Cortex Leadership Consulting

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Data-driven versus Data-informed Decision Making for Leaders

Richard Hammer Cortex LeadershipEvery organization, to be competitive and grow, is now facing the tough task of how to scale the talents of their people and processes through technology.  It has become a necessary skill for leaders to learn how to effectively extract the knowledge needed for them to make decisions that will shape the future of their organizations.  I asked Richard Hammer, a Senior Consultant with Cortex, whose expertise spans data analysis to enterprise architecture for scaling organizations and the technology that powers them the question:  What is the difference between making data-driven decisions versus data-informed ones?  The following was his answer.

Leaders are trying to make sound decisions driven by the data they have available to them.  If you’re data-driven, though, you may run the risk of being on auto-pilot.  Whatever scripts, macros, or code were written to analyze the data you are using to make decisions with is likely no longer reviewed and you have systems and people making decisions solely on the data, usually without questioning it.  This is the single best way to give your competitors the advantage … especially if they figure out your patterns and differentiate themselves.

The trap of being data-driven is you tend to tune out your instinct.  You tend to focus on a specific set of data, a specific result, and ultimately a specific outcome.  You create your own data bubble and start eliminating data that may give you different insights.  You zoom in, and in, and in, and in.

A better approach is to be data-informed. Sure, there are some practices where being data-driven is valuable, but I always question why, analyze the algorithm, and make small adjustments to the process to see if it becomes more efficient.  If it does, we go forward.  If it does not, we back the change out, analyze the data and results again, and make another adjustment.  Systems can be built that do this automatically.  This is the root of predictive analytics and artificial intelligence. You know you are on the right track here when the system recognizes a pattern you did not specifically tell it to recognize.

What you want to be doing is to take in all the data and keep an eye on the outliers and exceptions for later tuning.

If you are new to being informed by data, our suggestion is to get to know it.  Ask questions about it.  Discover the boundaries of the data you are mining.  Do tests and confirm the results (make predictions, take action, and measure the response based on what you thought would happen).

An example of data-driven decisions is with A/B tests of a marketing campaign. You have 100,000 customers you want to reach.  You do not know which message will most appeal: “BUY MY STUFF!!!” or “I think I found what you are looking for”.  In an A/B campaign, you would send 1,000 random customers each message.  When the results came in (who clicked more may be the indicator you are measuring), you send the remaining 98,000 customers whichever message is better performing.

To be data-informed, take a small step further.  When targeting 1,000 customers each, make sure the demographics of the target customers are diverse. Be sure the purchase histories of the target customers are diverse.  Look at the best practices for messages (all caps with exclamation points will likely not perform well) and identify a better A/B candidate.  Better yet, focus your target list based on demographic, history, and something new.  Use your instinct, test your gut, stretch and differentiate.  Don’t be driven by the data.  Let the data inform you in a way that aligns with your “gut”.

Some of the traps on the data-informed side can be decision constipation and not thinking in a way that allows you to scale the process.  It is a fine line.  Engineers want you to be data-driven because it is easy, consistent, and testable.  Once the machine is in place, it runs.  Engineers like that.

If you are looking to disrupt a marketplace, though, you need to sometimes question the machine itself.

Eventually, if you do not adapt, you become the machine and someone comes along to disrupt you.

 

 

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What should be keeping you up at night?

data-informed decisions
Leaders need to be making data-informed decisions.

Several years ago Harvard Business Review published an article about the contemporary sales process.  In it, they identified that many people ask their customers, “What’s keeping you up at night?”  The better question they identified was “What should be keeping you up at night?”  In other words, in business, the things you don’t know about can be much more impactful, and frankly scarier, than what you do know about.  Just ask the CEO of Equifax and he can probably tell you all about it as he deals with a security breach that was massive recently that affected about 143 million people that trusted their company.

Today’s technology is now powering so many parts of business processes.   From simple things like sending emails and processing invoices and payments to sophisticated computer-operated manufacturing processes.  Whether an owner or leader wants to be or not, leaders are all in the business of technology.  Without it, your organization will lose its ability to compete or remain relevant to whomever you are serving.

For that reason, it was the right time for us to bring aboard someone like Richard Hammer.  Known as an expert in how to build an organization that can compete in tomorrow’s technological marketplace, Richard understands how culture eats strategy for breakfast.  His genius, when it comes to technology, is his experience and in-depth knowledge that technology tools are worthless without the consideration of who will be using them and how they will be used for a successful business outcome.

I have already learned a great deal from him in the short time he has been with Cortex, meeting with our team, and some of our clients.  Here are a few of my take-a-ways as a business owner.

  1. People, processes, and tools. In that order.  So many times, when it comes to technology, leaders search for a tool without considering the people and processes that will be leveraging that tool.
  2. Make data-informed decisions. Many times, you will hear the importance of making data-driven decisions.  The problems with letting the data drive is that data doesn’t have the experience and perspective that a leader or their team might have that can affect what the data is saying.  Using data to inform you can be an essential and powerful part of effective decision-making.
  3. Think bigger. Technology scares a lot of leaders.  The subsequent reaction to technology is to ignore it, argue with the need for it, make quick decisions around it, or simply agree with people that understand technology slightly better than you do and do whatever “sounds” good at the time.  The leader’s job is to set the vision.  When you are stuck in Quadrant One (urgent and important – immediate task driven) all the time, you lose the ability to look far enough ahead to properly anticipate what isn’t going to change about your business and what is.  Thinking too small in today’s marketplace can leave you vulnerable to being taken out by leaders that didn’t.

What should be keeping you up at night?  You’ll need to answer that.  For me, it was all the things I didn’t know about technology that could quickly build our business and that I didn’t even know to ask about.  I’m sleeping much better these days.