Gut Instinct vs. Data: Which Is More Important When Making a Business Decision?

By Saar Bitner

I once heard a father telling his son that the best way to make a big decision in life is to ask 50 people for their opinions and then do what your heart tells you. This line of thinking proposes that research should be the first or foremost step of any big decision, and this certainly makes sense. It only stands to reason.

In business, however, many famous CEOs have discounted research and data and made some very tough calls based largely (if not solely) on their gut instinct – sometimes leading to riches and other times to catastrophic losses.

Take Steve Jobs, for example. He was famous for making critical decisions at Apple without first consulting fact-based business data. In 2010, Jobs accurately predicted that the tablet could actually overtake the PC one day, despite many data reports to the contrary. Following his intuition, in April of that same year, he launched the iPad, disregarding the many doubters who doomed it to fail.

As we know now, that decision has paid off: Apple sold more than 70 million iPads last year, and according to prominent Gartner Research, tablets should outsell traditional PCs for the first time in 2015.

On the flip side, there's the example of Motorola and its CEO Gregory Brown. In 1998, Brown ignored all indications that the mobile phone was taking off and instead invested heavily in Iridium satellite phone technology, despite it already being obsolete. This failed venture cost the company $8 billion.

So the questions remains: Should we make the big calls based on gut or data?

The Holistic Approach: "Data-Informed Gut Decisions"

These business leaders aren’t alone in their reliance on that "inner feeling." Richard Branson, famed founder of Virgin once said, “I rely far more on gut instinct than researching huge amounts of statistics.”

Similarly, a Fortune Knowledge Group study reports that 62 percent of executives feel it is often necessary to rely on gut feelings and soft factors when making big decisions on partnerships and proposals.

Yet recent economic history dictates that sound business data and experience should certainly weigh into the equation. In fact, new business intelligence (BI) technologies propose a better way to make important business decisions without betting the farm by using a hybrid approach: take all facts, statistics, and numbers into account, and only after empowering yourself with that knowledge, determine what your gut tells you.

There is simply too much at stake today to discount sound factual information, especially with the boom of business intelligence software that helps companies quickly and easily compile data and analyze it in easy to understand dashboards and reports. This provides businesses with powerful data-based insights, encouraging decision makers to take these insights into account before tapping into their gut feelings. These decisions are then transformed into "data-informed gut decisions," and come with far less risk since they leverage both instincts and the added power of data analytics.

Business Intelligence Bridges the Heart and the Head

Today BI enables businesses to combine inordinate amounts of data from CRM systems, financial databases, web reporting, social media, and so much more, and intelligently synthesize this raw information, first with computers, then with our minds, and finally with our hearts. Data visualization brings this analyzed information to life and allows us to transform it into meaningful business intelligence, which we can use to make more informed, intelligent decisions that also feel right.

Don Valentine, the founder of Sequoia Capital, puts it perfectly by stating, “Follow your instincts," which Michael Moritz interprets to mean, "Do your homework well, analyze things carefully, assess the options but eventually trust your judgment and have the courage of your convictions – even if they are unpopular.”

 There are simply too many inexpensive yet powerful BI tools on the market today to fall victim to a poorly chosen strategic direction based solely on instinct. It can literally be the difference between exploding corporate profits and imploding corporate destruction. Data analysis and gut decision-making must work hand in hand.

Data Is More Than Just Backup

Interestingly, research surrounding this topic supports the idea that decision makers today are taking a more holistic approach. According to the Economist Intelligence Unit (2014), “executives use data to confirm that their gut feeling and preexisting beliefs are correct.” In fact, according to their study, “57 percent (of senior business professionals) would reanalyze data if it contradicted their inner gut feelings.”

What this all tells us is that the best way to approach big decisions is to first consult as much factual data as possible, review it to discern what to take and what to discard, and then rely on a gut instinct to make the best call. With this approach, you have a far greater probability of making the right choice.