Running Your Business by the Numbers

Numbers have become so important in society and business that we forget we are dealing with concepts, chance, and uncertainty. Business is and always will be about risk and the false security that comes from numbers will not change that fact. Statistics has grown to prominence in society and continues to be a major factor in management decision making.

Statistics has a long history in modern business. Executives can make decisions based almost solely on the numbers presented to them in summary format. Data drives, metrics, and "the numbers" have all been used to describe statistical information and analysis. Consider the history of statistics in the Western world.

Statistics have been part of business since the 17th Century commoner of England John Graunt started listing the birth, death and Christenings in number related format. He organized this information into what is known today as descriptive statistics in the work Natural and Political Observations Made upon the Bills of Mortality (Statistical Thinking, 2006). Probability was developed from the games of chance (gambling) and was used to determine likelihood.

Businesses soon found the advantage of using statistics in their decision making processes. They can determine how many customers they have, growth in product sales, budgets and just about everything else about their operations. These statistics have been used as benchmarks to help determine continuous improvement.

Professor Bradley Efron helps us understand the importance of statistics in modern business:

"During the 20th Century statistical thinking and methodology have become the scientific framework for literally dozens of fields including education, agriculture, economics, biology, and medicine, and with increasing influence recently on the hard sciences such as astronomy, geology, and physics. In other words, we have grown from a small obscure field into a big obscure field."

What we shouldn't forget as business owners and mangers is that statistics is still obscure. In other words they are used to describe events that happen in the natural world. There are times when statistics do lie about what is happening. Therefore common sense, innovation and a little chance taking should still be used in our businesses.