio for free right now!