Analytics versus gut feel: Which is better for business?

Many business leaders continue to trust their guts, but there are ways to make them trust analytics, too.

Image: iStockphoto/metamorworks

The Collins English Dictionary defines gut feel as, “An instinctive feeling, as opposed to an opinion based on facts.” All of us have used gut feel in situations, such as, “I had a gut feeling that I shouldn’t have eaten that last piece of cake,” or “My gut feel is that our high school soccer team is going to win today.”

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“You can’t remember everything you have experienced in life, but you do store all this wisdom,” neuroscientist Tara Swart said. “Gut feelings are pattern recognition systems designed to keep you safe and well, but sometimes they can hold you back from thriving based on old fears.”

In business, gut feelings impact our use of analytics as well.

“Oftentimes I wrestle with this because I want the numbers to back up the gut feel,” said Michael Preyss, CFO of Garmong Construction Services. “Is the data coming behind and supporting whether or not this is really going to go the way you think it will … or the way it went last time?”

Preyss’ use of analytics led him to conclude, “Data analytics, good. Gut feel, not so good. If you can marry the two, good enough for now.”

This is precisely the challenge for IT, data science and other advocates of analytics in organizations. How do you build trust in analytics, yet maintain a balance with good old-fashioned gut feel?

Testing analytics against gut feel

The worth of analytics can be bench-tested against gut feel to see how often the two align with each other in terms of results.

Most companies have subject matter experts and experienced executives who have seen the ebb and flow of business many times over many years. They know their company operations inside out and have seen so many situations that what they call gut feel is really the culmination of what they have learned from all of these experiences over time. You don’t have to tell an experienced manufacturing expeditor how to expedite. He may not expedite “by the book,” but he knows his industry, and he knows how to get the job done.

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Is an individual with this experience going to abandon his time-honed gut feel business sense and let analytics make the decisions for him? Not likely. Nor is he immediately going to warm to IT or data science introducing such a project.

Instead, believability that analytics can outperform or at least become a welcome work partner for gut feel is at the heart of enthusiastic analytics adoption, and it takes time to build the trust in what the numbers and outcomes say. This is the reason radiologists are on call to make their own final interpretations of MRIs and X-Rays that artificial intelligence also evaluates; and it’s why many CIOs and manufacturing production engineers want to personally push the button that stops operations, and only after they have reviewed the analytics’ recommendations to do so.

In a gut feel environment, can you establish the worth of analytics?

Unequivocally, Yes! Analytics can reveal hidden facts that gut feel can’t.

“The exciting part is we can now start to look at the numbers and we can do sensitivity testing and we can look back a year ago, or six months ago, and see if our predictions came true,” Preyss said. “Sometimes, I’m way off, but the fact that we can look back and say, ‘We thought we were going to be here, and we’re within 25% of where we thought we were going to be a year ago.’ That’s exciting to me. Call it geeky, but I think it’s really fascinating to try to see how the math can come alongside and support the pulse of our leadership.”

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