Do You Look at the Data or Go With Your Gut?

Posted by Chuck Kocher
On April 4, 2016

Do You Look at the Data or Go With Your Gut?As a business leader you have to make some pretty significant decisions about which direction is right for your company. Chances are, you’re not a “Let’s-flip-a-coin” type of person. You want to make good, thoughtful decisions. But how do you do it? Do you look at the available data you have, or do you go with your gut instinct?

You might be surprised at the answer. According to a study by Time Inc.’s Fortune Knowledge Group, Gyro, 61 percent of business leaders claimed that real-world insight is more important than hard analytics when making decisions. Beyond that, 62 percent of leaders “trust their gut” when it’s time to make decisions. It’s also been suggested that a lot of business decisions are made based on emotion—and then data is brought in to justify the decision.

In reality, it’s often not a clear-cut, either/or proposition. While it’s important to have good data, it’s also important to have good business instincts and insights. I recently came across an interesting article about the dangers of relying exclusively on data. You can check it out here. The author looks at two examples of companies that did that—and suffered greatly as a result. One was AT&T’s miscalculation of the impact cell phones would have on their business. The other was a misstep by Digital about the future of personal computers.

Even though we live in a “Big Data” age—where more information is available to us than ever before—this isn’t a new problem. In 1958–1960 the Ford Motor Company had their own classic data-driven experience when they introduced the Edsel. Many in the auto industry claimed that Ford had done superior, product development and market research work in the planning and design of the new vehicle.

Based on their data, Ford assured investors, and the press, that the car was a superior product and—as a result of a sophisticated market analysis and R&D effort—and essentially guaranteed it would have broad acceptance by the buying public. Ford had the data—lots of it—but it didn’t help them.

Unfortunately for Ford, sales of the vehicle were miserable and the company lost millions of dollars. In fact the name “Edsel” came to symbolize commercial failure.

So where does that leave you when facing decisions for your business? Do you throw out the data and just go with your gut? Operating with no facts or data is scary, and foolish. You need good data to make good decisions, but there is more to data than just numbers. In addition to collecting and analyzing information, you need to actually talk to people in your industry. You need to discover what’s behind some of the data. There is a human element to business that can’t always be recorded in zeros and ones.

That’s where your gut comes in. You sometimes need to dig beneath the surface a bit to find out what someone really means when they give you an answer. It’s intuitive. It’s not always scientific. It’s not the only thing you should rely on, but it should be part of the equation. Otherwise, you could end up with an Edsel!