Last Fall (2018), I read this article about Jeff Bezos choosing Amazon HQ2 with his heart (click here) and it made me want to write this post.
Now here I am almost a year later (September 2019), and I’m finally writing the post. Better late than never I guess.
What does it mean to be “data informed” in a company?
Well, “data” is overwhelming. A piece of data is raw. It’s detailed. It’s a grain of sand in a desert.
A piece of “data” usually doesn’t mean much on its own.
You have to turn “data” into “information”. That’s how you become “data informed”.
One way companies do this is by generating Key Performance Indicators (KPIs). How many customers do we have? What percentage did sales grow this year vs. last year? What’s our inventory turnover ratio? What’s the gross profit percentage?
KPIs allow you to take a bunch of “data” points and turn them into one informative number.
All of these KPIs get put on your Dashboard. The idea of a Dashboard is like the Dashboard in your car. You have the most important information at your fingertips, easily seen, and easily consumed.
Side note: Funny thing, if you drop into a random company meeting anywhere in the world where people are sitting around a table, most likely the “dashboards” that people are using to make decisions were created in Microsoft Excel.
Trendy Silicon Valley companies come up with fancy names for their KPIs like “Churn” and “Net Promotor Score (NPS)”. But, at the end of the day, it’s just a calculation, just a number, or a category determined by numbers.
Now, all of this is great. Numbers, especially KPI numbers, can be helpful and they can be very enlightening.
And organizations continue to collect more and more data. Data collected by humans typing on their keyboards. Data collected by the Internet of Things (IoT) devices that collect data automatically, especially in Manufacturing environments.
Data is collected about a variety of things, including about us humans. How many phone calls did you make today? How many emails have you sent this month? How many “steps” did you take?
By the way, what are “steps” anyways? They seem like airline “miles” to me, a meaningful word applied to a meaningless number. Weird.
Understandably, the more data that is collected, the more people want to analyze that data to turn the “raw data” into informative “KPI numbers”.
KPIs are great. But is it possible for a KPI to be a meaningless number? I think so.
We human beings are funny people. When it comes to decisions, we can be so irrational. Yet we still take comfort in numbers.
Numbers are like a “security blanket” that comforts us when making a decision. Even when those numbers are meaningless.
Have you ever done this? You know you have to make a decision, so you take out a piece of paper and draw a line down the middle. On the left-hand side you write “pros” and on the right-hand side you write “cons”. It’s very helpful to write down the list of pros and cons. It’s a process that puts your “fuzzy” thoughts into “black and white” on the page. It’s the process more than the resulting piece of paper that is helpful.
Side note: This reminds me of a quote from Dwight D. Eisenhower which Ed Kless (more on him later) included in a Project Management workshop that I attended years ago.
Plans are useless, but planning is everything.– Dwight D. Eisenhower
Back to your list of “pros” and “cons”. It’s a great exercise.
But then you do a very funny thing. You count the pros and count the cons. I’m not sure the total count of pros or the total count of cons means anything. But why do you count the pros and cons? Because we humans take comfort in numbers, even when they are meaningless numbers.
When is a KPI a meaningless number? Good question, that’s where things get tricky. But suffice to say that there are good KPIs and there are bad KPIs.
The trouble is that there is so much data in organizations now. We have to rely on the KPIs on our Dashboards to “drive the car” without crashing and putting our careers in the hospital.
I’m ok with KPIs. Really, I am. Over time, you get a feel for which ones are good and which ones are bad.
We’ve got a lot of data being captured out there. People turn that data into KPIs and drop those KPIs onto Dashboards. All good. I don’t have a problem with that.
What I do have a problem with is when organizations become “data driven”.
Currently, when you Google “data driven”, this is the top definition that you get:
“determined by or dependent on the collection or analysis of data.”
The “determined by” part of this definition is what I see increasingly emphasized in organizations. And it scares me.
Increasingly, organizations are allowing data (not people) to make decisions. Their decisions are “data driven”.
One of my favorite podcasts is The Soul of Enterprise (click here) from Ron Baker and Ed Kless.
In Episode #1: Declaring Independence from the Tyranny of Taylorism (click here) back in 2014, Ron and Ed take a blowtorch to the phrase “what you can measure, you can manage” (which many people incorrectly attribute to Peter Drucker).
This “what you can measure, you can manage” phrase is a gateway drug, the pill that you swallow on your way to becoming a “data driven” addict.
Once you swallow this pill and believe that you can manage by measurements, then you are not far away from concluding that human judgement is no longer needed in your organization. All you need are measurements. And the measurements themselves can make decisions.
KPIs are good on a Dashboard, but bad when they directly drive action without being intercepted by human judgement.
When numbers begin to make decisions in an organization, bad things happen. Everything becomes about being faster and more efficient, but innovation suffers.
When numbers begin to make decisions in an organization, common sense suffers too.
Be Data Informed, not Data Driven
I personally want to be better informed by data.
I want to work in a “data informed” organization.
But, please, keep me away from a “data driven” organization.
I personally want more KPIs so I can find the ones that are meaningful and use them to be better informed.
But I still value “intuition”, “feeling”, “my gut”, “my conscience”, and those other precious human qualities that machines will never be able to emulate.
Perhaps the most well-known “data driven” organization on the planet is Amazon.
But going back to that Jeff Bezos article (click here) at the beginning of this post, even Amazon is not a purely “data driven” organization. Here’s a quote from the article:
Ultimately the decision will be made with intuition after gathering and studying a lot of data — for a decision like that, as far as I know, the best way to make it is you collect as much data as you can, you immerse yourself in that data but then you make the decision with your heart– Jeff Bezos
Well said Jeff, well said.
Be “data informed”, not “data driven”.