In Gut We Trust…

28 Jan, 2009 | by

On every coin and every bill issued by the United States Treasury you’ll find the words “In God We Trust”.  In recent years that slogan has been extended to say: “In God We Trust – All Others Bring Data”.

This clever twist is especially popular in Lean Six Sigma and Total Quality Management circles, where the data-driven decisions are the holy grail – the means to reduced costs, improved efficiencies, reduced downtime, and driving waste out of processes.

Now it seems neither of these adequately represents how business actually operates.

According to research published by Accenture found that nearly half (40%) of major corporate decisions are based on the decision maker’s ‘gut’, not on data.

While this number (40%) surprised me, I was not at all surprised to read that the top reason (61%) these managers rely on their gut is that good data are just not available.

Recently I visited one of these businesses. Like two thirds of survey respondents, these leaders recognize the weaknesses of their data systems and they’d love to fix them.

This company has multiple, archaic, manual data management systems. They collect piles and piles of data. Some of it gets filed in various Access databases. Some of it is stuck in paper filing cabinets. They act on almost none of it. Most of the time they file and forget it.

The biggest problem? Nobody can get to the data.

Actually that may not be the biggest problem. The biggest problem may be that nobody trusts that data that are there.  Some of the data are checked two and even three times. But nobody believes it.

So these people have no choice but to make almost all of their decisions based on gut.

Confronted with this situation, you may be asking the same question I asked: “So how’s that working for you?”

You won’t be surprised at the answer: “Not very well.”

This was obvious to all of us. This was a manufacturing company, and here are some of the reasons it was obvious:

  • Customer complaints torpedo new business opportunities.
  • High scrap rates siphon down profitability.
  • Product returns clutter a warehouse, some of it retained as “inventory” for years.
  • The list goes on…

Sadly this is very hard to quantify – because of the lack of data. But clear: deciding from the gut is expensive.

The good news is that when real-time, actionable data are readily available, most people use it to make decisions – good decisions.

Of course these systems require an investment.  Of course people need training to make good use of data. But given the high cost of the gut, the return on these investments is phenomenal.

Having said all this, transforming into a data driven business is hard. As the CIO post states: “Losing that gut-first instinct isn’t going to be easy, and I’m not sold on whether companies can stomach the change required. ”

Lets hope they can. In this tough economy ready access to actionable real-time data makes all the difference in the world.

So what is your experience – Gut or Data?

24 Responses so far | Have Your Say!

  1. amummaphick
    January 31st, 2009 at 1:50 am # – cooooolest domain name)))

  2. Mohammed K
    January 31st, 2009 at 11:37 pm #

    I find this to be a very good article. I dealt with a brewing company in 2007, that still utilized excel 97 to do their financial statements. As a strong brewing company you would have thought there was a way to connect the distributors and the brewing companies. Eventually SAP was installed and you can not imagine the business benefits this organization gained.

  3. Rotjontouts
    February 1st, 2009 at 3:52 am #

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    February 1st, 2009 at 3:48 pm #

    All I did was click the RSS link at the top of the site, then chose the reader I use. Seems to work fine for me.

  5. Peter Botting
    February 2nd, 2009 at 5:42 am #

    We need to decide what dat a is good for.

    Anything to do with numbers – yes. ROI. Investments. Purchasing. Productivity. Sales streams. etc etc.

    And then the quality of the data is crucial. Comprehensive, real time and presented without bias or agenda. A General who wants to double his army may well present a slanted set of data to the head of state. A production or sales manager will often also have conflicting agendas.

    Which brings us to gut. Good for people assessment. And without good people – data risks being incorrect, slanted, incomplete.

    But that’s what managers are paid for.

  6. David
    February 3rd, 2009 at 11:03 am #

    Loved this post. So many companies run on the gut of leaders. In some cases, those people are leaders because they have solid instincts, but in these times, you can’t duplicate that and build capabilities. I think many places fear data, as it is viewed as taking away some of the smoke and mirrors in decision making, making leaders less critical to day to day decisions.

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    Great post Evan!

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