Master “The Art of Thinking Clearly” before making your Analytics Investment

I lead the Technology Industry BU for a fast-growing Analytics firm and one of the perks of my job is the numerous conversations with a variety of prospects/ clients.

I recently read the novel “The Art of Thinking Clearly” by Rolf Dobelli which deals with systematic cognitive errors of human beings as a result of our evolution.

I enjoyed reading the book immensely, relating those cognitive errors to what I experience every day. I am selecting a few rampant cognitive errors mentioned in the book and linking them to situations I have come across.

NeoMania *

Def: The mania for all things new and shiny.

The desire to have Marketing Automation, Machine learning models, Artificial intelligence and other such cutting-edge capability is intense in organizations today and probably justified . However, it's alarming to see many of these efforts promise a very large ROI but never deliver against it. I once had an executive of a large organization say without batting an eyelid “We have invested millions in a Big Data environment and we now need to figure how to use it”.

I am always disappointed when I hear things like “Can you tell me how I can use ML capability in my business/ function ?”. I wonder if anyone would say it if I replaced the word “ML” with “Statistics”. Conversely the best use of ML/ AI is when the need or a business problem was identified first and ML/AI emerged as a solution.

Swimmer’s Body Illusion *

Rolf explains in the book that “Swimmer’s don’t have great bodies because they swim a lot, they are swimmers because of their physique being suited swimming”.

I have seen companies falling to this illusion when they look to replicate an Analytics success story from companies that seem to be doing very well and claiming that Analytics is driving their success. It’s safe to say that Retail industry has the most mature Analytics capability, but nobody is blaming the Analytics team at Sears and Macy’s for their decline.

In my opinion, most companies would succeed in their Analytics initiatives if they just are more rational and use data to be just that

Authority Bias*

Def: This the tendency of human beings to follow Authority without question, a culture most visible in religion but equally prominent in businesses.

When I ask my clients why they were following a particular strategy, the responses most often indicate an Authority bias .Interestingly the bias seems more obvious when the perceived results from the strategy are less obvious. 

My advice to my clients has always been to focus on outcome and not on the process. I am amazed even now that such a conversation isn’t always easy.

The Paradox of Choice*

Def: Too many choices lead to decision paralysis and often leads to poorer decisions.

The number of Analytics tools, vendors and technologies today is confounding. One would expect then that most clients would be happy with the choices they make. However, I haven’t seen a company that is entirely happy with their selection of BI or Analytics platform. 

If only they hadn’t compared the tools with each other but against a prioritized list of their own needs, they would have come to a better decision.

Default Effect/ Status quo bias*

Def: Default Effect/ Status quo bias reveal that we have a strong tendency to cling to the way things are, even when they put us at a disadvantage.

Most Tech companies with revenues of $500 Million to $ 2 Billion revenues are hyper focused on growth. The most important part of achieving growth is to size the market right, find the account segments to focus and then put Sales force or Channel partners to gain market share. One would imagine that these companies would have nailed this process well. I am still to come across one.

Alternative Blindness

Def: We systematically forget to compare an existing offer with the next-best alternative.

I have run across companies who have no Analytics capabilities looking to hire a team first, spending a million dollars and lose quite a bit of time before they see any capability in action. When we provide them the alternative to spend less than half a million and have the capabilities stand up in six months, one would imagine it would be a no-brainer. It is, but only to our clients :-)

* Please note that “The terms and their description are from Rolf Dobelli’s book.