Whether there is a boom or recession, whether the company is a start-up, a public company or in the public sector, there is clear evidence that fact-based decision-making, for strategic decisions as well as ongoing decision-making, is clearly crucial to success.
What, how and why?
Let's start by defining fact-based decision making. Simply put, we can say that it means all the decisions that are not based on the decision makers saying "I think that ...", which is unfortunately the most common background to decision making.
But when decisions are made and the decision makers say "the general picture is .." or "according to our monitoring of the trend and our summary you see that ..." yes, then we are in the fact-based decision-making zone.
Of course, daily decisions are made when there is no room for the gathering of a variety of facts and analysis of said facts. But in the event that a decision involves investing, or taking a new direction for a company, its offer or its operation, then you win big by ensuring that the decision is based on facts and insights.
In the following paragraph, we use data based from a larger survey that Bain & Co conducts annually. This one is from 2019 and concerns decisions regarding:
The company's overall strategy
Focus and budget for the development of products and services
Targeting and budget for marketing
Approach to changes in the market (regulations, competitors, etc.)
How to respond to feedback from the market (customers, suppliers, etc.)
Allocate the right resources for long-term innovation and research
A proven formula for success
The most important thing from Bain & Co's large research shows very clearly that companies and organizations that use fact-based decision-making perform significantly better than everyone else.
It all becomes more interesting when you drill a bit into the result and define what these "significantly better performances" mean.
The companies that perform better than others because they have a model and a system for working with fact-based decision-making are in some cases more than twice as successful on four very central factors. First and foremost, they achieve twice as good financial results, and certainly surprisingly for many, they make decisions much faster.
What is perhaps one of the most driving forces for them to perform so much more financially is that they are more than three times as successful in making the decisions that are made to really happen. This is precisely overlooked in many organizations, where it is assumed that all decisions made are executed. Which, of course, is a myth and a great misconception. The reason that fact-based decisions lead to a higher degree of implementation depends more on the fact that the decisions are more accurate and correct, because the people who carry out activities linked to the decision understand the whole and accept the decision as a truth. Many decisions made based on "I believe" or "I think" will be overlooked within the organization for the simple reason that those who will take care of the decision believe and think something else.
A proven formula for success, but few use it…
The most astonishing thing is that only 4 % of all surveyed companies from Bain & Co's survey respond that they use a systematic and well thought-out model to work with fact-based decision-making. The remaining 96 % do not use it at all, or only occasionally.
So to the question you as a reader should ask yourself here and now, do we belong to a company that is within the four percent or are we in the big second pile?
Statistically, it is…. just that, exactly 96 % chance that you belong to the companies that work with "I think". Even if you feel that you usually read and analyze before making a decision, there are some other components that need to be in place to qualify for the 4 % group.
So to the next big question. Most likely, you do not use fact-based decision-making, but everyone knows that you should. So why do so few make use of fact-based decision-making?
There are essentially three categories and three reasons:
The organization is unaware of the benefits and what it means to work with fact-based decision-making. Or it thinks that you use it by reading a little before making a decision, which is far from systematic.
The organization has a culture that is based on the fact that the employees, and especially the management team, have enough experience to quickly make decisions without any basis.
Being reactive has remained a norm in the organization and you always act afterwards and thus based on your own experienced events and results. This may be because it is considered too expensive or time consuming to monitor content and gather facts.
Is it expensive and difficult to start using fact-based decision-making?
Introducing a systematic model and associated tools to apply fact-based decision-making doesn’t need to be expensive, difficult or time-consuming. Many people believe that it must be the management team that makes such a decision, but on the contrary; it is usually a person in a line or staff function who, on their own initiative, starts with a systematic model and when the results become known, the usage spreads and you eventually have a new culture and are in the so-called 4 % group.
Good areas to start with are to create world-wide surveillance and – above all – monitoring digital content:
Own products and services on the market
Knowledge and technology areas that employees should keep abreast of
Competitors and disruptive trends
This can be done by examining which digital channels contain the necessary information. For own products in the market, you should monitor forums where customers and users discuss the product or service, social media, niche media, etc. For knowledge and technology areas, surveys on blogs, youtube channels, scientific databases etc. can be suitable sources.
Unfortunately, performing surveillance and gathering information is extremely time-consuming and costly if you do it manually, ie by manually reviewing the content of the sources and collecting the content. Fortunately, there are tools that make the job easier. For the smaller company, for example, Google News Alerts may suffice. With this tool you can enter keywords and get notifications when these keywords appear in news media. The tool is free, but also extremely limited.
For larger organizations, and when you need to monitor and retrieve information that extends beyond news media, more powerful tools are needed. Hoodin is an option for those of you who want to try automated monitoring of digital content with the purpose of working with fact-based decision making. We have solutions for different uses and industries, as we know that the results from monitoring must be of utmost relevance when it is used for decision making.
Do you want to go from the 96 % group to the 4 % group? Book a demo and have one of our experts show you what Hoodin as a platform can do for you to enhance fact-based decision-making.
Marcus Emne, CEO