“Data is a force, and that force can turn into something of a burden — or something that truly liberates you, your business and the things that you do. Data, when tamed, can be an asset like nothing else.”1 – Sri Shivananda, SVP and CTO of PayPal.
Your ability to tame data is ultimately about your ability to use data to drive effective decision-making. Whether or not your company succeeds or fails comes down to the decisions people make – so, this isn’t something to take lightly. With so much at stake, how can businesses ensure that the decisions they make come with less risk and increase their chances of long-term success?
One survey reported only 20% of employees believe their organisation excels at decision-making, and more than half feel time dedicated to decision-making is used ineffectively.2 As a result of these struggles, more businesses are looking to implement data-driven decision-making. It’s not hard to see why, as data-driven organisations are:
- 23x more likely to acquire customers
- 19x more likely to be profitable3
In this article, we’ll explain how data-driven decision-making can transform your business, helping to drive productivity, efficiency, and consistency across all areas of the organisation.
What is data-driven decision-making?
Data-driven decision-making is the practice of using insights derived from data to make better-informed business decisions, optimise strategies and drive successful outcomes.
It sounds simple enough on the surface, but the decision-making part is the endpoint of a complex process involving the following steps:
- Data collection: Raw data is harvested from multiple sources across the business
- Data cleaning: The data is then cleaned and sorted in preparation for analysis
- Data analysis: Next, the data needs to be analysed before the results can be shared with key stakeholders
- Data visualisation: The results of the analysis stage are presented with a visualisation that highlights patterns and insights from the data
Now that we’ve covered what data-driven decision-making involves, let’s dive deeper into some of the benefits of becoming a data-driven business.
#1 Make better-informed decisions
Traditionally, businesses relied on the experience, wisdom, and gut feeling of key decision-makers to guide them in the right direction. This put a tremendous amount of responsibility and pressure on decision-makers and magnified the potential harm caused by poor decision-making.
In a world of constant change and unpredictability, this approach becomes even riskier.
Today, there is a different way. By harnessing the power of analytics, we can make smarter decisions based on data — decisions free from bias or human error.
For example, according to a recent report, data-driven decision-making makes your business:
- 23 times more likely to acquire customers
- 6 times more likely to retain them
- 19 times more likely to be profitable as a result4
And that’s just scratching the surface. Whether it’s customer acquisition, process management, marketing or e-commerce, companies that leverage data-driven decision-making have a huge advantage over those that don’t.
Ever wondered how Amazon manages to ship products so quickly despite an ever-increasing customer base?
It’s simple. The largest e-commerce business in the world leverages the power of data analytics to predict demand. In other words, they know what people are likely to purchase and when. They then use these insights to ensure that distribution centres are well stocked.
#2 Improve productivity
Data-driven decision-making has a direct impact on business outcomes. By making better-informed decisions, you can streamline processes, reduce inefficiencies, and predict outcomes — all of which boost productivity.
One such example is econometric modelling, which involves understanding the relationships between variables to forecast future developments. Econometric modelling allows you to understand with a high degree of certainty how adjusting a process or modifying an action might have an impact on sales, turnover, or other key business metrics.
Data analytics allows you to build accurate models that can predict future outcomes across a wide range of business functions. Here are some examples:
- Understanding the variables that result in productivity allows you to create a workplace environment conducive to high-output, high-value performance
- Understanding skills gaps, talent shortages, and potential flight risks allows you to take a proactive, rather than a reactive, approach to recruitment and succession planning
Whatever the department or process, basing your decision-making on data rather than human instinct results in improved productivity.
For example, in an attempt to boost employee engagement and productivity, Google — a company well known for taking a data-driven approach — created a People Analytics Department.
Using performance reviews and employer surveys, the department crunched the data to understand what makes a great manager, settling on eight key behaviours. They then measured managers’ performance against these behaviours, helping to make them even more effective at motivating and leading their teams. Motivated employees perform better and stick around longer.
#3 Optimise campaign performance
In highly competitive and evolving markets, well-thought-out and expertly executed marketing efforts can go a long way to ensuring a competitive advantage and long-term success. However, that requires businesses to obtain a number of significant insights into their customers.
To improve the outcomes of their marketing tactics, businesses need to acquire an enhanced understanding of:
- Who they should target
- When they should target people
- How users are engaging with marketing material
- How and where to make optimisations that drive success
Within the context of the end of third-party cookies, which provide powerful insights that enhance and inform digital marketing efforts, this is a particularly important focus for businesses at the moment. Fortunately, data can provide a solution.
In the cookieless future businesses now face, first-party data looks set to play a big role in helping businesses make crucial marketing decisions. That’s because by collecting data and gleaning insights using predictive analytics, businesses can better understand their customers and subsequently target them more effectively.
As a result, data holds the key to making effective decisions around marketing tactics moving forward. In simple terms, data is allowing businesses to enhance their marketing approach and plan for a future without third-party cookies simultaneously.
#4 Drive internal efficiencies
Data-driven decision-making also increases efficiency across your business. All those wasted hours discussing options in an attempt to understand risks and outcomes are saved.
Now, in the era of big data, hard work is done for you. In the long term, this frees up business leaders to focus on other important areas, including market research or developing their products or services.
The process of collecting and analysing data also shines a light on any inefficiencies in your business, allowing you to overhaul processes, systems, and strategies that don’t work — and replace them with ones that do.
#5 Enhance internal accountability
Data analytics also helps to boost transparency and accountability around the decision-making process. Before, there was no clear way to track how decisions were made or by whom, or to fully understand the impact of those decisions.
With data-driven decision-making, there is a clear framework for accountability, and the ability to understand and measure the impact of decisions.
Improving both transparency and accountability can bring a variety of benefits to your company, including:
- Fewer internal conflicts or disagreements
- Greater efficiency
- More trust and confidence
These benefits impact all levels of the business. At the leadership and executive level, data analytics provides an objective framework for making decisions, free from bias or the internal politics that plagues many organisations. For regular employees, it provides clarity around how the business is run and how decisions that impact them are taken.
#6 Strive for consistency
Genuine consistency is incredibly difficult to apply to human processes. That’s because, for humans, opinions are always going to be influenced by a myriad of external and internal factors.
We have good days and bad days. We are swayed by our emotions, which are in a constant state of flux. We are biased, whether we are aware of it or not. All of these factors make our behaviour inconsistent and erratic to varying degrees.
While context is important, you don’t want gut instinct or outside influences to have too much influence when you make crucial business decisions. With customers, sales, and ultimately the survival of your organisation at stake, you need to be able to reach decisions without being swayed by bias or emotion.
That’s why decisions driven and informed by data are so important to a successful business. They provide both accuracy and objectivity when you need it most, which allows a level of stability and consistency to decision-making that would otherwise be impossible to achieve.
Get the support you need to unlock data-driven decisions
Data-driven decision-making offers powerful benefits, enabling you to build a more efficient and effective business across all departments. But realising these benefits requires resources and expertise.
While you can handle data analytics in-house, that isn’t always the best approach, mainly due to the skills required. Businesses often misinterpret the true scope of data analytics. Without specialist skills and expertise, delays and bad outcomes become more likely.
That’s not all. Looking after your own data strategy can be:
- Expensive: You need to invest significant time and resources into infrastructure, training, and recruitment
- Time-consuming: The process of collecting, cleaning, analysing, and visualising data can be complex and arduous
- Potentially risky: Poor-quality data and inefficient systems can result in false assumptions, which, when used to make decisions, lead to undesirable outcomes
By partnering with an experienced data analytics provider, you can get all of the benefits of data-driven decision-making with less hassle and risk. That’s what we offer at Jarmany. Our philosophy is simple — when you work with data the right way, nothing is unpredictable and no threat or opportunity to improve will ever be missed.
We can help you harness the benefits of a data-driven approach to decision-making and go one step further, guiding you to incorporate experience and specific business context alongside data to make decisions. That’s what we like to call being data-informed.
Whether you are looking to implement a data-driven culture, build an effective data platform, apply data science techniques, or access top expertise in the field of data analysis, we’re here to help. Your business has unlimited potential, and data holds the key to unlocking it. If you’d like to learn more about how we can help your organisation, get in touch today.