Data pelts today’s business leaders like hail in a thunderstorm. It’s become a critical tool in corporate decision making and strategy. But that deluge could be drowning out another useful implement in the decision-making tool box—going with your gut.
In the world of knowledge management (or KM, as its acolytes call it), intuition is about as highly regarded as rolling dice to make decisions. Yet the possible death of intuition among the next generation of Big Data–loving CEOs worries Yolande Chan.
Somewhat ironically, Chan is a professor of information technology management and associate dean at the Smith School of Business at Queen’s University in Kingston, Ont. She admits it might seem “counterintuitive” that someone like her—a former IT consultant whose research focuses on subjects such as digital strategy—would care a whit about intuition. Yet, as part of an international study examining how well executives trust and use their intuition, Chan and her colleagues discovered smart business decisions can still benefit from a healthy dose of hunch-based thinking.
The team of researchers from Poland, Italy, Canada and the U.S. was led by Jay Liebowitz, or “Mr. Analytics,” as Chan calls him. Aside from being a distinguished chair of applied business and finance at the Harrisburg University of Science and Technology in Pennsylvania, Liebowitz was the first knowledge management officer at NASA’s Goddard Space Flight Center.
Chan and her team sought to answer these questions: When faced with an important business decision, should executives rely more on intuition or data analytics? Or should there be equilibrium between the two? In their resulting paper, the researchers found that how business executives use intuition varies depending on their age, experience, gender and nationality.
Intuition, they discovered, still thumps data in executive decision making, citing a 2016 Smith School of Business survey that revealed that when executives make people-oriented decisions, such as hiring or firing, or must deal with volatile situations, 66% rely on intuition. Even in crisis management, 65% of executives use intuition rather than data.
There’s plenty of anecdotal evidence to show how intuition drives business. Writing for the Harvard Business Review in 2011, Modesto Maidique of Florida International University recounted asking Carnival CEO Micky Arison how he decided that buying P&O Princess Cruises for US$5.4 billion was a seaworthy idea.
“Gut,” replied Arison. “I trust my gut.” Arison was one of 20 leading CEOs Maidique asked about how they made two critical decisions in their careers. In almost every case, they primarily relied on intuition.
These days, Chan sees things shifting from following a hunch to using a quantitative approach. “Twenty years ago, you’d be laughed out of the room if you told someone to ignore their gut. In fact, so many decisions [back then] were legitimized simply because ‘the boss said so.’” It’s what, in their paper, the researchers call “feeling the numbers.”
“Well, that’s not the world today,” Chan says with a hint of worry. Executive “Spidey-sense,” as she calls it, is increasingly being stomped out by Big Data. “I would say there is so much hype and so much interest—appropriately so—in analytics and AI and modelling that we can underestimate the value of old-fashioned intuition.”
In their paper, Liebowitz and his team cite evidence from other studies that supports the value of intuition in business-related decision making. Research from the University of Cambridge in 2016 revealed that hedge fund traders who relied on their gut feelings fared better than those who did not. In the same year, a PwC survey of 2,100 executives worldwide found that 59% relied primarily on human judgment “rather than machine algorithms” when making important choices. The study suggests a kind of “rational intuition”—a combo of instinct and data analysis—would serve CEOs better than just one or the other. “In the best functioning workplaces, what we want is an awareness of the value of both,” explains Chan.
In fact, adds Tracy Jenkin, an associate professor at Smith who was a co-investigator with Chan on the research project, intuition can offer a useful “sniff test” to judge the reliability of the algorithms analyzing all those big batches of data. Jenkin, who teaches analytics and artificial intelligence at Queen’s and spent a decade working with companies such as Accenture and Dell, warns that not all analytics are infallible.
Intuition, especially when informed by decades of experience in a particular field, can offer “a holistic framing of the world,” says Jenkin. That can help executives ferret out what data analytics might be missing when it comes to assessing the bigger picture for their businesses.
The research has helped further “demystify” intuition, says Jenkin. In their own survey of 172 executives and managers around the world, the researchers delineate the existence of four types of intuition described in previous studies. “Affective intuition” is based on emotional reactions; “inferential intuition” involves decision-making processes that were once analytical but became intuitive with practice; “holistic abstract intuition” is founded on a knowledge of theories; and “holistic big picture intuition” bases judgments on a “full systems approach,” says the team’s paper.
The research has led to a book, How Well Do Executives Trust Their Intuition?, edited by Liebowitz, Chan, Jenkin and the other researchers on the team. “We’re thrilled to have a book,” says Chan, adding that rather than being an academic tome, it provides practical information on how executives can learn to listen to their body signals to make better business judgments. “We are not saying you should do away with data analytics. But this is a call for remembering how important our guts are.”