The great majority of executives around the world – 94% – say management of their company is prepared to make significant decisions about the strategic direction of their business, but barely one-third relied primarily on data and analytics when they made their last big decision. Executives’ intuition or experience and the advice and experience of others in their organisation were the decision making modes of choice for 58% of executives. However, the 43% of executives that say their companies are highly data-driven report the biggest improvements in decision making over the last two years. All executives said top priority over the next two years is to make investments in the quality of data analysis to make better decisions.
According to Gut & gigabytes: Capitalising on the art & science in decision making, a new survey report by the Economist Intelligence Unit sponsored by PwC, executives make big decisions frequently and review them often. More than three-fourths of executives make a big decision each quarter and 43% review them every month.
The survey found that the five most important decisions facing executives in the next 12 months are, in order: growing the existing business, collaborating with competitors, shrinking the existing business, entering a new industry or starting a new business, and corporate financing.
Said Dan DiFilippo, PwC’s Global & US Data and Analytics Leader: “A company’s success today is tied to how good it is at making big decisions. While executives say they continue to rely on experience, advice, or their own gut instinct, they also see investment in data and analytics as critical to success. Experience and intuition and the use of data and analytics are not mutually exclusive. The challenge for business is how best to marry the two. Executives know the right questions to ask. Now they need to know how to get the right answers from external and internal data they’ve used over the last two years.”
Executives said the appearance of a business opportunity they could not ignore was the most common motivation for considering a big decision (30%). Other reasons: making decisions that were previously delayed (25%), strategic fit (18%), testing ideas (15%), reacting to external factors (9%), and regulation (4%).
Despite executives’ comfort in relying on gut instinct, nearly two-thirds (63%) said the use of data has changed how their company makes decisions and they expect it to have more impact in the future. The top three changes executives plan in decision making include the number of people involved in making a decision, greater use of specialised and enhanced analytics and data analysis, and the use of dedicated data teams to inform strategic decisions.
Said Paul Blase, PwC’s US Advisory Data and Analytics Leader: “With so much at stake when it comes to the impact of big decisions on profitability, often valued in the billions of dollars, and the lack of predictability and frequency of when decisions are required, companies are trying to increase their decision making speed and sophistication. Better decision making requires the use of newly accessible data and analytic techniques, as well as clarifying accountability and the decision making processes.”
The survey findings affirm a balanced approach to using data and analytics to make speedy and sophisticated big decisions for competitive advantage:
- Mapping decisions to shareholder value by pinpointing decisions that have the biggest impact on the company’s future
- Linking the strategic alternatives to business impacts by simulating how mega trends, industry trends and the strategic alternatives affect the business and operating model
- Applying a value and results lens by quantifying the expected improvement in metrics associated with improving decision making
- Adopting a structured test and learn approach by specifying changes to the organisation, process, technology and culture that are needed to improve decision making