Big data baffles the boardroom

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Big data has the power to disrupt and to enable deeply granular insight that can transform the way companies do business – from how they market to prospective and existing customers to how much revenue they generate. Gathered and exploited properly, big data equals big returns.
So it’s perhaps surprising to hear that those at the top – the CEOs, financial directors and chief operating officers – are still scratching their heads over it. In this so-called digital era, where big data is being woven into the very fabric of business, that’s a worrying notion.

Yet it’s the key takeout from a report Big Data, Big Decisions: The Impact of Big Data on Board Level Decision-making, co-authored by academics from institutions including Brunel University London and Coventry University.

Behind closed doors

While big data is widely discussed at a societal level, and in terms of its implications for business relationships, the report’s authors felt a light needed to be shone on its influence on a seldom-researched group. “Much has been written about big data – what it is, how it can encapsulate new insight or be a superior alternative to existing sources of insight, and how it can change how businesses make decisions. However, little is known about how key decision-makers in firms use big data, or not,” says co-author Dr Ana Isabel Canhoto, from Brunel University.

The team of researchers set out to study top-level decision-making processes made by board members at 19 organisations, spanning the FMCG, finance, consultancy, IT and air-travel sectors. In-depth interviews – ranging in length from 90 to 150 minutes – were conducted with 20 directors involved in high-level decision-making.

The result is a piece of qualitative research, of more than 40 hours of material, delving into the experiences and views of CEOs, managing directors and global heads of digital – a notoriously hard group to persuade to take part in qualitative studies. This was backed with extensive secondary data analysis from sources including annual, corporate governance and AGM reports, and minutes and media articles.

Cognitive dissonance

Of course, business leaders are far from stupid; they recognise that big data can improve their decision-making, and the research findings support that premise. But working out how big data can help is eluding them. Many feel hampered by their lack of technical skills or daunted by the ‘non-linear thinking’ needed.

What became apparent from the study was that board-level execs are insufficiently equipped to deal with the influence of big data in decision-making. They are prone to cognitive bias, suffer from information overload and are stuck in old-school ways of thinking about information. This situation is exacerbated by a reliance on subordinates who tend to provide simplified, ‘top level’ round-ups of big data. One of the report’s key reveals was a disconnect between old and new – whether that’s old-school, intuitive approaches to decision-making versus more data-informed approaches, or the difference in worldview of senior board-level leaders and that of a generation that has grown up with digital.

“We tell stories and we go from A to Z; everything we do is about having a beginning, a middle and an end,” one respondent said. “It’s how we’ve been educated, how we process information, and how we strategically think and, therefore, deliver a result.”

But, the respondent added, there is an emerging generation that is non-linear in the way they operate. “If I’m talking to a 10-year-old, they’re not necessarily interested in the story of Little Red Riding Hood. [But] they might be interested in the world of Little Red Riding Hood, in which they would like to immerse themselves.”

Information overload

That idea of immersion in a sea of information is, the study found, overwhelming many execs, who feel they are drowning in the sheer volume of data. There is simply too much information to process.

“I don’t think you’ve got enough hours in a day to solve these problems, because we still have an overload of data,” said one director. “Sometimes, less data is better than more data.” Another was more forthright: “The people who are doing well are the ones that can cut through all the crap and make decisions based on facts.”

The quantity of big data on offer is a challenge that is further exacerbated by the pace of change characterising today’s business environment. The study unearthed boardrooms steeped in data, but intimidated by its speed and unable to react quickly enough.

While they are feeling pressured to rethink the way they do business, execs feel they cannot afford to pause while they adjust their approach. They are stuck in an ever-decreasing circle of having to modify their current processes while continuing to use them to carry on functioning. Some board managers said it was hard to decide when to stop consulting the data being generated and make a final decision.

New thinking

What the report starkly demonstrates is that today’s boardroom execs need to reappraise their approach to big data. “Being typically middle- to old-aged, many board members are ill-equipped to do that,” Canhoto observes – but some boards are taking remedial action.

Dr Alessandro Merendino, another of the study’s authors, stresses that its aim is to “make directors and the boardroom cognisant of the benefits of using big data in strategic decisions”.

In the meantime, Canhoto points out, there are two ways in which boards are dealing with data challenges and, fundamentally, both involve bringing in new blood and new mindsets. “One way is to break down silos and create new senior roles that bridge functions and the gap between technical knowledge and decision-making,” she says. “The other is to outsource these responsibilities to strategy consultants, digital experts or other external stakeholders with the necessary expertise.”

Big Data, Big Decisions: The Impact of Big Data on Board Level Decision-making by Ana Isabel Canhoto, from Brunel Business School at Brunel University London, and Alessandro Merendino, Sally Dibb, Maureen Meadows, Lee Quinn and Lyndon Simkin, at the Centre for Business in Society at Coventry University; Journal of Business Research, 2018.

This article was first published in Issue 24 of Impact.