10 reasons why data should be the driver for business decision making

by | Mar 14, 2022 | Data & Insight, Leadership | 0 comments

10 reasons why data should be the driver for business decision making

by | Mar 14, 2022 | Data & Insight, Leadership | 0 comments

Data driven decision making (DDDM), that is using facts, numbers, and metrics to guide your business decisions, drives organisational success and should become a norm within your teams. For those who still need convincing, this article presents advantages of making DDDM an organisational norm.

How many times have you heard someone say, ‘I have a gut feeling about this one?’  In modern life, relaying on intuition – simply knowing when something is good or bad – became a bit of a romanticised concept. Einstein himself used to say that the intuitive mind was a sacred gift. Regarding business, Steve Jobs is quoted saying “Have the courage to follow your heart and intuition; they somehow already know what you want to become.” Come on now, Steve.

While we agree that intuition can be a useful tool, we simply know that basing decisions, especially business decisions, on that ‘gut feeling’ is a mistake. It is through information and data that we verify, understand, and quantify. It is through data that we transform businesses. In fact, 80% of data-driven businesses report having a critical competitive advantage, with 60% of their leaders feeling more optimistic about the future of their organisations compared to only 52% of those without data-driven strategies.

The role of data in business has never been more important. The days of not collecting data as a company are long over. Departments that previously operated on premonition, status quo or frameworks of the past must now justify their forward-looking strategies with supporting metrics.  Management must make important business decisions based on facts, trends, and statistics. From human resources to marketing, data should now be at the heart of every business decision, whether among start-ups, SMEs, or PLCs.

Before I get to why, let me quickly touch on what data-driven decision-making is.

 

What is data-driven decision making

Put simply, data-driven decision making (DDDM) is the process of using data to make informed decisions. It helps leaders overcome bias and encourages taking actions aligned with business goals and strategies.

Fundamentally, DDDM means working towards key business KPIs by leveraging verified, analysed data, rather than merely shooting in the dark. No ‘gut feeling’ involved.

However, to extract true value from data, it must be accurate and relevant. The trouble is there’s so much of it out there, with new technology is generating ever more sets of data, that it can be confusing to sift through the noise and pick out the information you need.

So, relevant data, crucial for informed business decision making is our ‘gold.’ The effective harnessing of information allows us to streamline all operations, whether that’s getting a product made or structuring your data team. Crucially, it allows us to spot where things are not working as they should, so that we can fix that problem and boost overall efficiency, productivity and, ultimately, transform our business.

If you want to find out what matters to data professionals, we have a separate blogpost dedicated to our research into data teams here. We also have another one on biggest day-to-day issues data professionals face!

 

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Vital forms of data for businesses growth

First, let’s look at data visualisation, that is the graphic representation of the information and data we have collected. We show this through things like charts, graphs, and maps. It’s not only a very immediate and accessible way to interpret data, but also great for sharing with colleagues to demonstrate any trends and patterns in a simple and effective manner.

At the basic level, visualisation of data is effective because as a species we are naturally drawn to colours and images. In an instant we can process a visual, such as a graph, and pick out shapes, colours, and sizes. If you are in a situation where you need to “get people on board” in a hurry, such as when pitching to potential investors, a visualisation of data is a vital tool.

When talking about how data can be used in business, we hear a lot about “quantitative” and “qualitative”, but what does that mean?

Quantitative data

Data that we describe as quantitative is basically numbers, quantities, and values. Quantitative is used to express data in black or white terms, it either is or isn’t. For instance, we can learn with absolute certainty the number of customers who have bought a particular product, or how much money they have spent, or how many times your website has been visited. This form of data is ideal for studying your business analytics as it clearly and objectively shows where you can make practical changes to your operations to capitalise on those patterns of behaviour.

Qualitative data

Meanwhile, qualitative data is descriptive and less about the hard and fast numbers, making it less measurable than quantitative and, to some, less reliable. Examples of qualitative data are those that could contain opinions, such as customer reviews. Even though it’s not as reliable as its quantitative counterpart, qualitative data is still valuable in that it tells us why people are behaving in a certain way.

AI and Machine Learning

In recent years AI and machine learning has made its way into practically every business sector on earth, from medicine to manufacturing. While the visualisation, quantitative and qualitative methods all provide a data snapshot of how your business is operating, AI is very much the engine room of that process, always monitoring progress and performance. AI not only allows you to automate business data processes across your operations, but it does it in ‘real time,’ with zero chance of human error. Machine learning is used primarily to process huge amounts of data in an incredibly short amount of time. What’s remarkable is that, over time, the AI will ‘learn’ from this data and get even more efficient at capturing it. This is especially useful for processing enormous data sets and translating it into a format that business owners and managers can understand and act upon.

This has just been a very swift overview of some of the types of data that can be captured and applied to your business. I’ve worked in data, analytics, and insights for years and have seen time and time again the challenges businesses face in harnessing the data, leading to inefficiencies, waste, and heavy cost to companies.

Every time I moved to a new organisation, I would see these issues repeating, forcing me to effectively start from scratch. There was a clear and obvious requirement for a data project management tool to address these problems which is why I’ve made the decision to enter the world of entrepreneurship to provide the very tool businesses need to tackle these challenges. I aim to unlock the potential companies miss through lack of analytics integration, workflow transparency and ROI assessment.

 

10 reasons why data should be the driver for business decision making

 

 

data driven

 

The number of benefits to implementing data-driven decision making within organisations is limitless, but I narrowed it down to the following 10.

Clear picture

Data gives you a clear picture of your business situation. Numbers don’t lie. They point you in the right direction. When building a business strategy, data is the signpost. Want to know how your prospect feel about your new product? Check your data. Wondering how satisfied customers are with your service? Check your data. Debating where to focus your marketing efforts? You catch my drift. It’s all in the numbers. Spotting patterns and trends leads to generating actionable insights which enable you to take adequate, smart actions.

Decreased bias

You can not fully eliminate bias. Organisational leaders live and breathe their products and services which, occasionally, will lead to personal ambitions and beliefs clouding judgements. No matter how objective an individual tries to be, they will almost certainly be times when they lean towards certain solutions, even when not supported by facts and figures. This can be harmful to organisations and businesses. Biased decisions will never get outcomes you’re looking for.

The good news is that bias in decision making can be significantly decreased by implementing data-driven attitudes and, ultimately, organisational data-led culture. The key is making sure that the data you’re using is not biased itself.

Increased proactivity

Chances are that when you first implement data-driven decision making within your organisation, it’s going to be reactive. You the numbers, they paint a picture of what’s happening, you take a reactive action. White this can produce valuable outcomes, it’s not the only role data & insight should play within organisations.

With practice and the right types and quantities of information, it’s possible to leverage it in more proactive ways. For example, by identifying risks they grow too significantly or spotting opportunities before your competitors do, you can give your business an edge to drive forward, and fast.

Reduced threats

Making business decisions based on intuition or experience doesn’t exactly reduce risks. Not that your experience doesn’t matter, it does. That said, it’s not experience that allows you to make confident, risk-free decisions. Numbers do.

Using relevant data allows you to spot all the threats associated with a particular business decision before it is made. Those risks can be lowered by adjusting business strategies or eliminated all together by implementing different solutions.

New opportunities

Implementing data-driven decision making across your organisation can reveal new opportunities you didn’t even know where available to your business. Analysing relevant data and attention to detail allow you to uncover many hidden trends working to your advantage and predict future trends more accurately.

Strengthened leadership

Data-driven mindset makes you a better leader.

Implementing a data-led culture within all departments across your organisation will lead to increased ability to easily share insights and collaborate on key strategies. This will ultimately lead to becoming more knowledgeable, intelligent and, eventually, more profitable.

Using data to inform conversations across organisations helps create collective alignment and agreement, promoting collaboration, transparency, and trust crucial for businesses to thrive.

Knowledge and innovation

Information is an asset. Collaborative data-driven decision making within organisations encourages that mindset, promoting a culture of data-driven education across departments.

Additionally, studies run by the MIT Sloan School of Management prove that businesses engaged in data-driven decision-making observed a 6% boost in productivity, lending to implementing innovative solutions across organisations.

Cost-saving

Business decision makers are satisfied with their decisions if they make them meet their business goals. That’s despite the face there might be more efficient ways of reaching those. Once a decision has a positive impact on the business, it’s considered a success.

That changes once you introduce data in the equation. Numbers can reveal there were better, cost-efficient ways of achieving the something they wanted to achieve. That’s why it’s important to study data carefully, not for the sake of outcomes, but getting to where we want to be in the most efficient ways.

Revenue generating

Spotting patterns and predicting trends accurately generates more revenue. It’s that simple.

While becoming a data-driven organisation does not in itself generate revenue, you can use the data to identify opportunities for profit across all areas of the business. For example, data might reveal that a new range of your products sales very well in Australia. With this information, you can invest in growing in that market, generating revenue.

Additionally, the more effectively data is used in decision making, the more efficient your organisation becomes. This efficiency allows organisations to outsmart their competition and boost revenue.

Continual growth

All the above are supposed to keep your organisation evolving and growing.

The most forward-thinking businesses use data to unlock new streams of revenue and drive consistent improvement and growth.  Be one of them.

 

 

 

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