An American Banker article titled Bank CEOs Fear the Data-Driven Decision reported that:
“A recent study found that analytics are underused at banks and that senior executives are cold to the technology: a scant 20% said that if it were up to them their organization would be highly data driven.”
My take: As Paul Newman might have said, what we have here is a failure to communicate.
If you don’t think banks (in general, or the one that you work for) aren’t “data-driven,” then try the following:
1. Ask for a mortgage, but refuse to provide any information that would enable the bank to figure out your credit score or credit history. Ask the bank to decide on your loan-worthiness based on their “gut” reaction. Do this especially if you belong to a group considered to be a “minority.”
2. When trying to decide which bank branches to close, suggest giving each branch a number, then writing that number down on a piece of paper. Put all the pieces of paper together in a bowl, mix them up, and have someone pull out a piece of paper. What ever branch corresponds to the number on the piece of paper gets closed.
3. Ask for $1 million to launch a new marketing campaign. Tell the CEO he or she must make the decision to invest in the campaign without any ROI estimates, and to make the decision based on his or her “gut.”
The notion that banks aren’t data-driven is nonsense. From lending decisions to funding decisions, data is used all the time. In fact, I hear a lot of marketers complain that senior execs rely too much on data (i.e., ROI projections). And come to think of it, my suggestion in #2 above, regarding branch closings, involves numbers, so, in a way, it is data-driven.
Granted, the data banks use to make decisions might suck, but that’s a different issue.
There’s a deeper issue running through the AB article, however. It’s an issue of “definitions.” While analytics relies heavily on the availability of data, not every use of data qualifies as analytics. If you’re an analytics professional, you probably know what I mean. If you’re not, you might have no clue what I’m talking about.
Can I explain it better? No. I’m an analytics person, so I’m not very good at speaking in the language of the quantitatively-challenged. (In reality, I’m ten times better at it than most analytics people. So you can imagine how bad the problem is).
There’s another problem here. The notion that “data-driven” and “gut-driven” are at opposite ends of the spectrum is fallacious. How do experienced executive develop a “gut feel” for the market? Often, it’s after years and years of experience dealing with the data. (I wrote about this a while back).
There are countless opportunities for banks to become more analytical, or analytical-driven (although sometimes “analytics” might be overkill). But being analytically-challenged does not mean “not data-driven.” In fact, as Deva Annamalai (aka @bornonjuly4) points out in the AB article, the bigger challenge to becoming more analytical isn’t necessarily access to data, but organizational barriers and lack of business processes.
Bottom line: I’m not buying that bank CEOs “fear the data-driven decision.”