The data-driven organization - Let's not take this too far

In Scott Thurm's "In the Lead" column from the 7/23/07 issue of the Wall Street Journal, he talks about the latest seeming craze around "Business by Data".  Thurm's healthy skepticism of the new data-driven business mantra is spot-on. The data and metrics zeitgeist is starting to resemble another management guru inspired, flavor-of-the-moment strategy which looks at a few isolated successful case studies/examples and ascribes their success to the use of the idea in question and then says everyone must do business this way to be successful.  First, it is worth noting that when used incorrectly, data can be powerfully destructive (e.g., when assuming correlation implies causation for instance) to good decision-making.

That said, as those who've read this blog before would know, I am a huge proponent of balancing decibel- vs data-driven approaches to making decisions, e.g., managing the intuition and analytics. But this has to be done with a focus on optimizing resource allocation decisions and not just by looking at one element (whether it be data or scorecards, TQM, dashboards, etc). 

Ultimately, data must be used to help inform decisions and this requires it become information.  Beyond information, however, data becomes most powerful if it becomes information which ultimately is synthesized into knowledge which lives on within an organization.  It is this knowledge which can be disseminated across an organization to help drive optimized/better decisions.

Let's take a simple example.  You're a widget maker and sold 100 widgets in 2006.  That is data.  Pretty useless by itself.  You know that you sold 110 widgets in 2005.  Now those two points provide some basic information in that widget sales have dropped 9%.  Diving into this information to learn more about this 9% drop may result in understanding that this is due to the influx of lower-cost widget providers who have superior economics and with whom you cannot compete right now.  This knowledge can then drive decisions for the organization such as "Do we invest in new manufacturing capabilities that will let us compete better?" or "Do we aim to innovate our current product and move into new customer segments?"  The data by itself doesn't get you very far.  Taking that data and developing an understanding of why it is this way is ultimately the key.