- Highly data-driven companies are three times more likely to report significant improvement in making big decisions, but only 1 in 3 executives say their organisation is highly data driven
- More big decisions are made opportunistically rather than deliberately, and big decisions have a big impact on profitability
- Executives in the Asia Pacific reported technological change as one of the three biggest trends to influence big decisions in their organisation in the future.
A new report by the Economist Intelligence Unit (EIU), sponsored by PwC, shows that only one-third of executives globally rely primarily on data and analytics when making big decisions, instead relying on intuition or the advice of others.
According to the report, titled Gut & gigabytes: Capitalising on the art & science in decision making, 44 percent of executives make a big decision every month, and nearly one-third estimate the profit impact of their most important decision to be $1 billion or more. Yet despite the frequency and impact of these decisions, 58 percent of executives rely on either their own intuition or the advice and experience of others, rather than data and analysis.
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. Executives in the Asia Pacific region also report that decisions around corporate restructuring and making major investments in their business will also be significant.
John Studley, PwC Australia’s Data & Analytics leader, said that although industry trends including regulation and consumer spending are impacting the way big decisions are made by executives globally, in the Asia Pacific the impact of technological change is also high on the agenda.
“Executives in the Asia Pacific cited technological disruption and enablement as something that will influence decision making in their organisations in the future, which is different to other regions where threats to margins are more of a concern,” Mr Studley said.
“In high growth environments executives have more leeway to rely on gut instinct, as the downside from a poor decision might not be so severe. However in environments where growth is constrained, decisions should be backed by the rigour and insights that data can provide, particularly as the margin between success and failure is that much tighter.”
“In our region, rising affluence is driving the uptake of technology which in turn is creating enormous volumes of data. It will therefore be crucial for executives in the Asia Pacific to develop sophisticated methods for interpreting and acting on this data, and quickly, if their businesses are to remain competitive.”
Making better ‘big’ decisions
Mr Studley said there are four ways companies can use data to increase the speed and sophistication of their decision making including pinpointing and prioritising the decisions that will have the most impact on the organisation’s future; simulating how industry trends will affect the business; quantifying the expected outcomes of decisions; and identifying changes to organisational processes, technology and culture that will improve how decisions are made.
“Successful organisations don’t just hire a small band of data scientists; they find smarter ways to connect their analytic firepower to the front line. They find ways to rapidly predict the likely impact of their decisions at all levels.”
Notes to Editors
- The EIU in May 2014 surveyed 1,135 executives, of whom 54% were C-level executives or board members.
- Respondents came from Europe (29%), North America (35%), and Asia-Pacific (24%). The remainder were from Latin America, the Middle East and Africa.
- Eighteen industries are represented; about 10% each from banking and capital markets, technology, energy and utilities and mining.
- The majority of companies reported annual revenues last year of at least US$1 billion.