July 30, 2018
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Nick Newby

Data-Informed vs Data-Driven

You need to have your pulse on your data, and how it’s impacting your business.

Everyone can agree that in order to compete in nearly any business in any industry, you need to have your pulse on your data, and how it’s impacting your business.  Where there is confusion about data is how much decision making should data be doing in your business.  Thus, draws the question, Should your decision-making be data-driven, or data-informed?

Data-Driven 

The term data-driven in itself may take on a more data-informed meaning for some people, but for a Data Scientist, a data-driven decision is one that is made in the absence of human intervention.  This is where IBM’s Watson steps in and decides that after your insurance premium will go up by $32 to account for the changes in driving style of individuals that live in the neighborhood you recently moved to.  This is when we start to see computers make choices and decisions for us, based on the optimal solution. 

This can be very advantageous, if you need to make the same type of decision hundreds of times and you need to make sure over the course of those hundred decision you are averaging out to the optimal result, this is imperative.  Assigning insurance premiums to hundreds of thousands of drivers requires a computer to determine the best estimate of every customers risk in order to insure they make the right decision.  This protects them from over-risking or under-risking on their entire portfolio.  Having individuals make these decisions begins to bring in a risk of straying too far to one side or the other, through natural bias.

Data-driven decision making requires enough data in any certain area to trust that the result will be the optimal one. Most companies don’t have enough data for true data-driven decision making. Even if there is “enough”, all companies fear the quality of their data and don’t know the pitfalls of their data structure.

Data-Informed

A data-informed decision is one that takes the information from the data and combines it with tribal, anecdotal knowledge to make the correct decision.  Allowing data to inform a decision allows a human to intervene to make the decision.  This intervention allows a leadership team to asses the situation and make decisions with the aide of data.  This type of decision-making is when Billy Beane trades Carlos Pena to help develop the team and shift the management to his system (Note: We love Moneyball). 

Taking into account the things that can’t be quantified can allow a team to make quick decisions within the bounds of the data, maximizing on the intuition that leaders have.  This type of decision making can be advantageous when a company has limited data or needs to move quickly.  It also allows a team to put their knowledge of the business to work in making decisions. 

Where do you stand?  

Do you take the information you have, combine it with logic from your business knowledge, mix it together into the perfect computer model, let it simulate the decisions thousands of times and let the system run?  With the satisfaction of knowing the system will make the optimal decision for you?

Or do you take the data you have, understand the guidance it provides, combine it with your intuition to make a decision to power your company forward?  Knowing that you have been informed by the data, but sprinkled in your knowledge and made the best decision you can come to? 

From our operation experience guiding high growth companies, the most effective path is to make data informed decisions.  Allowing data to inform your decisions allows you to utilize intuition, trusting the data to give you the guidance needed to keep your business on track.  When you develop a team to run your business, you focus on bringing in talented, experienced people that have diverse backgrounds, different skill-sets and various viewpoints.  These people help to drive your business forward, their viewpoints can’t all be completely integrated into a data-driven decision system.  They can, however, take guidance from data and determine, for instance, the optimal time to call customers based on their understanding of customers experiences.

Even though we believe having a data informed process is the best for a business, we do feel the need for automating the decision-making process.  Automation can allow you to super charge your teams ability to use data to inform their decisions, by presenting them with the adequate information, on a scheduled basis.  Get the right data in the hands of the right people, and they can drive your business forward, through data-informed decision-making.

Nick Newby
Nick is the managing director of data science for NuView Analytics

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nick@nuviewanalytics.com
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