Be like Bezos: Why leaders should be data-informed, not data-driven

Are you a numbers person? Many of us aren’t. But according to leading data specialist Dr Selena Fisk, all business owners need to be data literate at the very least.

We live in a data rich world, after all.

Dr Fisk’s good news? Anyone can be a numbers person, and data doesn’t have to drive every business decision.

Instead, in this extract from her book, I’m Not A Numbers Person, Dr Fisk covers why it’s more important for leaders to be data-informed, rather than data-driven.

When talking about the ways in which data can be used, there is an important distinction to be made between being data-informed (which is what we want to be) and being data-driven (what we do not want to be). Being data-driven is like a horse wearing blinkers in a horse race — they can see the finish line and the goal, but they can’t see what is going on either side of them. They race towards the finish line, with minimal distractions, and a limited understanding of what other horses and riders are doing. Data-driven organisations are ruthless around the numbers.

They move staff on if they don’t meet targets; they change their product lines to increase market share; and they callously make all the big decisions based on what the numbers suggest will work. I do not believe that organisations should aspire to be data-driven, because despite the fact that I am a numbers person, the data (particularly if you’re relying on one piece of quantitative data) can never tell you the whole picture. 

Conversely, being data-informed is like being a racehorse without blinkers. They can see the goal and the finish line and they know what they are aiming for, but they can also take in the speed of horses around them, their position relative to others and slight shifts in movement from horses on all sides of them. There is a finish line, they are working towards it, but they are aware of the context they’re in.

Being data-informed in business is much the same. When you’re data-informed, you use the numbers and rely on them to provide information about where you are going and what you need to do to improve, but you also incorporate your understanding of context, people, the financial climate, market demand and company culture into the decision-making process. When you are data-informed, you don’t make decisions driven by the data — you make decisions that are informed and influenced by the data. Organisations should always aspire to be data-informed if they want to effectively harness the power of data, but never be driven by it.

The aftermath of the September 11 United States terrorist attack is a tragic example of data-driven decision-making gone wrong. Ken Feinberg’s book What is Life Worth? The unprecedented effort to compensate the victims of 9/11 (2006) and the subsequent film Worth, directed by Sara Colangelo (2020), both document Feinberg’s work as the US Government’s Special Master of the September  11th Victim Compensation Fund. This fund had the enormous challenge of compensating thousands of families for their losses due to the attacks.

It was tasked with coming up with a dollar figure for each life lost, taking into consideration income, age and marital status. Feinberg’s team’s initial approach was data-driven, as essentially there was a formula, where demographic details were entered to develop a payout figure for each person. The victims’ families quickly realised that this algorithm led to significant disparities in payout figures. They were angry. People questioned why their relative was not ‘worth’ as much as others; it was heartbreaking.

Over time, as Feinberg met more families and heard their stories, his approach changed. He learned of different contexts with partners and children, and he attempted to find solutions for longer-term illnesses beyond the two-year program. Ever so slowly, Feinberg and his team modified the fund, built trust with families and achieved the threshold amount of families signing up for the fund. In the end, the fund was responsible for more than 5000 families receiving over US$7 billion in compensation. Although it was, in many ways, an impossible task, the initial data-driven approach was never going to work.

Bezos’ book

Amazon founder Jeff Bezos is a successful business leader who is data-informed rather than data-driven. This might come as a surprise, as many people assume that Bezos is, in fact, data-driven. However, Bezos once said: “People think of Amazon as very data-oriented and I always tell them, look, if you can make the decision with data, make the decision with data… But a lot of the most important decisions simply cannot be made with data.”

Bezos advocates for a combination of data and gut to inform decision-making, rather than being driven solely by the data, and he is very comfortable talking about the importance of being data-informed. Take for example the launch of Amazon Prime. Bezos reported that the numbers indicated that Amazon Prime would not be successful.

If he had considered the numbers only, he would not have pursued what is now a key element of Amazon’s success. Despite the numbers indicating it might not work, Bezos understood the broader context and emerging market around the idea and decided to go with his gut, despite what the data was telling him. Bezos said, ‘you collect as much data as you can. You immerse yourself in that data… but then make the decision with your heart’.

This is an edited extract from Dr Selena Fisk’s book, I’m Not A Number’s Person, available now at Booktopia.