Is the data-driven enterprise an oxymoron?
Previously on diginomicas, I asked the question, “If causal emergence is a viable alternative to reductionism, perhaps it’s an answer to that 1996 question, ‘Why do we need all this data?'”
In a thread on LinkedIn, my friend Matt Watkinson (author of” The Ten Principles Behind Great Customer Experiences” and “The Grid”) asked, “What is the point of a business?”
Is it to earn a profit? To make and keep a customer? To maximize returns to shareholders?
To provide meaning and purpose for employees? To contribute to society? To have some fun with your friends? To seek personal fulfillment? To feed your family?”
Matt labels these questions as the “philosophical realm” of a business, or, what is the philosophy of your business? I was deep into philosophy early in college until I realized that if I switched to math, I wouldn’t have to write papers. Hitchhiking one day, a truck driver picked me up. As we talked during a long stretch, he asked, “What do you do?” I responded, “I’m a college student.” “Good for you. What are you studying?” I said, “Philosophy.” In all seriousness and enthusiastically, he said, “That’s great. Let me tell you my philosophy of driving trucks.”
I suppose it’s not unreasonable to consider the question, “Why are we in business?” within the realm of philosophy.
Matt asserts that facts, evidence and objectivity, the bedrock of science, are not the drivers of business decision-making. Instead, “subjectivity, opinion, and values” are. Elaborating on this premise, he observes that “data gathering, analyzing, structured experimentation, and formulating of principles,” plays a minor role compared to the philosophical realm, “which dominates our decision-making, the activities we undertake, and the reasons we undertake them.”
Reading between the lines, Matt is saying that business decisions aren’t science. It’s a provocative assertion. It goes to the heart of the current proposition that companies need to be data-driven. What is a data-driven company? There are many ways to define a data-driven company, but the consensus is one which makes strategic and tactical decisions that are rooted in data analytics.
There was something Matt said in the thread, one word: Gigerenzer. Gerd Gigerenzer is a German psychologist and a fellow at the Max Planck Institute for Human Development who has studied the use of bounded rationality and heuristics in decision-making. Gigerenzer sparked a controversy by attempting to debunk the Nobel Prize-winning duo of Kahneman and Tversky (see their 1974 article, Judgment Under Uncertainty: Heuristics and Biases) in a very public dispute (see Gigerenzer versus Kahneman and Tversky: The 1996 face-off). Henry Kissinger once opined why arguments between academics become some vicious: “Because the stakes are so low.” But reviewing that discussion is a diversion.
Bounded rationality is a human decision-making process in which we attempt to satisfice rather than optimize. In other words, we seek a decision that will be good enough rather than the best possible.
