All businesses nowadays are faced with an overload of data that can be overwhelming. Disregarding such data will be disastrous to a company, though. Competitors use similar data sets to make decisions on product innovation, production, marketing, and sales. In today’s business environment, gutfeel and intuition are not enough for business leaders to risk basing their decisions on.
Cognitive Biases Can Mar Business Decisions
Business decision-making that is not data-driven can be bogged down by cognitive biases. These are mental shortcuts that the brain takes because it does not have the capability of a computer to quickly process large amounts of data to make decisions. Because the human brain’s evolution is focused on survival, it tends to choose safe decisions with the least uncertainty. This limits creativity, innovation, and the ability to break barriers and extend frontiers. Also, this includes personal biases, personal agendas, and the ego.
Confirmation bias favors preconceptions and existing beliefs without considering alternatives. Conformity bias and bandwagon bias both tend to follow the perceived thinking of the majority even without proof that these are the best options for the company. Authority bias tends to follow what figures of authority espouse.
Framing bias means making decisions based on the style of information presentation rather than its substance. Anchoring bias means being influenced by information that is shown or known first, even if subsequent information proves wrong.
Ambiguity bias means sticking to decisions with known outcomes. Similar to this is the status quo bias, which wants everything to remain the same. The opposite is the pro-innovation bias which deems anything new as better, even without proof.
Loss-aversion bias is the emotional attachment to a decision even after its weaknesses are identified. Action bias is the compulsion to do something immediately, even without a proper basis.
Self-serving bias means making decisions that will positively impact the self regardless of the effect on the company. Strategic misrepresentation means intentionally minimizing costs and exaggerating the benefits of a decision. Feature positive or optimism bias focuses only on the benefits of a decision, even if there are significant downsides.
Business Intelligence with AI
Every business needs a business intelligence system to avoid human cognitive biases in business decision-making and make sense of data. These systems are not always easy to introduce to an organization, though. For instance, there can be some forms of resistance to change. Proper training in the use of the system is also crucial. It is best to hire professionals for IBM Cognos administration so that the company’s management and personnel can focus on their respective jobs and being users of the system.
Business intelligence systems using artificial intelligence (AI) are the latest tools for companies. Signal AI surveyed 1,000 global companies with 500 or more employees. It found that about 69 percent of the leaders believe data is the biggest factor in decision-making, but 80 percent stated that there is too much data for them to use by themselves for decisions. Hence, 79.3 percent of those firms are already using AI business intelligence to support their decision-making.
AI can process a high volume of data and do complex analysis without human error in seconds and real-time. It can categorize and quantify data in various permutations based on the company’s needs. It can identify trends, detect anomalies, and produce actionable insights. Furthermore, the longer the company uses the AI system, the better it works. This is because AI continually learns as it goes, and the more data it processes, the better it becomes at making predictions and recommendations.
One of the examples of the use of AI in real-time is the pricing of airline tickets on various online platforms. These can change by the minute depending on various factors analyzed by AI, such as the prices of competitors, the demand from consumers, and available flights, among others. Similarly, many hotels have room prices changing in real-time online.
Internally, various departments of a company can see the data analytics in real-time on dashboards. Each department can ask the software to produce reports with figures and charts according to its needs. For instance, the marketing department can determine which of the company’s products are favored by separate demographic segments. This information will be valuable in designing marketing campaigns for each demographic.
Business intelligence systems also provide collaborative online spaces for members of a team. This is particularly useful when employees are working from home.
With AI-powered business intelligence systems, business decisions are data-driven and, therefore, logical and unbiased. Insights from error-free data analysis also ensure that decisions are cost-effective and profitable.
