There are certain combinations in the business world that are greater than the sum of their parts.  Those familiar with the history of Apple, know without both Steve Jobs and Steve Wozniak the company wouldn’t have been successful.  Steve Jobs lacked a deep technical skillset to build software or hardware, but was an incredible marketer and salesperson.  Steve Wozniak had an incredible technical skillset, however fit into the standard stereotype for computer programmers, being introverted and unable to speak to a “normal” person about their work.  Without each other, its unlikely Apple would have become what it did today.  Their skillsets complemented each other, creating a combination that was greater than the sum of its parts. 

Business knowledge and analytics share a similar relationship.  By themselves, each have strengths and weaknesses.  When brought together, they’re complementary, allowing for better results than each by themselves.

Pros and Cons of Business Knowledge and Analytics In Decision Making

Let’s discuss the pros and cons of both business knowledge and analytics in the context of decision making within a business.  This will provide a foundation to gain insights into how the combination of the two creates a sum greater than its parts.  For the sake of wordiness, I’ll introduce the term BKA, short for “business knowledge and analytics”.

Three dimensions will be used for each evaluating BKA individually.

Objectiveness: How susceptible to bias is the approach?  If two individuals independently are given a question, how likely is this approach to result in both people giving a similar answer?

Speed: How quickly can the decision be made with this approach?

Scalability: As there are more an more decision makers in a company, how well can this approach be implemented across the company?

Business Knowledge

ProsCons
Objectiveness-Small/simple decisions
-Where data isn’t collected
-Varies significantly between decision makers
-Past experiences can influence a decision
-Can vary from day to day for the same person
Speed-Doesn’t require data collection or time to run an analysis
Scalability-Small/simple decisions can be easily implemented via company norms/culture-Large/complex decisions don’t scale
-Requires preparation to transfer knowledge

Analytics

ProsCons
Objectiveness-Highly consistent from day to day
-Highly consistent from person to person
-Some degree of subjectivity with decisions on approach
Speed-Repeatable decisions where data is collected and process already created-New decisions where data hasn’t been collected or a process already created
Scalability-Code based approaches are easily repeatable and scaled-If version control not properly managed, can created inconsistencies

Combined

The above gives you an idea of what the pros and cons for BKA when used independently.  In this more detailed format it may be more challenging to see, but the pros and cons of both approaches are compliments.  To help make this easy to see, the below graph provides a summarized perspective of the above pro and con tables.

The combination of BKA provides you the best of both worlds!  If a decision requires speed, go with a heavier approach of leaning on your business knowledge.  However, if a decision is highly complex, go with a heavier analytics approach, as this will provide a more objective viewpoint that can be scaled across your company (if need be).

Decision Making Framework

Popularized by Jeff Bezos at Amazon, I’ve found this approach to decision making the most useful.  When a decision is reversible, make it fast.  This implies only using easy and quick to gather data vs. conducting a large and complex analysis to collect more information.  Since the decision is reversible, the value of speed often outweighs the risk of being “wrong”.  Thinking about this in the context of the pros and cons above, this means using your knowledge of the business is likely the primary source of information for this decision.  This can often be the majority of decisions made at a business each day.  Not all decisions should require data and analytics, as this would slow decision making considerably. 

When a decision is not reversible (or extremely expensive to do so), there should be a thoughtful effort on which information is necessary to make the decision.  If you’re a restaurant looking for a building, this should be a thoughtful process.  Identifying the relevant decision-making factors (foot traffic, space, layout, etc) and then weighing the various options will result in a much better decision than picking the first building you see!

What to Expect When Combining Business Knowledge and Analytics

The above sections make the points about BKA being compliments to each other in the decision-making process.  However, what are some of the outcomes you’d expect to see if today you’re primarily using business knowledge, but made the decision to start using analytics?

1: Confirm Your Existing Perspective

Sometimes your existing knowledge of a situation and analytics end up giving the same answer.  This doesn’t mean implementing analytics was a waste of time or money!  You now have two different approaches that led you to the same answer, meaning your confidence in that answer can be greater than each independently.  Everyone is susceptible to biases, so the value of “double checking” important decisions can be significant.

2: Finding New Insights

Using analytics can help you find new insights and knowledge you may not have been aware of before.  This is most likely in new areas you haven’t explored in the past, but can also occur in spaces you’re already familiar with. 

In new areas, finding new insights with analytics should be relatively straightforward.  If you have no base knowledge of an area, using data to better understand it is likely to generate novel findings.  However, when exploring areas you’re already familiar with, it can lead to uncomfortable questions: Why wasn’t I already aware of this? How could we have missed this?  This is part of the power of analytics (and value in combining with your business knowledge), as it provides a different approach and perspective that may find something new with fresh approach.

3: Finding Insights Counter to Your Perspective

While rare, sometimes analytics can help find a situation in which your existing perspective is simply incorrect.  These can be the most challenging situations for a business owner or decision maker, especially for a business new to analytics.  The natural first question is to challenge the analytics, which is a reasonable first step.  If you and your business have a long held belief and a new analytics approach comes in and tells you something opposite to that belief, we should make sure the new analytics approach is being done correctly.  However, if the analytics approach is done correctly, the next steps can test the culture of a business in a way it may not have been tested in the past.

4: Consistency Across Decisions

As you further integrate analytics into your business, you should expect to see a higher degree of consistency across decisions and decision makers.  While there will always be room for interpretation and disagreement, analytics often shrinks that window.  You should find more productive disagreements since the scope of potential disagreement is much smaller when a business adopts the findings from analytics as the “truth”.

Final Thoughts

If you’re a business owner and less familiar with analytics, I hope these thoughts provide you some things to think about within your business’s decision-making processes.  The objectives of using analytics aren’t to replace your knowledge of your business, they’re to compliment and enhance your knowledge of your business.  Knowledge is power, and analytics aims to increase your knowledge.

If you’re interested in how analytics can help your business, reach out to Simplified Analytics for a free consultation about how analytics may be able to help your business.

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