When Big Data Leads To Bad Decisions

Knowledge is power. So if data equates to knowledge, having a lot of it will naturally allow us to make better decisions that will lead to wealth and success, right? Certainly many organisations are using big data to bolster revenue and bring about overall improvements. But big data isn't the silver bullet to business woes and you can still make bad decisions even with all the right information at your fingertips. We take a look at how big data can lead to bad decisions.

If you believe all the hype about big data, the technology is the lord saviour Jesus Christ incarnate and is able to perform miracles. Researchers are even using big data to find a cure for cancer.

In a business context, big data is about making money. When you run a business, uncertainty is just a part of life but bad decisions can be costly. Big data can be used to lower the level of uncertainty by using information from a number of sources to guide companies down the right path to increasing revenues.

It's evident that organisations are putting a lot of faith in big data and, as a result, data analytics professionals are highly sought after these days.

All this sounds good on paper, but technology isn't infallible. There are many factors that come into play when you're trying to derive insights from big data. For one, not all data is good data. Just because you're pulling in information from various different sources doesn't mean all of it will be useful or correct. Context and quality matters when it comes to looking at data.

The human element is also important to consider because ultimately the information is going to be interpreted by people and decisions are executed by people. According to research from the Chartered Institute of Management Accountants (CIMA), 72 per cent of organisations admitted to at least one strategic initiative failing due to flaws in their decision-making process. Alarmingly, 36 per cent blamed this on information overload and 32 per cent said big data has actually made things worse (although it should be mentioned that 37 said big data has helped them).

Here's what CEB, a technology and management consultancy firm, had to say about this:

"Unfortunately, life isn’t the same as a glossy advert for 'big data solutions', and there is no simple correlation between more data and better decisions. How “good” that data is will always depend on the person using it to make the decision, and CEB research shows that line managers are often prone to misusing the data they are given."

Homing in on the use of big data in financial planning, CEB notes that many executives tend to cherry pick data to support what they already believe.

Big data can be a powerful technology and it can lead to better decisions in an organisations. But companies need to be aware of its limitations and ensure that they put in standards and practices to ensure that it is used properly.


Comments

    1. Biased data comes in (either via leading questions or confirmation bias)

    2. Management use data like a drunk uses a lamppost - for support rather than illumination

    Data is just that, data. The meaning behind the data comes from the process of acquiring the data. The problem is, the data analytics often rely on people with no background in the actual data they're analysing. So they conclusions they make are mathematical, and may or may not have any real significance.

    Something I learnt as a spectroscopist is, "if you stare at a spectrum long enough you can find a signal out of anything"

    I am always amused when I read the article in the business section of newspaper where they explain that people who buy shaving cream also buy milk. They never explain whether the decision is then made to put the shaving gear next to the milk or put them so far apart to get extra sales but ultimately lead to customers departing to competitors due to poor store layout. :)

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