CONTACT US

The Rise of Data-Driven Decision Making: Trends Leaders Can't Ignore

Making the right decisions about your company is the lifeblood of your business. One wrong decision can lead to a spiral of harmful outcomes, whether it is customer dissatisfaction, financial loss, compliance and regulatory issues, or internal and external threats. These outcomes could be irreversible, which is why companies are learning how data-driven decision making can make businesses more effective and lucrative in our technologically-driven society.

At Critical Connexion, we work with our clients to help them understand why data-driven decision making has become a leadership priority. Yet, having data isn’t the issue here – businesses collect mounds of data every day. In fact, many organizations are facing a “data overload.” So, you probably already have ways of collecting your company’s data, but it is knowing what to do with the RIGHT DATA that becomes a complex and convoluted issue. In fact, studies have shown that companies waste 60% of their data and analytics investments by not using them for data-driven decision making.

How do you translate your data into meaningful decision making and outcomes? That is the focus of this month’s blog. You may already know how to read and analyze your data to tell what is happening, but does it tell you why things are happening and what you can do to improve? Making data-driven decisions will tell you all of that and more.

 

What is Data-Driven Decision-Making?

Data-driven decision making is just like it sounds: it is the process of using your company’s data to inform your decision-making process and substantiate what course of action should be taken before you commit to a decision. This means you are making your decisions based on facts – not guesses or past experiences. Business leaders are so used to relying on their “gut” instinct to make decisions, but our guts do not tell us the whole story (or the correct story).  

Why is this important to your business? Data-driven decision making has numerous benefits:

  • Improve both your customer satisfaction and customer retention.
  • Predict what will happen and then act accordingly with proactive risk management.
  • Improve your strategic planning based on data-driven facts.
  • Enhance your company’s operational efficiency
  • Have sustainable growth while being able to confidently reorganize or pivot with changing markets.

 

How are companies making data-driven decisions? Financial institutions have used their data to manage financial risks, detect fraud, and improve investments. Retailers have used their data to improve customer satisfaction by personalizing shopping experiences and improving their inventory management. Even healthcare providers are using their data to improve their patients’ healthcare experiences while also reducing costs. These industries and others are fully embracing data-driven decision making to outperform their competition.

How you use your data to make decisions will depend on your company’s specific goals, the data you have access to, and the quality of this data. Those are the first steps in embracing data-driven decision making.

.

How to Start Data-Driven Decision Making

Just because you have mounds of data doesn’t mean you are using the right data! This may mean hiring someone who has an analytical mindset to be able to spot patterns in your data and interpret the meaning behind these patterns. Are your customers voicing the same complaints about using your website for purchases? Is there a product that consistently does better or worse than others? Is there a section of your company that is constantly behind the others? Once you see patterns in your data, you can draw conclusions as to why they exist and find ways to improve going forward.

You need to first have someone spot these data patterns, and then you can tie every decision you make back to this data (hence a data-driven decision-making approach). This is one of the hardest parts of starting data-driven decision making because, as we mentioned earlier, we love to “trust our gut.”

Do your best to avoid relying on your gut instincts when determining what course of action to take. Just because something worked well in the past doesn’t mean it will in the present or future. This can start by taking these six steps:

  1. Clearly determine the business problem you want to solve or decision you want to accomplish.
  2. Collect the right data based on what you want to solve or accomplish (i.e., customer data, employee data, product data, etc.).
  3. Prepare and visualize the data both quantitatively and qualitatively.
  4. Analyze the data using an analytical mindset.
  5. Use any insights you extrapolate from this data to make an informed decision.
  6. Implement change and monitor successes based on this data-driven decision-making.

 

It is important to remember that how you collect the data (step two) is always based on what you are looking for (step one). For example, if your goal is to improve customer retention and satisfaction, designing a survey can help track customer sentiments over time. If you need to solve product effectiveness, data from customer comments or complaints may work best.

In order to use these six steps as part of your data-driven decision-making process, you also need to visualize the meanings behind the data. This is both a quantitative and qualitative approach to business.

On the quantitative side, you are compiling the numbers – how many customer complaints, how many failing products, how many employee issues. But on the qualitative side you need to figure out what the data means. This could be accomplished by making visual charts or graphs to quickly identify patterns and trends in your data and the meanings behind them. Then you can conclude what decisions need to be made based on these visualizations.

Ignoring qualitative insights that your quantitative numbers may simply not capture will hurt your data-driven decision-making efforts. Business leaders cannot just rely on numbers – they need to interpret their meanings and connect them to their real-world industry issues.

Data-Driven Decision Making is a Team Effort

We mentioned the importance of hiring someone who has an analytical mindset. This is because data-driven decision making is not a solo sport; in fact, many companies have an entire team that analyzes and makes sense of their company’s data.

For example, we have spoken to many business leaders who believe the data expert is in their human resources department, but HR professionals may lack the analytical skills needed to properly collect the right data. At Critical Connexion, one of the main complaints we have heard from our clients is that their HR teams actually collect more data than they can efficiently analyze, and this data isn’t what they originally needed to solve a problem.

Your HR personnel may be experts in making the final decisions based on the data, but you need a variety of experts on your team: data collectors, survey designers, statistical analysts, and then the action planning support team. Analytic experts will identify which data can predict your target outcomes, whether it is for customer retention, employee engagement, or overall performance.

If you are leading your team towards a data-driven decision-making culture, you will need to develop the ability to do the following:

  1. Ask the right questions based on what you want to solve with the data.
  2. Challenge any assumptions behind the data (and behind your gut instinct).
  3. Interpret the patterns and trends you find in your specific business context.
  4. Balance the quantitative analytics with qualitative experience and judgement.

 

Your team needs to think strategically about your data by evaluating it based on your overall strategy and business goals. Think critically about data, ask questions about the meaning, and avoid taking numbers at face value. You should also understand that data has limitations – data can only tell us so much about real people and it may be imperfect or even incomplete. That is why you have a “human” team to try to tell the full story behind your data.

 

There are Risks to Ignoring Data-Driven Decision Making

Data-driven decision making is not optional, but essential for business growth and survival. Without data, businesses fail in identifying opportunities and changing customer needs. Companies often rely on outdated and archaic business operations that end up wasting resources when they fail to consult their data. In addition, avoiding data-driven decision making may come at a dangerous cost of exposing your business to fraud, compliance and regulatory issues, and other unforeseen risks.

Finally, you will be at a competitive disadvantage if you ignore your data while your competitors are leveraging data for better decision-making. Implementing a data-driven approach today will help you become more efficient and drive performance for long-term success.

.

About Critical Connexion:

Critical Connexion is a distinguished business management & consulting firm that focuses on leveraging a foundation of leading finance, HR management, strategic sourcing, risk & operations experts to accelerate brand success for clients.

We specialize in navigating the evolving landscape of corporate growth by adeptly addressing changing systems, processes, and people requirements. Recognizing the substantial nature of technology and changing business needs, we ensure that these resources are directed with foresight and expertise. We are your extended partners for business growth, scaling seamlessly and brand elevation.

 

Contact Us:
Ph: 213-798-6676
Email: info@criticalconnexion.com

.