The Decision Making Dilemma: Gut Instinct vs. Data Driven

In my previous article, I spoke about using frameworks for an efficient decision making process. One of the biggest challenges for making decisions is the constant dilemma of choosing between gut instinct and data. 

Lately, there has been a lot of conversation around data driven decision making. But how many of us are actually able to prioritize data for decision making. Aren’t most of our decisions still based on our gut feeling? In fact, according to Alation's new "State of Data Culture" report two-thirds of CEOs still rely on gut feeling while making decisions. 

And why not? While making decisions you are dealing with people and when people are involved, you have to consider all factors and not just cold facts and data. After all, your gut is not completely random. It’s a sum total of all your experiences. 

Gut Feeling vs Data: What is Better?

Gut without data is just your whim, and data without gut is just a cold, hard fact. In my opinion, marrying the two is important.

Gut paves the way for experimentation; data helps make it a success

As I said earlier, your gut feeling isn’t completely random. Rather, it is a sum total of all your experiences that shapes up your intuition. It gives you the ability to try something new for the first time. 

For example, while working at an EdTech company in India, we launched a bundled pricing option on top of our existing pricing packages. It was based on the hypothesis that if we gave an option to the Indian learners to do as many courses as they could in a fixed period of time, they would find the bundled offering very cost effective. And our gut feeling was right. The pricing experiment turned out to be a huge success for the market.

But that would not have been the case, if we did not keep a check on data from the very beginning. While preparing to launch this bundle offering, we had data which showed that people might not be willing to pay a huge amount upfront (3x more than the current course price). So we worked with a financing platform to offer personal loans at affordable rates, available within a few minutes at the point of checkout. Once we launched this bundle pricing with the personal loan option we saw an immediate uptake of the bundle option.  The data driven execution proved useful and a significant minority percentage of our customers shifted to this option.

Gut is limited by your experience; Data is limited by its availability 

Your gut feeling depends on what you have learnt and experienced in the past. Hence, in the beginning you might not feel confident about your gut, but it will get better with time and you will become more confident. 

Data is limited by your ability to collect and analyze it. Many times, people fail to look at all the aspects of data. And by looking at it in parts, you can make wrong decisions. 

Gut allows you to be human; Data allows you to be practical

Gut brings in the human element to your decision making. It tells you to treat your customers right, to listen to your employees, and to be empathetic to your stakeholders. 

Data helps you analyze the impact of your actions and to stay practical. 

For example, you might be doing a lot of employee engagement activities for your employees thinking this keeps employees happy and increases retention. But by analyzing data like employee retention percentage, employee net promoters score, enablement score, etc, you can see the actual impact of your actions and keep yourself practical. Don’t be surprised if your data shows a completely different picture. At least, you now know what is not to be done!

Data Driven Gut Instinct: The Real Cool Kid

I am confident that you are using data inputs in your decision making, especially in today’s complex business situations. But if data was the sole important factor in decision making, then how did businesses run and succeed when there was not enough access to it.

In my view the combination of data and gut, essentially, a data driven gut instinct is the answer for leaders to lead in today’s environment! But like most people I am still trying to figure out what is the right balance to leverage data and intuition. If you have the answer, then do let me know!