When Are Decisions Driven by Analytics, or Merely Informed by Them?

In http://www.dataintegrationblog.com/data-quality/from-tactical-to-strategic-action-operational-decision-management-2/

Boy did Julie Hunt ever hit the nail on the head: 

“But – real-time decision-making also has to be vetted with domain knowledge, human experience and common sense, to validate the viability of analytics results. Decisions make a positive difference for the enterprise only if they are based on accurate intelligence. While many things are possible with predictive analytics, there is always the danger of trying to force ‘reality’ to fit the model. This can be deadly to real-time operational decision-making.”

When it comes to decisions that can be made via models, you have to separate them into two categories: those that do not require 100% precision, and those that are too important to get wrong. 

For example, routing a call center call, approving a credit line increase, rating a car insurance premium – these are all “decisions” that are made in high volume, but getting some of them wrong, in the aggregate, causes little harm. Obviously, the closer you get to perfect performance the better, but you can allow these decisions to be made without human interference. Obviously you track the result and continuously improve the models.

On the other hand, many decisions in an enterprise are too important to turn over to some algorithms. In these cases, the quantitative analysis can be a part of the decision process, but ultimately the decision vests with the person or persons who take responsibility for it. In point of fact, very few managers are comfortable with answers based on probability. The difference between 80% probability and 95% probability simply doesn’t resonate. For important decisions, managers want one answer, and that requires discussion and consensus. 

We have to be very careful not to over-promise on analytics. 

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One Response to When Are Decisions Driven by Analytics, or Merely Informed by Them?

  1. lewandog says:

    Reblogged this on lewandog and commented:
    Oh my, how true!! Definitely good to remember the importance of domain expertise in any analytical foray!! #analytics

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