What makes for a great business leader? Is it their expertise and knowledge which ensures decisions are well rooted in reality? Or is it their bravery - a willingness to trust to instinct and make snap decisions?
A lot gets written about the way CEOs and the rest of the C-suite make choices and lead the business. From Daniel Kahneman’s two systems of thinking through to Jon Ronson’s suggestion that chief executives have a lot in common with psychopaths, there has been a lot of interest in what it takes to sit in the big chair at the top table.
That ability has been coming under pressure from the rise of data and analytics as a business resource. Evidence-based decision making can seem at odds with the very notion of leadership - after all, if you have the data (or model) to direct you, why do you need a highly-paid individual?
According to a new study by PwC, “Guts and Gigabytes”, this shift has not yet happened. The report, written by the Economist Intelligence Unit and based on a survey among over 1,000 senior executives worldwide, found that 41 per cent rely on their own intuition and experience when making a decision, followed by 31 per cent who draw on the experience of others. Using data and analytics was named by 23 per cent.
That fits with data from other surveys which suggests around one in five companies are in the vanguard of using data and analytics. But it also points to a significant obstacle in further growth. The truth is that leaders trust themselves above anything else and find reasons to object to anything that might contradict them.
In this report, data quality and completeness was identified by 41 per cent as a concern, with the same number saying they find it difficult to access the data they want. More worringly, among British respondents, 61 per cent said that relying on analytics had actually been detrimental to their business in the past.
By contrast, another report written by EIU, but this time commissioned by Applied Predictive Technologies, discovered a much bigger shift. Just 10 per cent of its 174 respondents said they relied on intuition to reach a decision, while 32 per cent adopted a collaborative approach. The largest group - 42 per cent - claimed to be data-driven, with a further 17 per cent at the leading edge of using an empirical, test-and-learn process.
Where the APT study did find a worrying gap was in 19 per cent of companies where decision makers were said not to be accountable for the decisions they make. It hardly matters how you make up your mind if nobody checks on whether it was the right choice. Board meetings in those companies may just as well involve the toss of a coin.
With two reports finding such different degrees of data-driven decision making, it is hard to know just how far data and analytics have really reached in the business world. It may be that the majority of companies are using some form of substantive proof, or that only a small group of innovators has got that far. But what is clear is that intuition - whether it remains the dominant model for business leaders or not - now has a rival. Chief executives need to discover whether they have the guts to go with the data.
(A detailed look at the APT-EIU survey will appear in the Autumn issue of DataIQ, due to be published at the end of September.)