When do you use data and when do you rely on instincts in making business decisions?
Decision-making is important in every business and organisation. It is crucial in finding short-term, medium-term and long-term solutions to problems or plans that need to materialise.
There are different ways and factors in arriving at a certain decision. Some have to be done at a snap of a finger due to the need for urgency. Others have to be deliberated carefully by a team. Then, there’s this age-old question, “Should you use data or should you rely on your instincts or experience when making business decisions?”
Many entrepreneurs recognise the value of both in decision-making. One must be able to know how to weigh when one is more necessary than the other in a given situation. Relying only on one may put decision-makers at a disadvantage. It is helpful to look at data and listen to gut-feel and learn from experience when coming up with a plan or strategy to navigate through one’s decision-making process and arrive at a sound resolution.
Data and gut feel go together
There are circumstances when data weigh heavier than gut and vice versa. But one has to consider both when arriving at a resolution. According to Renata Freund, Founder and Director at Honeycomb Strategy, “Data and intuition go hand-in-hand, both playing a role in business decision-making. Together they are the secret sauce that underpins great entrepreneurs. Data is your confidence. It is what allows you to make decisions with conviction, knowing they are grounded in truth. Instinct is your creativity. It is what allows you to experiment, to create the new and reimagine the old. When you pair that confidence and creativity together, that’s when the magic happens.”
This was echoed by Hayden Brass, Founder and Managing Director at Zea. He remarked, “They are both critical and both play an important part in my business. For marketing, a lot of instincts have played a part in coming up with unique concepts and ideas for campaigns, but often, this has to be backed up by relevant data. When it comes to reviewing the return on investment for a marketing campaign, it is crucial to look at the data and statistics to determine whether one’s gut instincts are accurate or not.”
He also added, “And when it comes to hiring staff, this is probably the most critical of them all. It is important to go through the relevant standard hiring processes to see if they are “on paper’ a good fit for the organisation. This is one of the most crucial steps in vetting candidates. But as it approaches the pointy end of the hiring process, the more I like to pay attention to my gut instincts as to whether I believe they are the right person for the role or not. By no means is this always accurate, but it is complementary to the data collected on the candidates and both play important roles in finding people that are a good fit for our organisation.”
Nitasha Badhwar, Co-founder and Chief Strategy Officer of Sunpower Renewables agreed that both go together. “I think both data and gut-feel go hand-in-hand, and you can’t necessarily isolate one from the other. Data prepares you (like a weather app) but your gut-feel defines your direction.”
She cited an example from her experience, “When we started working with lithium-ion batteries, the prices were exceptionally high. It was difficult to develop a commercially viable product without stripping features to a bare minimum. If we had just relied purely on data, we would have started many years down the line which wouldn’t have afforded us the time to experiment, develop and evolve a truly comprehensive product. At that time, it was just gut-feel to jump into product development, given the data we had in hand. Today, our product line has a range of products catering to customers’ every need including an Intelligent energy flow optimizer which turned the product from a regular generator to a smart generator. On the other hand, our gut-feel was to stick to b2b and not develop the online sales channels, but the pandemic and data proved us wrong, and we are now embarking upon developing this sales channel.”
A balanced approach can help
David Fastuca, CMO and Co-founder of Locomote, maintains a balanced approach when it comes to making decisions. “I relate this back to marketing because within the marketing world, there's often this fight between data-driven marketing in which you spend a dollar, you get X dollars back, and then there's the marketing that you can't attribute, which is like a brand.”
David further illustrated this by providing an example, “When someone sees a link to a post on LinkedIn, just because you might be getting low engagement or five likes and two comments, it doesn't mean that few people are viewing it. The ideal customer you're trying to get might have read it but just hasn't interacted with it. Then all of a sudden they come to your site and then they inquire about a demo. Where does that attribution go to? It's easy to say, ‘Okay, they clicked an ad and then they signed up, so let's throw more money on ads.’ But the truth could be is that they saw your post, they read your blog, they interacted with some other content on your website, or they heard you on the radio. Maybe, all of a sudden, they saw an ad as they were scrolling through Instagram and then decide to click it.”
“But what happens is that the CEO of the business or the CFO says, ‘That lead is attributed to this ad spend so let's put more money into that,’ when really you need to attribute that to beyond other channels. So, that's where the instincts and gap come into play. I try and have a balanced approach where 50% of my decisions are using data and 50% is based on my instincts and what I'm learning in the space. If things are improving, such as more conversions are happening on my website, then I will attribute a good percentage across both channels, the ones that you can really track because it's really analytical. But then, it's always important to be working on your brand and your awareness through channels that you don't spend on. So, while I do 50-50 decisions, I also split my budget differently across those channels. So, I do 70% of my budget on what I can track really tightly and closely, such as outbound meetings being booked and calling. Then, I reserve the remaining percentage to the brand, which is content and things that you can't track because as a business, you always need to be investing in your brand over the long term,” he explained.
Decision-making in business is crucial because it affects a lot of people, both in the internal and external environments, including the peripheries. It is important to take into consideration all the factors that may be necessary for arriving at a particular resolution. It’s always good to check the numbers and it also pays to listen to your instincts.