Decision Making: Scientific vs Intuition

Business is all about decision-making:

• What price to charge?

• Who and how many- to employ?

• How to respond to a new competitor?

• How much inventory to hold?

• Whether to expand the business?

Two approaches to decision-making in business:

• Intuition (Hunch):

  • Based on intuition, gut feeling and experience

• Scientific:

  • Based on data and analysis

Scientific decision-making:

• Scientific decision-making involves making decisions based on evidence and adopting a systematic approach, rather than intuition, hunch or ‘gut reaction’

Examples of scientific decision-making:

• Decision trees

• Investment appraisal

• Dynamic pricing

Benefits of scientific decision-making:

• Data driven= evidence-based

• Removes some (but not all) subjective judgment from decisions

Drawbacks of scientific decision-making:

• May still rely on assumptions (judgement)

• Doesn’t guarantee the correct decision

• May ignore the crucial aspect of business experience