Being data-driven in organizations is a bigger challenge than it is made out to be. For managers to suspend judgement and make decisions that are informed by facts and data is hard, even in this age of Big Data. I was spurred by a set of tweets I posted, to think through this subject.
Decision Making Culture
A lot of organizations have jumped into the Big Data era having bypassed widespread use of data-driven decision making in their management ranks altogether. And this is, for many organizations, an inconvenient truth. In many organizations, even well known ones, experienced managers often made decision on gut feeling or based on reasons other than data that they collected. Analytics and business intelligence hoped to change that, and in some ways, it has. Many organizations and managers have changed their work styles. Examples abound of companies adopting techniques like Six Sigma in the 1980s and 1990s, a trend that continues to this day in the manufacturing industry.
With the explosion in technologies and methods that have enabled Big Data to be collected and stored as “data lakes” and for data to be collected in real time as streaming data using technologies like Spark and NiFi, we’re at the advent of a new era of decision making characterised by the 3 Vs of Big Data, and data science at scale.
To see three contrasts between old and new management decision making styles:
- Spending and buying decisions (for resources, infrastructure, technology and projects) are made after competitive evaluation based on data now more than ever. In the past, the lack of communication and analysis engines, and limited globalization enabled managers to spend less time evaluating even critical decisions, because the options were limited. Spending and buying decisions make up a lot of the executive decision making and a lot of it is informed by small data. The new trends of connected economies to networks, data mining and data analysis is bound to impact this positively. A flood of information enabled by the digital age exposed them to possibilities but without the tools to do better at such competitive analysis. The advent of advanced analytics will upend this paradigm, and will result in a better visibility for decision alternatives.
- Operational excellence decisions are based more on real-time data now more than ever. Operational excellence and process efficiency is a key focus area for many manufacturing organizations, and increasingly concerns service oriented organizations as well. While “small data” were being collected at regular intervals, to get a sense of the business operations, these were not fully effective in capturing the wide range of process modes and didn’t represent the full possibilities one could leverage with such data. The number of practitioners of advanced methods, who used such methods in a verifiable way, were also limited and rarely formed the management strata or informed them. The proliferation of the new classes of data scientists and data engineers will affect the way decisions will be taken in future, in addition to the advent of real-time analytics.
- Small data as a stepping stone to Big Data. Small Data, which is data collected as samples that may be slices of sensor information or representative samples of population data (such as Big Data), may increasingly be used to formulate the “cultural business case” for doing Big Data in companies. Many companies that do not have the culture of data driven decision making in their managerial ranks, are experimenting on a grand scale, with Big Data. Such organizations have taken to Big Data technologies such as Hadoop and Spark, and are collecting more data than they usefully analyze, often times. There is definitely scope to evaluate the business value with such implementations. There is also an opportunity to improve the cost effectiveness of the data science initiatives in companies, by evaluating the real need for a Big Data implementation, by using “small data” – data that does not have the same volume, velocity, variety and veracity criteria that what’s now accepted to be Big Data does have.
Data Driven Decision Making Behaviours
Decision making is strongly influenced by behaviours. Daniel Kahnemann’s book Thinking Fast and Slow provides a psychological framework for thinking about fast and slow decision making, the former being gut-driven, and the latter being driven by careful, plodding analysis. Humans have the tendency to decisiveness, especially in organizations, and executives are often rewarded for fast decision making that is also effective. Naturally, this means that decision making as a habit flourishes in organizations.
Such fast decision making, however, comes at a price. A lot of decisions that aren’t well thought-through, could influence a large organization’s functioning, because the decision could be fundamental to the organization and may be relevant to all employees. Some organizations do reward behaviours in their managerial cadres that facilitate looking at the data that supports decisions. However, the vast majority of managers have a tax on the time they spend on decisions and would be rewarded for acting quickly and influencing a wide ranging array of decisions instead.
Enabling fast decision making has obvious benefits in a market economy. The more time managers spend in decision making, or delay a decision, the less competitive companies tend to look. Data driven decision making can be enabled by providing access to data, in a quick and painless way. And this means building intelligence into our interfaces, and into the machines that help us make and record decisions. It also means being able to delegate the mundane tasks well and easily.
A lot of organizations that have Big Data initiatives may not have the appropriate management or decision making culture that can fully utilize the investment in Big Data, which can sometimes be considerable. By using “Small Data” and the insights from analysis of such data, there is an opportunity to invest less and build the behaviours and organizational systems and habits that will make a Big Data implementation effective.