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Data Minded - completely without algorithms

I can't hear this phrase anymore: 'Data is the new oil.' Behind it there is always a vague understanding and the idea that per se money can always be made with data. Business model, product idea or real customer needs? Not so important, even startups know that. Many apps are built today only to secure data, traffic and the next round of funding. What is to be created from the data in the medium term is surprisingly often not questioned. In corporate groups, when asked, it was often said, 'Then we'll do something with AI.' That might work for the big tech players, who have a highly lucrative advertising model and can use pattern recognition in the data volumes to precisely target ads. In the ideal case, product innovations even emerge from these insights. However, this is not the case in German SMEs and corporations.

Data is above all information

The Economist author who compared data with the oil business in 2017 said: The data business shows similar structures to the oil business. For example, it tends to monopolize similarly. Facebook attracts the antitrust authorities just as Rockefeller's company Standard Oil did back in 1911 - and data does a similar amount of work as oil (extracting, refining and converting it into products for end users). Today, people also like to misunderstand the fundamental nature of data: it is equated with digitality. In the frenzy of the oil parable, people in this country like to digitize things completely bypassing the customer or their own company. But data is first and foremost information. For me, data-oriented thinking means first and foremost making decisions based on information rather than feelings. I don't necessarily need digital products and algorithms to do this; on the contrary, an informed decision-making culture should actually precede the use of algorithms. Because in an instinctive decision culture of gut feeling, you don't really need them.

My gut feeling comes to a decision much faster

If you're wondering whether a contract change is likely to work, there's a very simple way to make a data-driven decision: an A/B test. You simply compare the completion rate of contract version A with the success of version B. Google's standard tools are quite sufficient for this. Now some will think 'Fair enough, but I can't decide on business expansion that way.' I think, in principle, yes. Because recently I met the person in charge of a very successful young furniture company from the USA, which is also active in Germany. The team was about to enter another European market, and I asked him if he was curious to see how successful it would be. He replied that it was not very exciting, as it was pretty much predictable. The market entry was preceded by extensive research, countless A/B tests, which the team cross-checked with findings from the past. They knew exactly which input would lead to which output and when, he explained to me. That's what I call data-driven business development. It's incredible diligence at its core. My gut feeling comes to a decision much faster.

It simply comes down to commitment, whenever decisions are made in the company, to base them on measurable information - and to consistently act on the results. In my view, this is a pivotal point for data mindedness: to give information priority over one's own gut feeling instead of collecting it in order to rationalize instinctive decisions. But why do we have such a hard time with this?

The mistake has system - Data Biases: Two Common Misconceptions

Of course, when making decisions, we can draw on information, hypothesize, juxtapose experiences - but that's not our primary instinct. Our brain follows the logic of evolution: it guides us to judgment quickly and conserves energy. In a world where it's no longer fight or flight for us, however, this programming leads to systematic misjudgments. I have personally experienced two of these over and over again. To describe them, I find the concept of "biases" from cognitive psychology helpful (and of course use it here free of any scientific pretense).

The Silicon Valley bias: Nothing under Musk.
The halo effect from social psychology describes how we automatically infer unknown characteristics of a person from known ones. If the first impression is positive, we like to judge the rest in the same way, without evidence to support it. We form a "halo. Hardly anywhere is this effect better observed than with the tech saints Elon Musk, Jeff Bezos and Co. The great innovative and entrepreneurial achievements lead to a cult of personality without really working on the important internal adjusting screws of digitization. For years, the Silicon Valley progress narrative has attracted German entrepreneurs as tourists. After their trip to the Valley, they may invest a few hundred thousand euros in a startup, but their culture in the core company remains largely unaffected.

Data Minded: 1 Commitment - 4 Goals

For me, data mindedness starts with the commitment to make only informed decisions, always and everywhere in the company. This means, for example, gathering information from inside and outside the company, testing alternatives, weighing risks against each other, and combining information. You have to practice this. Why is it worth the effort? I observe four competencies that we can only achieve - and urgently need - through an informed decision-making culture.

  1. Proactive risk management: We have all experienced the reactive German Corona policy, usually associated with feelings of powerlessness. Despite sufficient information in the summer of 2021, the government has avoided decisions to shape the fall of 2021. In my view, the economist, Moritz Schularick, explains very well why this is so: 'It is much easier for them to act when there are no more alternatives and you have your back to the wall. The only thing is that proactive risk management is not possible in this way. But proactive risk management will become more and more important in the coming years in the wake of climate change and other risks.'
  2. Alliance building: According to a recent study by the Capgemini Research Institute, around 48 percent of companies and public institutions worldwide - and as many as 64 percent in Germany - are planning joint initiatives for data ecosystems. Similar to the large platforms, they want to bring together (anonymized) data and skills in this way. But mergers, such as the Alliance of Opportunities to combat the shortage of skilled workers in Germany, also use cooperation for innovative solutions. Informed decision-making cultures find it much easier to cooperate because they can see the rational advantages.
  3. Vertical competence: Many data-driven players, e.g. from the e-commerce sector, are developing talent in terms of vertical competence, as I would call it. For this, they recruit more according to mindset and attitude than purely technical credentials. On the other hand, they define areas of responsibility very narrowly: Such companies are looking for a director only for the "Paid Search" area, for example. In Germany, candidates are used to - and expect - even broader areas of responsibility. But the model of pointed expertise and vertical competence will influence the market. Because it meets the challenges of data-driven business.

  4. Talent appeal: Data-driven decisions signal commitment. Informed action is comprehensible. Only when I, as a company, can truly say 'Results matter to us, not politics,' do I slide to the radius of certain talent. An informed decision-making culture could become the organic seal of approval for employers.

My personal conclusion:

We should not talk about data-driven as long as we leave decisions in the company to our primary instinct. Gut feeling makes management decisions intransparent and makes identification more difficult. Informed decisions, by definition, make sense; they are half the battle of Purpose. They also lead to a culture in the company that attracts and retains people. I have experienced this myself for years.

About the author

Dr. Sebastian Tschentscher finds the best digital minds for your company with his executive search boutique "Digital Minds".

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