Good business acumen is no longer about following the “gut instincts” of experienced business leaders. The art of business decision-making has evolved into a science with the explosion of big data. Now, the most effective leaders rely on metrics, facts and figures to derive business insights, develop business intelligence and make reliably wise business decisions. Decisions made in a data-driven culture lead to business evolution and growth over time, with a stronger bottom line.
What Is Data-Based Decision-Making?
Data-driven decision-making (DDDM) involves working toward business objectives by leveraging verified, analyzed data. Professionals using DDDM collect information based upon measurable goals or key performance indicators (KPIs), analyze patterns and extract facts. Qualitative analysis is based on observation rather than measurement and data not defined by hard numbers and metrics. On the other hand, quantitative analysis focuses on hard numbers and statistics. Leaders must combine both of these approaches to drive more informed business approaches.
By using big data, executives glean actionable insights that enable them to develop data-driven business strategies and align business operations and activities with these insights. This is far from easy, as the data-driven business landscape drives accelerated change; everything is in flux, and what was true yesterday may not be today.
Leveraging data also helps companies achieve key objectives to smarter, more reliable decision-making by guarding against unconscious biases and gut decision-making. Data-based decision-making culture helps professionals:
- Understand market and business trends
- Assess and create new business models and market opportunities
- Optimize and streamline operations for cost-effectiveness
- Make stronger hires and retain top talent
- Grow the top and bottom line
The Importance of a Data-Driven Culture
Data-driven business decisions make or break companies. An MIT Sloan School of Management study showed that companies that use primarily data-driven strategies benefited from 4% higher productivity and 6% higher profits.
However, a commitment to investing in data does not necessarily create the complete cultural change necessary to generate results. NewVantage Partners recently reported that 98.6% of executives say their organization aspires to a data-driven culture, while only 32.4% report having success. A 2018 IDC study also noted that while many organizations invest trillions of dollars in modernizing their business, 70% of initiatives fail because they have not built a data culture.
Three core capabilities are essential to the development of a truly data-driven culture:
- Data proficiency: The right talent with a wide range of data skills to make an organization competitive. Data-driven organizations prioritize data skills in recruiting and professional development.
- Analytics agility: The ability to quickly identify objectives, find sources of data, collect and prepare data, mine data for insights and act decisively.
- Community: There must be trust, commitment and a shared mindset. People ask the right questions, challenge existing ideas and come together with a collective mission to base decisions on data rather than instinct or intuition. In fact, data is viewed as one of a business’s most valuable strategic assets in a data-driven community.
How Can Using Data Transform Your Business?
Decision-makers can use actionable data to transform every aspect of an industry, let alone a business. Consider the possibilities:
Launch new products: Professionals can use data to identify new product and service development opportunities and understand how a new offering might perform.
Adjust marketing messages: Data informs marketing executives about the customer experience, the customer journey and how and when customers engage with their products. It analyzes how customers receive and respond to information, and then helps professionals tweak messages to make them more compelling.
Transform business models: Organizations may evolve as data indicates that they can generate more revenue by adapting to changing consumer demands. For example, many service-based businesses have adapted the service level agreement model to stabilize operations and ensure increasing revenues.
Make smart investments: Whether it’s machinery for a manufacturer, store locations for a coffee chain or personnel investments for an insurance company, analytics guide investment decisions and reliably and accurately predict the return on investment.
Find opportunities for cost savings: Big data is used to improve operational efficiency. A large component is streamlining staff, process steps and investments to ensure that peak cost-efficiency is reached.
As organizations become more data-driven, ambitious professionals are looking to leverage the big data revolution as a career opportunity. The more expertise you have in data and analytics, the brighter your prospects — and that trend shows no signs of slowing anytime soon.