Experimentation in business vs. prediction

The key theme in Michael Schrage's December article in the MIT Sloan Management Review is that data trumps intuition. He points to evidence that this is true even when experienced senior leaders and subject matter experts are involved, and this can have significant consequences for how companies approach the task of anticipating customer demand.

Organizations may be confident they know their customers, but they’re very likely to be overconfident."

-- Michael Schrage

  • I am particularly sensitive to his call to “embrace our ignorance”, that experts and managers are notoriously bad at predicting the outcome of experiments / decisions, that empathy and experience are very poor replacements for data and careful experiments.
  • Only humble and systematic experimentation is really “customer-centric”.
  • If big data can help us identify promising patterns and correlations, pervasive (and now cheap) experimentation can close the causality loop, creating "virtuous cycles of profitable insight between big data and small experiments”.

This view radically challenges our managerial hero complex (admit it, reader, you, like me, fall prey to it on a regular basis!). Imagine a world where the most valuable skills or personality traits we are looking to hire and retain are humility and curiosity instead of leadership and expertise?

-- Yassine El Ouarzazi

Customer social identity as an indicator of purchasing behavior

Fear of disruption, changes in demand driving corporate VCs?