When it comes to decision-making, one would think that this is a rational world, where decisions are based on rational thinking. In such a world, decisions will follow a rational process of defining the question or problem statement, look at all the options available, gather all the supporting information and come to a conclusion whereby a decision (the best one) can be made.
However, that is in the rational world. In the real world, it is quite evident that this is not how decisions are made, and it begs the question, why not?
Let me unpack this by looking at the following:
How management decisions are made:
Like it or not, a very large number of management decisions are based on experience and intuition and not based on a review of all the options, supporting information available, etc. The problem with this is that past experience and solutions may not give the business the competitive advantage it needs in an increasingly competitive global market.
Why do managers/decision-makers not make rational decisions?
A number of factors contribute to managers not making fully rational decisions. This includes the time it will take to gather all the required information in support of all the various options. However, even when intuition and axiomatic evidence eliminates most non-relevant options, decision-making is still not rational.
Many decisions in organisations are supported by some level of information, which is referred to as the bounded rational model. However, the one component that is persistently difficult to obtain is supporting data, more specifically supporting information. The simple process of data leading to information, leading to knowledge and then leading to insight is not functioning.
Why is my business intelligence (BI) solution not giving me that information?
BI solutions should not be technological wonders that exist for their own sake, but rather a business management solution. It must not regurgitate data from the operational sources without any value-add.
BI managers must seek to understand what information is used and how it is used in the decision-making process. There will always be bounded rational decision-making in companies simply because the future is impossible to predict, but that is no excuse for basing decisions on gut feel and intuition because the BI solution is not geared towards supporting decision-making.
BI must supply information, knowledge and insight in support of decision-making.
Gerhard Botha is principal consultant at PBT.
When making decisions based on a rational approach, it is imperative that the outcomes of the decisions are reviewed. It may be that a failed outcome is a result of insufficient, outdated or incorrect information, which must be addressed.
A great concern is that today's BI solutions are very inwards focused, whereas the information required all too frequently lies outside of the organisation. What is the exchange rate, which competitor is launching a marketing campaign, what are the demographical changes in my region? These are all questions impacting strategic decision-making, but are all too seldom supported by BI solutions. More to the point, what competitor, supplier, customer, market and geopolitical intelligence do I have in my solution?
Where is my BI manager?
This leads to the fact that the role of BI in organisations must be brought back on course. BI must supply information, knowledge and insight in support of decision-making. The BI experts must seek to understand what decisions are being made and be able to source the relevant information in support of these decisions.
Almost more importantly, BI experts must understand what effect their information has on the decision-making, what information is seen as relevant and how the process of supplying information can be improved based on the outcome of the decision. BI managers must review their role in the organisation and recognise that supplying information and building technologically advanced solutions must only be a means to an end.
In business, it is not expected that decision-makers will always seek empirical evidence in support of their decisions. They are, after all, extremely busy people who have a number of priorities and important aspects to deal with on a daily basis. However, making decisions in today's multifaceted and volatile business market is very complex, and as a result, decision-makers need to make use of the technology available to them that allows them to obtain the right information they need at the right time to make the right decisions.
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