Companies that rely heavily on data are far more likely to report significant improvement in making important business decisions, but only one in three executives says his or her company is highly data-driven.
A global survey by the Economist Intelligence Unit and PwC shows that more big decisions – defined as significant decisions about the strategic direction of the business – are made based on executives’ intuition, experience, or the advice or experience of others than are made based on data.
And big decisions happen often – 79% of 1,135 executives say they make a big decision at least quarterly. Just how big are these decisions? Almost one in three puts the value of the decisions at $1 billion or more.
Companies are incorporating data into the decision-making process more often, but just 32% describe the process as highly data-driven. That group is three times more likely to report solid improvement in decision-making in the past two years, compared with those who are not highly data-driven.
The main barrier to making greater use of data for decision-making is the quality, accuracy, and completeness of data, the report said. Another obstacle: difficulty assessing what data are useful.
Management accounting experts say finance professionals are well-positioned to turn all that information into better business decisions.
Although relying on their gut instinct or that of others remains a more popular process for making big decisions, 64% of executives said data have changed the way their companies make decisions, and they expect them to have more of an effect on decision-making in the future.
Executives’ top three changes to big decision-making are greater use of specialised analytic tools and techniques; employing a dedicated data insights team to inform strategic decisions; and relying on enhanced data analysis.
The report offers five steps for organisations to consider before their next big decision:
- Keep an open mind. Data analysis is not limited to recurring decisions, the report says. This analysis can be used for a single decision, such as identifying a potential target for a merger or acquisition.
- Unlock existing insights. Data do not have to be new to be useful; the report says that previously siloed data can lead to fresh insight.
- Understand inherent bias. Using your gut means a view slanted to your way of thinking. “Get to know what lies behind your dashboard,” the report says.
- Invest in talent. Provide a foundation of data analysis to existing employees before hiring new data scientists.
- Take the lead on accountability. Be clear about who has decision-making rights, the report says. Providing more access to data can allow decisions to be challenged.
“While executives say they continue to rely on experience, advice, or their own gut instinct, they also see investment in data and analytics as critical to success,” Dan DiFilippo, a PwC data and analytics leader, said in a news release. “Experience and intuition and the use of data and analytics are not mutually exclusive. The challenge for business is how best to marry the two.”
Related CGMA Magazine content:
“Agility, Creativity in Demand for Finance Professionals”: Thought leaders in management accounting discuss the skills needed today for finance to become a valued business partner.
“Six Tips for Using Existing Data More Wisely”: Organisations are collecting more data than ever before. But often they are not using the data in the right way – if they are using them at all. Brett Knowles offers six ways to make sure you are making the most of the data you already possess.
—Neil Amato (email@example.com) is a CGMA Magazine senior editor.