Gut instincts rule in the business battlefield with only a minority of business leaders relying on data and analytics in their decision-making process despite the huge financial impact these decisions will have.
This is a surprising find: A total of 58% of business executives say they rely on intuition or experience as the preferred mode for big decisions, according to a survey just released by PwC.
These “big” decisions are listed as those having an impact of between US$50 million and $10 billion on the businesses. Yet business leaders struggle with how to leverage the use of the data, according to Gut & gigabytes: Capitalising on the art & science in decision making, a survey done by the Economist Intelligence Unit (EIU) sponsored by PwC.
The EIU, in May, 2014 surveyed 1,135 executives, of whom 54% were C-level executives or board members. The majority were from Europe (29%), North America (35%), and Asia-Pacific (24%) including New Zealand. The remainder were from Latin America, the Middle East and Africa.
PwC partner in New Zealand Colum Rice told Idealog that locally there is a broad mix of experience in the application of data analytics.
“Some companies are advanced users while some are a lot further down the learning curve.”
While there are contrasts between the local and global trend, there are parallels in the challenges Kiwis faced around the issue of data quality and accuracy. New Zealand SMEs can definitely benefit from leveraging data analytics to grow, Rice adds.
There are two levels of decision making – one that can be made based on analytics, and the other not, Rice says. For the decisions that have to be driven by facts, good data comes in handy.
“Data won’t help if you ask the wrong questions. So it is a question of not if we have the data but if we have asked the right questions (in the data collection) to help us make the decision,” he adds.
Businesses across the world are most focused on growing their businesses; collaborating with existing competitors; and shrinking their businesses over the next 12 month.
Although using data and analytics is three-times more likely to lead to better strategic business decisions, only one in three executives say their organisation is highly data-driven, according to the survey.
Of the 43% of the respondents whose companies are data-driven, the verdict is that data analytics always help improve business performance.
All respondents identified investments in high quality data analytics as a top priority over the next two years.
What’s keeping business awake at night?
Across the globe, companies are faced with the pain caused by technological changes and responding to evolving consumer behaviour. Others are majorly preoccupied with coping with regulatory changes and their impact on business.
How data analytics is being used
Most companies use data analysis to optimise their range of options, including the choice of channels to distribute products and services, as well as the types and prices of these, the survey adds.
A popular technique being used to sort variables is A/B testing (a statistical hypothesis).
Barriers to data use
Many executives are sceptical or frustrated by the practical application of data and analytics for big decisions.
CEOs have typically shunned data use. In fact, 52% of CEOs have previously discounted data they don’t understand while 25% cite last of skills and inability to use data effectively.
The main barrier to using data analytics is the quality, accuracy, or completeness of the data, although this is more prevalent among the developing world than the developed, according to the findings.
The other barrier is the difficulty of assessing if the data is useful. The sheer volume of the data is also often overwhelming.
To avoid being swamped, companies need to adopt a solutions-centric approach – read, be clear about question before delving into the data or suffer “analysis paralysis”.
Just because data is easy to store doesn’t mean it will be eventually useful.
“Data and datasets are already biased, even before human start analysing it,” the survey quotes Joe Peppard, professor at the European School of Management and Technology, Berlin, as saying.
The answer is not in hiring another band of data scientists but building the bridge between data producers and the frontline staff who can then find ways to predict the likely impact of their decision at all levels, the survey adds.
Ultimately, data is historical hence not a predictor of the future. “Half of the C-level executives agree that relying on data analysis has been detrimental to their business in the past,” according to the survey.