Beware data overload: don't let analysis paralysis stunt your business

There is often a sense of mutual envy, or at least mutual appreciation, between startups and big firms. I conducted a study last year looking at their different approaches and the startups I spoke to often aspire to the financial security, brand strength and access to resources the big guys have, while the established firms envy the dynamism, responsiveness and dramatically lower cost structure of startups.

But trying to be like the other guy isn’t always the right solution. I was talking recently to an entrepreneur working in renewable energy. To establish his firm’s credentials, he and his co-founder “consciously tried to behave like a large company” – projecting a conservative brand image, building proper processes and partnering with leading technology providers and banks. These tactics helped the firm achieve a modicum of success, but the business didn’t grow anything like as quickly as it had hoped. My guess is success would have come from taking a more maverick approach.

As a startup or SME, competing successfully against big firms is a form of asymmetric warfare. Small businesses know their best way forward is not a full-frontal assault on an established competitor; it is about finding unprotected niches, focusing on markets the big guys don’t want or cannot address in a cost-competitive way and trying out new ideas that established firms might find too risky. But equally important is focusing on the way you work and adopting tactics that big companies cannot match.

What is the achilles heel of large companies today? It is a way of working – let’s call it meritocracy – that values deep expertise, careful analysis and systematic decision-making. Big firms are run by accountants and engineers. They like to get to the bottom of things. They have been seduced by big data and business analytics. They have compliance, safety, regulatory and audit functions that monitor their every move.

There’s nothing wrong with meritocracy, but it has a dark side. It can lead to analysis paralysis – an urge to keep collecting data, to make sure all risks are resolved, at the expense of moving forward. It also breeds sterile decision-making – a reluctance to take any information into account that cannot be quantified.

As a small business, you have two key advantages. One is the capacity for decisive action. Your ability to focus and act quickly will always be greater than that of your larger competitors.

The other is your capacity to act on emotional conviction – on your intuition or belief. Remember during the EU referendum, when Michael Gove said the country had had enough of experts? Well, fortunately for you, big companies are still in thrall to experts. You have more freedom and can tap into intuition or emotion-based arguments in ways that big firms cannot.

In practice, this means you should:

• Keep any analysis simple and focused. Search costs are so low these days that you can gather basic market and pricing data, and generate simple competitor intelligence in a couple of days. That is enough to get you moving forward.
• Use reputable source material where you can. Try to cut through the blogs and comment pieces to get to the underlying data.
• Reflect on past decisions to guide you. Think about what has worked previously. In a world with too much information, it is helpful to develop simple rules to cut through the complexity.
• Recognise some decisions can be entirely fact-based (such as A/B testing on website design), but others need human judgment. The best are made with a combination of both.
• Hold separate discussions about data collection. Many meetings are a waste of time because the purpose isn’t clear – some people think they are making sense of an unfolding situation, others think they are trying to make choices. Schedule a decision-making session for a later date.
• Use rapid prototyping and market testing. Always look for ways of trying out your ideas on users in a low-risk way. You’ll learn more by launching a minimum viable product than repeatedly revising a clever business plan.

In today’s fast-changing world, the twin drivers of business success are decisive action and emotional conviction. A few large firms, such as Amazon and Facebook, are good at this; most established firms are hopeless at it. But as a small company, these attributes are part of your genetic makeup. Don’t lose them.

Julian Birkinshaw is professor of strategy and entrepreneurship at London Business School and co-author of Fast/Forward – Make Your Company Fit for the Future

Sign up to become a member of the Guardian Small Business Network here for more advice, insight and best practice direct to your inbox.