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**What Is Statistical Thinking?**

Understanding statistics is important for anyone running an organization of any scale. There are many common misconceptions in the field that can be very harmful to the performance of a company, and a good leader must invest the time to train themselves to think in the right way.

Statistical thinking is the ability to align one’s thoughts with the fundamental ideas of statistics, allowing the person to make better decisions in any given situation. There is a lot we can learn from the structured, rigid nature of statistics, and a surprising amount of that carries over to areas of life that we wouldn’t normally associate with statistical analysis.

**Important principles**

The fundamental principle of statistical thinking is that the world around us is one large network of systems, all connected in ways that are rigidly (although not always clearly) defined. Realizing this, if we can measure this system, we can apply statistics to everyday life to a large extent, analyzing everything that happens around us, which will help us look for a root cause or sources of variation in the system much more effectively.

In addition, statistical thinking also allows one to avoid falling for some of the most common traps in analyzing data. For example, understanding how deviations work, and what they indicate about the validity of statistical results, is an important principle for anyone working with large amounts of data. The risk of making a decision that looks like an improvement on the chart, but is not supported by statistical analysis, can not only be damaging or costly to a company, but can reduce confidence in your skills.

Six Sigma uses statistical thinking as a core element. Those with statistical thinking would enjoy learning about Six Sigma, and those taking Green Belt or Black Belt training will receive an excellent introductory or refresher training on statistics.

Another critical point from those with good statistical thinking is that variation is inevitable in any kind of process. What this means is that it’s often impossible to predict a certain outcome with 100% accuracy, and knowing where to expect those variations can be of great benefit.

Anyone who’s had to work with statistical analysis should already have some intuition for this, and it can only grow stronger the more you apply your knowledge to real-world situations.

Lacking good statistical thinking often leads to many problems in an organization. It’s hard to define the exact scope of a given problem in many cases without having access to statistical data about that problem, and as a result, if the problem statement is not clear, identifying the root cause or sources of variation can be nearly impossible.

This carries over to the management style of a person without strong statistical thinking. They would not be able to understand the complex processes that govern the work of their organization properly, and as a result, they can’t be expected to make accurate decisions from their leadership position.

It also limits their ability to coach and mentor their employees on what statistical analysis to perform. Should a capability analysis be performed? Should a gage R&R study be performed? What does the p-value mean again?

**Effects on development pace**

What this ultimately leads to is a slowed pace of development, and improvements that could have been realized much earlier end up going undiscovered. Even worse, these problems can compound in the long run, further decreasing the productivity of the company and causing stagnation.

Last but not least, a leader who doesn’t understand statistical thinking properly is not prone to taking calculated risks. This can have one of two outcomes – either the leader will be reluctant to take any risks at all, or they will leap at every opportunity, no matter how much danger it might pose to the company as a whole. Risk-taking is an important part of any business, but it must be done in a way that minimizes the potential negative impact for everyone, especially those that have no say in the decision. Statistical thinking helps better quantify risks.

**Conclusion**

The good news is, statistical thinking is a skill that can be honed with practice. A good leader must identify their shortcomings in this area and take steps to improve the way they analyze every situation. There are specific routines that can be followed to improve one’s understanding of statistical thinking, and as long as you keep moving in the right direction, you’re going to see positive results in the long run.

If you are interested in improving your statistical thinking, consider signing up for Green or Black Belt training with 6Sigma.US >>>

The post What Is Statistical Thinking? appeared first on Shmula.

Original: http://www.shmula.com/23437-2/23437/

By: Shmula Contributor

Posted: June 26, 2017, 3:47 am

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