What is a data-driven culture?
A data-driven culture is a corporate, business or non-profit culture that incorporates data when both large and small decisions regarding strategy are made. Being able to do this involves making data accessible and empowering all levels of employees to utilize it. Employees are encouraged and enjoy embracing data rather than shying away from it. The people you hire are naturally curious, ask questions and find the data they need to arrive at conclusions.
Why data-driven decision-making is important
Data driven decision making is important because it will accelerate growth. That growth can be in topline sales revenue or growth of increased profits by finding efficiencies. Successful organizations of today will have to be able to apply data to develop the right strategy, to correctly deploy its resources for optimal return, to ascertain if the strategy is working, and, to identify corrective actions, when necessary. A McKinsey study in 2018 found that organizations leveraging behavioral insights outperform peers by 85% in revenue growth. There are countless studies and articles that claim a similar message: leveraging data to make decisions should have a positive outcome on your company’s success.
Being a data-driven business is easier said than done
The digitized world of today has exponentially increased the quantity of data available to companies, big and small, that can be harnessed to improve all facets of the business. More companies are recognizing that data-analytics can offer strategic benefits and are investing in capabilities to support this. Yet, Forrester reports that for most companies 60% to 73% of data go unused. This reminds me of almost twenty years ago when companies were enamored with the potential payoff associated with CRM platforms. After spending a large sum of money, most companies were disappointed to learn that almost 80% of the platform went unused.
These similar disconnects two decades apart points to one of the more neglected topics when it comes to data-analytics – organizational culture. While companies expend time and effort to ascertain what technology to deploy, not enough time and effort is spent thinking about how the organization will use its data to make better decisions.
How to be a data-driven decision-making organization
For a company to truly be data-driven, data-analytics have to be ingrained into the very fabric of the organization. Every function – finance, marketing, operations, sales..have to be aligned to applying data to make an informed decision. More importantly, data can no longer be “siloed and hoarded” by function, but generously shared across the organization.
Here are six steps for companies to be great at data-driven decision making:
Step 1: Start at the top. CEO’s must lead the way by setting the right expectation on how decisions are made by harnessing data. He/she will also need to set the tone for the right balance between data-based and intuitive decision making to prevent analysis-paralysis.
Step 2. Identify, create, and align on the most critical data. A pilot needs only six gauges to effectively fly a plane. A company should have a hand-full of strategically critical data KPI’s that will align and focus the organization. These metrics, however, should be significant enough that a successful achievement of them will materially and positively impact the valuation of the company. We are of the opinion that if you focus on “plain vanilla” KPI’s that all other companies focus on, you will not get breakthrough results.
Step 3. Build or buy the right tools. Depending on the size of your organization, there will likely be a combination. Work with analytics and data experts to help you identify what tools are right for your business needs based on 1) what your business does 2) the data is collects and 3) the critical KPIs identified above. Do your best to maintain fewer tools that all can access rather than many tools that only a department, for example, accesses.
Hint: more than likely your IT expert is not a data analytics expert
Step 4. Create the appropriate business processes and work-flows. To inculcate a data-driven discipline into the organization, you cannot just will it to happen. Companies will have to develop processes and work-flows on how the various functions are required or invited to participate in decision-making given most decisions will require data from across the functions.
Step 5. Use the tools. This seems obvious, but as mentioned, there are many examples of powerful tools going mostly unused in organizations. This happens because learning new tools or processes is hard. The path of least resistance is for an employee to keep doing what they know. Provide training. Then provide a refresher. Managers and supervisors should ask their employees for answers that the tool can provide to begin adoption.
Step 6. Don’t get stuck. As much data as is available, still not every question will be able to be answered. There will still be times where you may question the data or need to go a different way. Trust this feeling. Data is a guide only.
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Data is extremely important and one of the most strategic tools an organization has – but data itself has no value. What you do with it and how you leverage it is where the value resides. Daasity has built a platform for ecommerce and D2C companies that does much of the hard work for you so you can leverage your data right away and immediately start making better decisions. If this sounds like something you need, contact us today.