“A good decision is based on knowledge and not on numbers” – Plato
What are the guiding objectives for making a business decision? We want to satisfy our customers. We want to be able to demonstrate that the service or product we provided them has quantifiably improved their loyalty or customer satisfaction. We want to increase revenue and profitability. We want to reduce costs and prevent disasters.
Decision science is defined as the design of efficient procedures that either aid a decision maker’s effort or evaluate courses of action according to chosen criteria or policies so that a decision logically follows from the computations (ref: Principia Cybernetica Web). The theories that support these efforts take into consideration the uncertainty of the situation, the information available about consequences, the risks involved, costs & benefits of each action and the time, resources and preferences at the decision maker’s disposal.
Good decision making must take into account logical, environmental and emotional perspectives. Today we have the ability to capture, store and measure a flood of data (big data). This deluge of data has empowered organizations to create analytics and metrics to track behavior and predict the future with greater accuracy than ever before. MIT Professor Erik Brynjolfsson’s studies have shown that data driven decision making does indeed improve the decision making performance by 4-6% in productivity and profitability (ref. HBR Oct 2012).
Companies need to rise to the challenge posed by the availability of this improved predictability. There is no longer the excuse of not having enough data to prove that a proposed solution was bound to succeed or fail. The value of the executive is still his/her ability to create a vision, spot new horizons to explore and chart a map to get there without being afraid to embrace the opportunities offered by the new data paradigm. The value of the domain expert is in his/her ability to ask the right question. The value of the IT team is in their ability to recognize that data proliferation and accessible analytics are essentially the wheels that will propel their organization forward and that they themselves are responsible for keeping the wheels well-oiled.
2500 years after Plato- numbers matter but knowledge still holds its own in the process of decision making.