Data science vs the hunch: What happens when the figures contradict your gut instinct?

Despite the widespread adoption of analytics and scientific testing by businesses around the world, the management sixth sense continues to flourish.

Many still believe company politics trumps evidence when it comes to management decisions. Image: Shutterstock

On the face of it, business people still hold wildly contradictory views about the relative value of data science as opposed to gut instinct when they make decisions.

Almost six senior executives out of 10 see themselves as making decisions based on data, according to new research. Yet more than seven out of 10 of the same group also say they trust their own intuition when choosing a course of action.

On top of that, despite most managers believing they are data-driven decision makers, 57 percent would reanalyse data that contradicted their intuition rather than trust it first time, the Economist Intelligence Unit study for predictive analytics firm APT has found.

However, the apparently conflicting positions taken by respondents to the worldwide survey are not necessarily incompatible, according to report editor Pete Swabey.

"It's not an analysis versus intuition debate. There is a role of intuition in the process of analysis, which you might think of as sense-checking or comparing with your experience, that can help you make sense of the data," he said.

He cited the example of Dan Humble, head of insights and research at pharmacy chain Alliance Boots, who contributed to the EIU-APT study.

According to Swabey, Humble has said he behaves exactly as the 57 percent does; if the data contradicts his intuition, he will reanalyse it.

"That's not to say that [Humble] does not ultimately trust data generally, but if it does contradict his intuition, then that is a possible sign that something has gone wrong with the collection, the analysis or the interpretation, or there needs to be more data to put that into context."

Having flagged up a counterintuitive result, if it ultimately turned out that the analysis had been conducted correctly, Humble would act on the data.

"Because if to your satisfaction it has been collected, analysed and prepared correctly, then what can you do but follow the recommendations of the data? But your intuition is an indicator that perhaps something is wrong," Swabey said.

"Neither should you blindly follow the data that comes out of the first analysis, because we all know the huge range of things that can go wrong in the analysis process.

"But then equally — as nobody is suggesting you should — the other side of the coin is that you should not just go on pure intuition and wander around ignoring all the evidence."

APT vice president UK Rupert Naylor said he had recently experienced the value of intuition in a would-be scientific trial into the effectiveness of sales flyers at a client company.

Having put in place a flyer campaign with a newspaper, the company examined the results coming back through APT's software and found the material had had a zero impact on retail and online sales in the trial areas.

"If there had been a 10 percent [rise in sales], they'd have said, 'Well, the flyers don't make any sense. They cost money to produce and distribute, so let's not do them'," Naylor said.

"We went back and checked the data, which was correct, the software was working correctly, so there was no problem there."

As a final measure, the company went back to the media agency involved in the research project.

"The media agency had forgotten to do the trial. So there had been no insertion and hence the test versus control performance was zero. You can see why they wanted to reanalyse," he said.

Regardless of the relative status of data science and intuition in an organisation, company politics continues to play a role, the researchers also found.

Respondents were asked the degree to which they agreed with the statement, 'Company politics trump evidence when it comes to management decisions'.

Some 44 percent agreed or strongly agreed with the statement, with 28 percent neutral and 28 percent disagreeing, report editor Pete Swabey said.

"Clearly the biggest answer is, 'Yes, company politics trumps evidence'. So that is not a great sign on that one," he said.

Nevertheless, APT's Rupert Naylor said analytics can help undermine support for internal political agendas by providing a scientific basis for decisions.

"Now whether people act on that scientific evidence — whether this initiative drove more sales or footfall and so on — is then a political thing because the loudest voice in the room could still dominate," he said.

"But by having one version of the truth what you're doing is removing one barrier to companies operating in a scientific way. Ultimately, given the pace of change and competition you have to move away from just politics."

Naylor said widening access to data within the business is another way of trumping company politics.

"In the old world, if a lot of data was being gathered and it wasn't very accessible, then people were able to cherry-pick data to support their arguments and then you could potentially, if something didn't meet your gut feel, get the right bit of data," he said.

"But in the current world you have one version of the truth. You can gather all the transaction data, say, for a company and all these external sources of data like weather and competitors and demographics.

"If you put that into a common place and make that accessible, then the debate moves from, 'Is the data real and am I cherry-picking the data?' to 'What is this telling us about this particular initiative?'. That's a trend that we're definitely seeing."

The EIU-APT study also suggests that more successful companies are better at running trials and analytics.

The researchers looked at companies that considered themselves to be growing faster than their business rivals and found that 45 percent of them said they can test outcomes based on trials.

That compares with only 10 percent for the groups that were either neutral or shrinking compared with competitors.

"The conclusion then, in the first cut analysis, is obviously that these [more successful] groups are doing tests and trials. Does correlation prove causation? I wouldn't comment."

Researchers surveyed 174 senior managers and executives from organisations around the world for the report Decisive action: How businesses make decisions and how they could do them better. More than half of the executives were C-level, and 49 percent represented organisations with over $500m in annual revenue.

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