Management is Much More Than a Science: Limits of Data-Driven Decision

Making
IN BRIEF: The big data revolution has reinforced the belief that all business decisions should be reached
through scientific analysis. But this approach has its limits, and it tends to narrow strategic options and hinder
innovation.

WHY IT HAPPENS: The scientific method is designed to understand natural phenomena that cannot be
changed – the sun will always rise tomorrow. It is not an effective way to evaluate things that do not yet exist.

THE SOLUTION: To make decisions about what could be, managers should 1) devise narratives about possible
futures, applying the tools of metaphor, logic, and emotion first described by Aristotle. Then they must 2)
hypothesize what would have to be true for those narratives to happen and validate their hypotheses through
prototyping.

Note: When we face a context in which things cannot be other than they are, we can and should use the
scientific method to understand the immutable world faster and more thoroughly. Data analytics helps in this
context.
When we face a context in which things can be other than they are, we are inadvertently convince ourselves
that change isn’t possible.

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One school of thought

 Big data can eliminate reliance on ‘gut feeling’ decision-making
 Business education wasn’t scientific enough (hence pressure to make MBAs more scientific)
 Intellectual rigor = data analysis
Other school of thought
 Alternative approach to strategy making and INNOVATION is one that relies less on data analysis and
more on imagination, experimentation, and communication

Is Business a Science? Both

 You should only use the scientific method IF you’re trying to understand something that ‘cannot be
other than they are’.
 Your ability to exercise free will/ the power of choice when thing ‘can be other than they are’ is ‘the
art’ of business. Great business innovations have the power to change human behavior. THUS, the
realm of possibilities is driven by the art of human invention and persuasion (the ability to imagine
products and processes that simply never existed), not by scientific method.

Can or Cannot? It depends

 Science: Is this situation governed by necessity (elements that cannot change)?
o Best approach: Apply methodology that optimizes the status quo
 Art: Is this situation governed by possibility (things we can alter)?
o Best approach: Design & imagination should be for focus for use of analytics
 Luquiform Lesson: Deconstruct each decision point.

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Management is Much More Than a Science: Limits of Data-Driven Decision
Making
o Laws of science can govern each step (physics)
o Sequence can change (combine two steps into one)
 Lego Lesson:
o Data is no more than evidence. Evidence of what? Depends on the questions you’re asking.
o You should always consider the limitations of the data. Absence of data or IMAGINING what
could be or could have been can lead to better executive insights. Note: very different than
analysis.

Breaking the Frame – START by empathizing

 Frame – underlying beliefs about why things are the way they are (cognitive shortcut)
o Best Approach: START by applying ethnographic research, and /or design thinking and other
user-centric approaches to innovate. Recognize the importance of qualitative (not
quantitative), or observational research in understanding human behavior (and decisions).

Constructing Persuasive Narratives – NEXT Leverage the system of persuasion

 Ethos: The will and character to change the current situation. To be effective, the author of the
narrative must possess credibility and authenticity.
 Logos: The logical structure of the argument. This must provide a rigorous case for transforming
problems into possibilities, possibilities into ideas, and ideas into action.
 Pathos: The capacity to empathize. To be capable of inspiring movement on a large scale, the author
must understand the audience

Why Metaphors Matter

 A well-crafted metaphor reinforces all three elements of persuasion. It makes the logical argument
more compelling and helps the audience connect with the argument.
o Associative fluency: the mental ability to connect two concepts that are not usually linked and
to forge them into a new idea. When people link unrelated concepts, product innovations
happen.
o Metaphors help consumers understand and relate to an innovation. Segway – no positive
experience to compare it to (no metaphor) so it crashed (among other reasons – regulations,
etc)

Choosing the Right Narrative

 BE SURE TO CREATE MULTIPLE NARRATIVES and test to see which one fits/sticks
 Clarify Conditions – Specify what would have to be true about the world for it to work then work
toward a consensus.
o Best approach: Have a group agree on whether it can make most of the conditions a reality and
have them take on the responsibility for doing so (survey, focus group, customer trial periods).
 Create New Data – relevant data doesn’t exist because the future hasn’t happened yet. Create it.
o An approach: Prototyping – giving users something they haven’t seen before and observing
and/or recording their reactions. Create improvements based on feedback until successful.
o NOTE: Some things you can’t or shouldn’t prototype. Use common sense.

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