Are you making decisions based on intuition, or are you leveraging the power of data to drive your business forward? Every day, businesses face a flood of decisions, each one shaping their future and steering them toward success. Decision makers have access to more information than ever before, presenting incredible possibilities to use this information to make informed and effective choices. Analyzing collected data to make decisions can benefit a business as it enables the company to understand what is happening outside of the decision-maker’s perspective. Let’s talk about what it means to be data-driven, and some ways to implement this into your daily decisions.
What Is Data-Driven Decision Making?
Data-driven decision making stems from using information – facts, metrics, surveys – in an organized way to fuel decisions aligning with the company’s objectives. This helps to eliminate potential biases and allows companies to make decisions faster. But not everyone harnessing the power of data. A 2021 survey reported that 58% of respondents claim that their companies base at least half of their business decisions on gut feeling and experience. The same survey compared the percentage of decisions made on experience between companies who are best-in-class vs laggards. The results showed a clear link between company success and data-driven choices, with the best-in-class companies using data in 60% of decisions and the laggards utilizing data in 30% of decisions. There is untapped potential in using data for these business decisions as they can help a company to become agile and even detect new opportunities for growth and success.
6 Steps to use data in your decisions:
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Identify
It’s easy to get overwhelmed by the decisions that need to be made and the practically limitless amount of data that exists. To begin the decision making process, make sure the goal is specific. Ask questions about the problems your company is facing and take the time to research data sources that are already available. This will help to develop a strategy for gathering any additional information before making the final decision.
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Collect
Now that there is a specific business direction and goal, it is time to find the data to inform the decision. Data can be collected internally or externally and often both types of data are useful to collect. Internal company surveys, databases, industry reports, or even social media metrics can be identified and utilized during this stage. The goal is to have enough data to determine trends after analysis, so the more types and quantities of data, the better. Robustness in data collection aids the remainder of the process.
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Organize
Cleaning and organizing data are one of the most important steps to achieving success with interpreting data. This is the process of taking raw data and rigorously reviewing it for incorrect, improperly formatted, or incomplete data. The end result should be a clean and consistent table that can be easily reviewed.
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Analyze
The data is now ready to be processed to look for trends that will inform the decision-maker. Analysis should be conducted with the business goal in mind but keeping an open mind regarding the results and other potential applications for the data. Based on the data at hand, different models and methods can be used to gather trends. Some data may need data professionals to properly parse, but often allowing business users to work with the data can also reveal insights specific to the business. The more people that engage with the data, the more possibilities for insight arise. Look for the meaning behind the information, rather than just numbers. By the end of this phase, trends and patterns should become clear. The decision makers might not always be the same people analyzing the data, so the data analysts must pull their insights into a visualization that clearly tells the story of the data and helps to answer the questions originally asked.
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Implement
Once the data has been fully analyzed, plans can be developed, and decisions can be made. Keeping the decision or goal from the “Identify” step in mind, informed strategies can be created and put into practice. This can lead to modifying goals and changing directions and sometimes this enforces decisions that have already been made. The conclusions drawn from the data may lead to additional questions and more data needs to be considered. Identifying the next steps for data collection and setting KPIs are steps towards keeping data at the forefront of the decision making process.
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Review
Once the decision has been made, the results of implementing the decision can be tracked utilizing data. Reviewing the KPIs from the “Implement” stage and gathering more information on the impact of the decision can help monitor the choice and provide data for future informed decisions.
Potential Challenges to Data-Driven Decision Making
Although gathering insights with data is a powerful tool for decision making, it does not come without some challenges. Here are some struggles that might cloud your view:
- Limited data
Relying on existing data rather than gathering new data may not accurately answer the question the business is asking. Additionally, data may become outdated quickly. Data marketplaces are online stores where people can purchase different types of data. These make it easier to find specific studies and information that will provide the trends needed. If possible, gathering your own data provides the flexibility to address all aspects of the business goal or question at hand.
- Not gathering the right data
There is a lot of information in the world and not all of it might be right for your business. Gathering true insights from the data leads it to be valuable. This is why determining which data to use is such a critical step in the process. Make sure the data gathered is representative, robust, and that all variables are considered to avoid data bias. It is entirely possible that a factor you are thinking of is correlated to one variable that is actually impacted by another. Utilizing many approaches to gathering data and thinking about assumptions made can help to negate this challenge.
- Neglecting data privacy and ethics
There are always risks with gathering personal information. It is more critical than ever that the people who are managing and reviewing the data are informed and educated on data privacy and do not share the information unnecessarily. Data should be used with care not only for the safety of individuals, but for accuracy in reporting. Employees who are working with data should be trained in how to handle data sensitively and accurately.
In using data, businesses can make decisions in a more agile, cost-effective, and collaborative way. This method of making decisions can uncover opportunities and help drive businesses towards achieving their goals. With the right framework in place and the correct channels of data, the potential for transformative business success is possible.
Ready to make data-driven insights for your business? Connect with the Technology Strategy team to learn more!