Billionaire entrepreneur, Richard Branson, once said, “I rely far more on gut instinct than researching huge amounts of statistics.” Notwithstanding his reputation as a daredevil, Branson is far from a radicalist when it comes to relying on his gut feelings to make decisions. According to a recent survey, 62% of U.S. executives admit to depending on “gut feelings and soft factors” to make decisions. And who can blame them? Hinging on our gut is fast and easy – it requires minimal heavy lifting in the form of research or data crunching.
What if, though, there was a viable alternative to using our gut – one that offered similar “ease of use,” but was more data-driven? Business Intelligence (BI) tools may be the solution. In theory, BI enables a human to use software to sift through and process large volumes of data at rapid rates. The applications are powerful and far-reaching – ranging from improving employee productivity, to identifying new market and product opportunities, to optimizing supply chain operations, etc.
All that glitters is not gold, however. While counterintuitive, research indicates that there are circumstances when we should ride the coattails of our gut (rather than BI) to make decisions. Let’s investigate.
It may surprise you to learn that the term “gut feeling” is not a misnomer. The gut is actually a nervous system – one that rivals the power of our central nervous system. “Gut feelings” reside in the enteric nervous system, an intricate system of protein, neurons, and neurotransmitters (a hundred million of them, approximately the same number found in the brain) located in the tissue sheaths that engulf the colon, esophagus, stomach, and small intestine. Remarkably, our enteric nervous system is able to learn, remember, produce feelings, and, ultimately, influence our thoughts, perceptions, and actions. It really is our second brain.
Unfortunately, it can be very difficult to pinpoint when we should use this “second brain” over a more data-driven approach. British management journalist, Mike Heller, has highlighted the difficulty in determination: “Never ignore a gut feeling, but never believe that’s enough.” Fortunately, by asking a few key questions, we can more effectively pinpoint whether we’re best to look internally and favor our gut or externally and favor BI results when making decisions:
1. Are well-intentioned personal motives at play?
There are almost always personal motives underlying each decision we make. Before making a decision, effective decision makers take a hard look at the personal motives at play and evaluate whether or not they are well-intentioned (like hiring a less-than-qualified candidate who exhibits admirable “soft-skills” or refraining from engaging in price hikes or competitive advertising because such practices don’t align with business values). In these cases, BI results are given more of a backseat in the analysis process as they don’t typically account for the personal motives underlying decisions.
A word of caution: On the flip side, if our motives are ill-intentioned and aim to satiate ambition, greed, malice, etc., BI tools should trump our gut feelings. Indeed, the etymological roots of “instinct” (the term is derived from “instinctus” or “impulse”) remind us of our natural tendency to act on impulses and make rash decisions. Effective decision makers recognize when they are emotionally charged to the point that it is negatively impairing their judgment and, in these instances, cling to BI tools to guide the decision making process.
2. Is implicit knowledge or “dirty data” involved?
It’s estimated that we create 2.5 quintillion bytes of data every day. From GPS signals generated by our cell phones and cars, to our interactions with others, to our transaction records, the world of “big data” has arrived. It’s not yet possible for BI tools to account for all this data – especially data that isn’t captured by technology (such as face-to-face interaction data). This is when our gut comes in handy. Unlike BI tools, the genetics of our enteric nervous system allow it to cache enormous amounts of information captured in our daily lives generated both via offline and online channels to produce informed gut feelings.
When making decisions, effective decision makers consider whether there is implicit or “insider” knowledge at play. Personality factors, peer anecdotes, and reputations can have enormous truth to them, and this intel is not typically captured by BI. In many cases, these motives reside in our subconscious and we, ourselves, may not even be aware of them. Ken Paller, professor of psychology at Northwestern University, explains, “We may actually know more than we think we know in everyday situations, too…Unconscious memory may come into play.” If these pulse points offer strong contradictory evidence against BI results, effective decision makers tend to listen to their guts.
In addition to implicit knowledge, effective decision makers will also consider the volume of “dirty data” that is being fed into BI tools or considered as part of the decision making process. Salesforce data can be especially subject to dirty data in the form of incomplete records, duplicates, misspellings, and out-of-date information. In a similar vein, financial data can be embedded with errors. Before making a decision and deciding whether to hinge on your gut or BI, consider the amount of unknowns. The cleaner the data, the more weight BI ought to be given.
3. Is innovation an objective?
The late Steve Jobs once reflected, “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.” Time and time again, Jobs ignored consumer reports and survey data when launching products. Particularly cogent examples include launching the iPod when data suggested that CD players would continue to dominate the market, and introducing the iPad when almost all evidence pointed to PC’s continued market supremacy.
If you’re optimizing for innovation when making a decision (with the caveat that you, like Jobs, also have the domain knowledge and expertise to know when data might not hold all truth), you should consider following your gut. By definition innovation involves the creating of something new and novel. To disrupt the status quo, it’s likely in your best interest to look beyond historical facts and trends (such as those amassed by BI tools).
If, however, innovation is not a top priority, you’ll do well to pay more attention to BI. Consider the following cautionary tale: When Ron Johnson (ironically, former senior VP of retail operations at Jobs’ brainchild, Apple) noticed that things at retail giant J.C. Penney were going awry, he made bold “innovative” moves. Johnson, for example, eliminated coupons as well as most of the store’s sales. These moves weren’t informed by data or BI. Further, they weren’t tested on a small scale before being deployed across J.C. Penney storefronts. Not surprisingly, the approaches failed – Johnson’s objective wasn’t to optimize for innovation but to recoup lost sales.
There’s no denying the enormous potential of BI. It empowers us to combine vast amounts of data accumulated by our CRM systems, databases, web analytics tools, social sites, and make sense of it to make more informed decisions. Despite the hype around BI though, we can’t overlook our “second brain.” After all, 57% percent of senior business professionals reanalyze data when it contradicts their inner gut feelings. Knowing when you should rely on your gut vs. the “gigabytes” will empower you to avoid second guessing data and give you the courage and conviction to optimize the decision making process.