The Danger of Relying on Data for Decisions

Dateline: December 9, 2016

Welcome to our Friday WRAP – one thought-provoking idea to think about over the weekend.

Data-driven decision making is quickly becoming table stakes for every managerial decision. Using analytics to understand options and predict outcomes relies on data to fuel the analytics engine.  Recently Professor Sam Ransbotham, editor of the Sloan Management Review Data and Analytics Blog, wrote about how data can lead decision makers astray.  His article, Duped by Data, suggests that even small errors from misleading data can add up when a decision is based on many such analyses and each one is a bit wrong.

I suspect there are many examples of small stories about misleading data throughout lots of organizations. Using a sports-management analogy, the movements toward “small ball” are based on the idea that a series of small changes can add up to wins, with data analysis supporting each small decision. But this cuts both ways. If you believe that doing lots of small things correctly can add up to success, then doing lots of small things incorrectly can lead to failure. A number of small deceits by data can add up.

Professor Ransbotham suggests a way to manage the risk of misleading data,

Even with diligence, managers may still be duped. A useful concept managers might consider borrowing from the domain of security is the idea of defense-in-depth: that is, thinking through the consequences of the failure of one line of defense. For managerial decisions based on data, an additional layer of security may be to recognize that data may still deceive. What are the consequences of mistakes (both in costs and time) if the data is weak or unreliable? What hedging could reduce extreme, unacceptable, or negative consequences?

What security practices can you put in place to guard against the problem of misleading data?

That’s a WRAP!  Have a great weekend!

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