Data vs gut-feel in decision-making

When do you use data and when do you rely on instincts in making business decisions?

Decision-making is important in every business and organisation. It is crucial in finding short-term, medium-term and long-term solutions to problems or plans that need to materialise. 

There are different ways and factors in arriving at a certain decision. Some have to be done at a snap of a finger due to the need for urgency. Others have to be deliberated carefully by a team. Then, there’s this age-old question, “Should you use data or should you rely on your instincts or experience when making business decisions?”

Many entrepreneurs recognise the value of both in decision-making. One must be able to know how to weigh when one is more necessary than the other in a given situation. Relying only on one may put decision-makers at a disadvantage. It is helpful to look at data and listen to gut-feel and learn from experience when coming up with a plan or strategy to navigate through one’s decision-making process and arrive at a sound resolution. 

Data and gut feel go together

There are circumstances when data weigh heavier than gut and vice versa. But one has to consider both when arriving at a resolution. According to Renata Freund, Founder and Director at Honeycomb Strategy, “Data and intuition go hand-in-hand, both playing a role in business decision-making. Together they are the secret sauce that underpins great entrepreneurs. Data is your confidence. It is what allows you to make decisions with conviction, knowing they are grounded in truth. Instinct is your creativity. It is what allows you to experiment, to create the new and reimagine the old. When you pair that confidence and creativity together, that’s when the magic happens.”

This was echoed by Hayden Brass, Founder and Managing Director at Zea. He remarked, “They are both critical and both play an important part in my business. For marketing, a lot of instincts have played a part in coming up with unique concepts and ideas for campaigns, but often, this has to be backed up by relevant data. When it comes to reviewing the return on investment for a marketing campaign, it is crucial to look at the data and statistics to determine whether one’s gut instincts are accurate or not.”

He also added, “And when it comes to hiring staff, this is probably the most critical of them all. It is important to go through the relevant standard hiring processes to see if they are “on paper’ a good fit for the organisation. This is one of the most crucial steps in vetting candidates. But as it approaches the pointy end of the hiring process, the more I like to pay attention to my gut instincts as to whether I believe they are the right person for the role or not. By no means is this always accurate, but it is complementary to the data collected on the candidates and both play important roles in finding people that are a good fit for our organisation.”

Nitasha Badhwar, Co-founder and Chief Strategy Officer of Sunpower Renewables agreed that both go together. “I think both data and gut-feel go hand-in-hand, and you can’t necessarily isolate one from the other. Data prepares you (like a weather app) but your gut-feel defines your direction.”

She cited an example from her experience, “When we started working with lithium-ion batteries, the prices were exceptionally high. It was difficult to develop a commercially viable product without stripping features to a bare minimum. If we had just relied purely on data, we would have started many years down the line which wouldn’t have afforded us the time to experiment, develop and evolve a truly comprehensive product. At that time, it was just gut-feel to jump into product development, given the data we had in hand. Today, our product line has a range of products catering to customers’ every need including an Intelligent energy flow optimizer which turned the product from a regular generator to a smart generator. On the other hand, our gut-feel was to stick to b2b and not develop the online sales channels, but the pandemic and data proved us wrong, and we are now embarking upon developing this sales channel.”

A balanced approach can help

David Fastuca, CMO and Co-founder of Locomote, maintains a balanced approach when it comes to making decisions. “I relate this back to marketing because within the marketing world, there's often this fight between data-driven marketing in which you spend a dollar, you get X dollars back, and then there's the marketing that you can't attribute, which is like a brand.”

David further illustrated this by providing an example, “When someone sees a link to a post on LinkedIn, just because you might be getting low engagement or five likes and two comments, it doesn't mean that few people are viewing it. The ideal customer you're trying to get might have read it but just hasn't interacted with it. Then all of a sudden they come to your site and then they inquire about a demo. Where does that attribution go to? It's easy to say, ‘Okay, they clicked an ad and then they signed up, so let's throw more money on ads.’ But the truth could be is that they saw your post, they read your blog, they interacted with some other content on your website, or they heard you on the radio. Maybe, all of a sudden, they saw an ad as they were scrolling through Instagram and then decide to click it.”

“But what happens is that the CEO of the business or the CFO says, ‘That lead is attributed to this ad spend so let's put more money into that,’ when really you need to attribute that to beyond other channels. So, that's where the instincts and gap come into play. I try and have a balanced approach where 50% of my decisions are using data and 50% is based on my instincts and what I'm learning in the space. If things are improving, such as more conversions are happening on my website, then I will attribute a good percentage across both channels, the ones that you can really track because it's really analytical. But then, it's always important to be working on your brand and your awareness through channels that you don't spend on. So, while I do 50-50 decisions, I also split my budget differently across those channels. So, I do 70% of my budget on what I can track really tightly and closely, such as outbound meetings being booked and calling. Then, I reserve the remaining percentage to the brand, which is content and things that you can't track because as a business, you always need to be investing in your brand over the long term,” he explained.

Decision-making in business is crucial because it affects a lot of people, both in the internal and external environments, including the peripheries. It is important to take into consideration all the factors that may be necessary for arriving at a particular resolution. It’s always good to check the numbers and it also pays to listen to your instincts.

Data vs gut-feel in decision-making

How do you make decisions for your business? Do you rely on numbers or to your intuition? In this age where information is vast and several tools are available in measuring them, many companies turn to data in helping them come up with plans and strategies for their businesses.

It cannot be denied, however, that there are entrepreneurs who gained resounding success for listening to their business instincts. But with resources, people and many other things on the line, you cannot afford to take a huge risk and decide on something that cannot deliver the expected result.

There are pros and cons when deciding based solely on data available or listening only to what your gut is telling you. The key is a balance of both. There are times when you need to take into consideration one over the other but it is helpful not to discount the other in the process of arriving at a resolution.

Data-gathering may take a lot of time, effort and resources. While numbers can scientifically provide a basis in forecasting what is to happen, there are other factors involved that data cannot fully capture. Since businesses always involve people, emotions and other influences may come into play that data may not be able to completely predict. That’s where gut-feel comes in. Certain decisions have to be made instantaneously and your instinct and hunch can guide you to making a good one. The downside with intuition is that it is more of a hit or miss thing, which can lead to either great achievement or a huge failure.

Numbers may sound cold but logic can provide a greater probability. On the other hand, perception and gut-feel will provide the warmth and may up your chances for success. Here are some instances of how looking at both methods can be advantageous in decision-making.

Spotting trends and patterns

Consumer behaviour can be plotted and measured, which can allow you to see patterns on how trends come and go. Data will provide you with a rationale on how the market moves and allow you to see the next things that may happen. However, how things will unfold cannot be foreseen fully by the numbers. Changes in human habits are unpredictable because people’s feelings are not based on logic. You need to have a good grasp of your market through experience and relationships, which may be able to complete the picture that data can partially provide.

Getting feedback

Surveys are prevalent nowadays, especially with modern technology, as they can be administered online. It’s a good way to get feedback from your clients and prospective customers. But it can only gather limited information as you may not fully know the rationale as to why participants gave such answers. But if you communicate effectively with your market and you interact with them regularly, you will be able to comprehend why they behave in a certain way. Knowing them well will enable you to get their pulse which graphs and pie charts may not be able to entirely provide.

Planning strategies

You can craft your strategies and tactics based on scientific facts. It may save you unnecessary losses as it will help you efficiently match the need and demand of the market rather than taking a shotgun approach and make you overpromise what you can do or underpromise and limit your capability. But there will be times when experience and right judgment may give you a better lead than what data can offer. You can inject some creativity and ingenuity in your strategies based on your gut-feel and good perception.

Putting your faith in your intuition may pose an enormous risk. But going into business is a risk in itself and only those who are courageous can truly achieve success. However, you can take a calculated risk when you back your judgment with data. That will increase your odds towards success.

Making good decisions as an entrepreneur

Business owners face tough decisions every day. There are several things that need your attention, including fires to put out. More often than not, these decisions can affect not only your personal life but also those of others. The responsibility of making a choice that can chart or hinder the growth of your business is a heavy burden to take.

However, there are various factors to consider when you make a decision. Oftentimes, you have to take different approaches depending on the situation. And even if you encounter similar circumstances, there is no surefire formula on which solution to take because results may vary from time to time. The best you can do is to make a calculated risk and lessen the possible negative impact of the decision you take. These are things you need to consider to help guide you in choosing the most suitable path for you.

The reason for the decision

Before you look at your options, analyse first the reason why you need to come up with a decision. Knowing your purpose will help you weigh your choices better. Are you going to make a decision that can help boost the sales of your business or is it for stronger long-term relationships with clients and your team? Priorities may change at any given point, so make sure that you are making a choice that will support your present need and priority.

Effect of the decision

What is the possible effect of your decision on yourself, your business, your family, your clients or people involved? Some decisions may be minor to you but major to others. Take into consideration the probable outcomes if you choose a different route. While you are at it, deliberate the short-term, medium-term and long-term effects of your decision.

The time needed to make a decision

There are circumstances where you need to think and act fast. Otherwise, you might lose an opportunity or prolong a crisis. On the other hand, there are instances when you shouldn’t rush with your judgment, but have to take time to assess the various angles of the situation and the options available.

Value of feedback from others

It is not unusual to seek opinions from others, especially those who have more experience or who had been in the same state before. But when you gather feedback from others, it cannot be avoided that there will be opposing or varying views. You need to ask yourself, are you getting inputs from others because you just want to affirm what you have already decided or are you approaching the right people who can help you see through the gaps?

Information and resources available

Is the information available up-to-date that it will help you see the complete scenario when you go by your decision? Are there enough resources to back up what you have decided to do? While some options appear ideal and perfect, carrying them out may be difficult to do because you do not have the capacity and capability to follow it through.

You will never really know when you have made the right decision until the results start showing. Making a decision involves logical and strategic thinking as well as listening to your gut-feel. However, bear in mind that as a business owner, decisions you make may affect several people in the process. There are times when you have to make sacrifices and go against the flow for the greater good or for long-term success. It is good if you can unburden the load by sharing your sentiments with like-minded individuals, similar to the Forum setting in EO, without having to reveal confidential matters. In the end, decision-making is a responsibility you have to take when you lead a team and bring your business towards success.