How Much Data Is “Too Much”?

thinking gearsIt is often said that it’s important to have access to full and relevant data and information about each option before making a decision or commitment. It has been argued that a ‘rational actor,’ given enough information about each option, will be able to compare and contrast the choices objectively and form a robust conclusion. This argument is extended to say that where information asymmetry exists (for example where the seller knows more than the buyer) then problems are likely to occur. In principle, this is difficult to disagree with – after all, if you’re about to buy a house and the seller ‘forgets’ to tell you that the neighbours like to hold late night parties every night, then you’d probably start to feel the effects of that information asymmetry very quickly after moving in!

 

Understandably, when it comes to decision making, there is a tendency to try to maximise the amount of information and data about each option for the very reasons mentioned above. If you’re considering booking a hotel, you might use a website to compare the prices of hundreds of hotels in the area. You might look at the ratings of a few potential hotels on several different sites. You might then consider how close the hotel is to the city centre, whether it has a gym, or whether it provides free breakfast. Yet, as anyone who has booked a hotel in a city they aren’t familiar with knows, it is very easy to swamp yourself with data. It is easy to become overwhelmed, so much so that it becomes tempting to defer the decision completely.

 

Imagine you’re looking to book a hotel in London. Depending on the area you’re looking in, you have hundreds—or thousands—of hotels to choose from. The prices vary from mid-range to luxury – and there’s a fine balance between price and location (a hotel might look like a bargain until you realise it’s a 60 minute commute from the city centre!). Then there’s the reviews – seeing impartial reviews of a hotel is useful, but how do you interpret a situation where some reviews are extremely positive,  but an equal number say it’s horrible, unclean and unfriendly? The temptation, in situations like this is to get more information. Perhaps you look at other review sites, or consider a different hotel. And so the cycle continues. Before you know it, you’ve spent three hours searching travel sites and you’re still no closer to making a decision…

 

Having extensive data, it would seem isn’t always such a good thing. Or, more accurately, having disparate pieces of data that can’t readily be analysed, correlated or compared can cause decision paralysis.  

 

What this means for business and business analysis

When working with our stakeholders, customers and clients, we’ll often be helping them to improve their businesses or business units. This might involve understanding and defining strategy and objectives, ensuring the right systems and processes are in place, and helping to kick off and run change projects. Inevitably, throughout this process there will be a lot of decision making – and we’ll be on hand to help our stakeholders make informed decisions about which direction they should take.

 

However, in these cases, a very similar pitfall awaits us. Rarely is there a clear answer or direction, there will often be hundreds (or thousands) of options, sub-options and solutions open to us and our business. It is very tempting to seek every conceivable piece of data and to compare every conceivable idea. What we implicitly try to do here is increase the certainty in our decision making –after all, nobody wants to make the “wrong” choice. Yet, there will always be an element of uncertainty in decisions. It’s important that we consider the costs of seeking additional information, in time, focus or money. There will come a point where it is better to stop seeking information and go ahead and choose. We can help our business stakeholders by advising when we feel this point has been reached; by highlighting the risks but making a recommendation on the best approach. Put simply: to avoid decision paralysis, we need to decide when to decide.

 

We can also help our stakeholders, clients and customers by encouraging them to build the collection of data into any new processes that are deployed. By ensuring the most relevant items of data are collected, we can ensure that future decision making is easier. On top of this, ensuring that analytic capabilities are considered or developed can be extremely useful – after all, if an organisation has a way to make sense of the seemingly limitless pieces of structured and unstructured data and information that it has access to, then this will help decision making. A firmer focus on analytics also allows hypothesis based decision making. Rather than committing to a long-term course of action, organisations can create a hypothesis, test and learn.

 

In summary: Data is only as useful as the actionable insight that can be derived from it, and in order to avoid decision paralysis, it is important to decide when to decide.

 

 

How do you help your stakeholders, customers and clients make informed decisions? What is your view on analytics and hypothesis based business decision making? I’d love to hear from you, please leave a comment below.

 


This post was brought to you by IBM for Midsize Business and opinions are my own. To read more on this topic, visit IBM’s Midsize Insider. Dedicated to providing businesses with expertise, solutions and tools that are specific to small and midsized companies, the Midsize Business program provides businesses with the materials and knowledge they need to become engines of a smarter planet.

IBM Logo




tumblr tracker


Leave a Reply