The power of data
Do you trust your own gut feeling? Do you continue to do what you’ve always done (and keep getting the same results)? Do you make your business decisions based on (educated) guesses? Hopefully the answer to these questions is “no” for most companies. If an organization needs to make a tactical or strategic decision, it should look for facts and data to base their decision on.
“Data-driven decision making (DDDM) is about making decisions that are backed up by hard data rather than making decisions that are intuitive or based on observation alone.” As stated by Techopedia.
Basically, you want hard facts, you want to know you are on the right track and make your choices with those facts in mind. But how do you retrieve that kind of information and knowledge? That’s why we use business analytics to back up our story, while in the past we used observation and educated guesses. A study from MIT Center for Digital Business shows that organizations that adopt this way of working actually have a 5-6% higher output or productivity. Making this a much smarter way of doing business.
The majority of the data generating tools are pretty high-tech and you would need an experienced data scientist to crack the data and turn it into information understandable for business managers and executives without an IT-degree. Luckily there are self-serve or business analytics tools available for those without a technical background.
For both large international enterprises and smaller local business, it is key to make decisions based on data. It helps to answer important business questions; How can I generate more leads? Convert leads into sales? How can I optimize my stock management? How can I reduce logistical costs? Can I use the production facility more efficiently? Management needs insight in the business before acting to improve the business.
Let’s get started
It’s necessary to turn data into insights before you actually can make those decisions. This type of data is often referred to as Big Data, and it’s called BIG for a reason: there is plenty of it. Instead of looking at ‘all the data available’ it’s better to start by asking “What do we want to achieve?”. But even in that stage it is easy to get overwhelmed by the oceans of data and the possibilities it provides. Of course, every organization also has many goals they want to achieve. Prioritizing and selecting one or two strategic objectives is key at this point.
Next is to define the road towards achieving those goals, what is needed to get to that point. Which data is critical to answer that question? It is better not to collect all the data you can get, but to focus only on the data that you actually need. Often part of the required data is already available, the organization may just not be aware of it. The other part either needs to be collected by adding data platforms or by purchasing external data sources. Collecting data – either way – does have a price tag. As long as the advantages outweigh the costs, it is a smart business investment. Costs of data can add up quite easily, thus it is vital to focus solely on the data which is required to reach the selected business goal.
With all the data sources defined and in place, it is time to set up the process and choose the people who will collect the data. Data needs analyzing before it has any meaning or use for business decisions. There are many platforms available to manage your data; some are as easy as Excel but most others need more experience, expertise and analytics.
Ultimately, all effort will come together when it’s presented to management in a meaningful and understandable way. In the end the gained insights from the data lay the groundwork for business decisions and achieving the defined goals. Now, that is Data Driven Decision Making.