by Andrew White | December 16, 2019 | Comments Off on What’s so Special About 50:50?
A few years ago, a colleague in our team, Frank Buytendijk, led a review of our client inquiries. He was trying to validate a finding we already knew anecdotally: Most organizations do not follow a formal methodology for evaluating the return on investment for their information and technology investments and done use business outcomes to drive those efforts. After sifting through several year’s worth of formally written data, analytics, and data and analytics strategies, we found about 85% of them did not include a measurable business outcome. As such an ROI would have been impossible. See Data and Analytics Strategies Need More-Concrete Metrics of Success. Our general perception was something closer to 50%.
My own review of public research and general knowledge shows that broadly around 50% of organizations develop a method to evaluate the business benefit of their IT investments. In fact, this threshold seems to have held for many years. I thought I heard an anecdote that many the same 50% was thrown at IT projects success in general.
In summary therefore we could say that half of IT investments might be ROI based; the other half are justified using things like faith, hope, and charity. Or maybe we will just say strategy.
But this 50:50 split is not very different from a random walk theory. In probability theory this means that the chances of being correct are no better then 50:50. As any good betting person knows, anything we can do to reduce the faith, hope, and charity (sorry, I mean strategy alone) will improve the odds of success. With that should come slightly improved chances of positive business outcomes and perhaps career longevity.
But in this weeks US print edition of the Economist, in an article titled Odds and Evens, there is news that bias leads people to make erroneous decisions around certain probabilities. The article suggests people might favor the 1% increase in winning at 98% to 99% over the same 1% increase at, say, 25% to 26%. Technically these are equivalent, yet the higher % to which the improvement is applied lead’s some to believe it is more likely. The article notes this as cognitive uncertainty.
The article suggests that 50:50 is a particular favorite of many folks, as explained in a new working paper. What is so special about a 50:50 (or 0.5p) probability? Maybe the clean-cut number means something? Who knows? But it happens to relate closely to our analysis of business metrics and ROI being used to justify investment and report success.
Just a short while ago another of our colleagues, Rita Sallam, published a new and important method for evaluating business value and case for your portfolio of data and analytics (the ‘I’ in IT) investments. It’s called ROAR. See How to Optimize Business Value from Data and Analytics Investments … Finally. Maybe finally we can break through the cognitive uncertainty bias and away from 50:50.
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