Data-Driven Organizations are a Bad Idea

Consider: it really takes only a few facts to make a decision, but it takes a wealth of insight to know what the relevant facts are for the decision.

In a data-driven company, every single analysis generates facts, and every single one of those facts indicates a possible decision. In a data-driven organization people really have very little guidance to make decisions. Even worse, the uncertainty that all the possible decisions that could be made drives people to ask for more analysis. More analysis means more facts generated which means more possible decisions suggested, which means an even greater confusion and the problem gets worse. The end result is that decisions get made for really very arbitrary reasons, usually the last fact someone say before they were forced to decide. I think it's better to rely on intuition and experience that to try to make sense out of a sea of random, contradictory facts.

What works is to have a decision-driven organization. Understand what kind of decisions the organization needs to make, understand the basis on which these decisions should be made and be explicit about it, and then once that blueprint for decision-making has been made then build the information needed for the decision.

Good Data, Bad Decisions

Barnaby S. Donlon in the BI Review (http://www.bireview.com/bnews/10000989-1.html) gives a good description of how data goes to information, to knowledge, and then to decisions. He's saying all the right things, and all the things I've been hearing for years, but you know -- I don't think it works anything like that.

When we start with the data, it's all too much. It's too easy to generate endless ideas, endless leads, endless stories. I've seen it happen when an organization suddenly gets analytic capability.

Before, the organization was very limited in it's abilities to make decisions because they had limited information. The organizational leaders have ideas, and because of the lack of information they have no way of deciding what is a good idea or a bad idea. After the organization starts an analytic department, then suddenly every idea that the leadership gets can be investigated. The paradoxical result is that the leadership still can't make informed decisions. Every idea generates an analysis, and virtually every analysis can generate some kind of results. Without data, the result is inertia; with too much data the result is tail-chasing.

The right way to do this is to begin with the end. Think about the decisions that need to be made. Then think about how to make those decisions in the best possible way. Starting with the end means the beginning -- the data, the analysis, the information -- is focused and effective.