Why Data-Driven Decision-making Matters and How to Optimise it within Your Organisation

Data-driven decision-making is crucial for business success. By definition, it refers to the process of making strategic choices based on experience and evidence, rather than solely relying on intuition or past experiences. Most businesses will be using data in one way or another, whether it’s for important decision-making or not. However, there is still a large portion of businesses that are still using their data incorrectly, purely out of not knowing how to optimise it. 

Let’s run through some examples of how businesses use data to drive decisions:

Examples:

Leadership Development at Google :

Google's well-known people analytics initiative, Project Oxygen, was used to identify common behaviours of high-performing managers and created training programs to develop these competencies for other leaders.  

“Google launched Project Oxygen, a multiyear research initiative. It has since grown into a comprehensive program that measures key management behaviors and cultivates them through communication and training. By November 2012, employees had widely adopted the program—and the company had shown statistically significant improvements in multiple areas of managerial effectiveness and performance.” - HBR

Driving sales at Amazon: 

Amazon uses data points to decide which products they should recommend to customers based on their prior purchases and patterns. Amazon also uses authenticated user experiences to entice customers into buying a certain product, for example, by sending e-mails saying “We saw you were looking at X, Y, and, Z” to encourage purchasing behaviour.

What are the benefits of using data?

1.) Make confident decisions

The most important and valid reason for using data is that it enables you to make confident decisions. As humans, we all have a natural bias, which can often skew our best judgement. Our brains can trick us into thinking we are making the right business decisions, based on a ‘feeling’ rather than fact. Data reduces this bias massively and enables us to look at facts instead of emotions.

2.) More Proactive

Having data at your fingertips will naturally make you (and your team/business) more proactive. When you can see what is and isn’t working - and in some cases in real time - you can become more proactive about things such as performance, promotions, and business sales without even realising. When data is at your fingertips, it feels like less of a chore to make improvements because you have all of the facts and figures in front of you.

3.) Cost savings

In some (not all) cases, a benefit of using data is saving on cost. This could be understanding where your business is spending too much (or too little) money, and also ascertaining where your blind spots may be. For example, if you collect data on your recruitment process you may be able to see where you’re spending too much time on your process, which results in money being over-spent.

Steps for making data-driven decisions

"Making data-driven decisions takes practice. If you want to improve your leadership skills, then you’ll need to know how to turn raw data into actionable steps that work toward your company initiatives. The following steps can help you make better decisions when analyzing data." - Asana

1.) Know your vision

What is it that you want to achieve with your data? Is it more sales? Is it better-trained employees? Is it higher levels of customer service? Decide the vision and the goal and work your data points backwards.

2.) Find data sources

What data sources best complement your vision? Find 5-6 key data points as a minimum and go from there.

3.) Organise your data

Don’t create a basic spreadsheet and hope that it will work. Do you have a platform that allows for data points to be recorded? What type of data will you be collecting (qualitative or quantitative)? What are your competitors using? Shop around before making a decision.

4.) Perform data analysis

Most importantly, analyse that data and look at it thoroughly. Especially if you have qualitative data, you’re going to get a lot more personalised insights which will be useful in the decision-making process. Ensure that you have more than one person analysing the data so as not to create bias.

5. Draw conclusions

What is and isn’t working, and what are the next steps?

Data-driven decision-making shouldn’t be ‘the future’ - as it’s what we’re living in right now. Instead, organisations should look at data as something current and necessary to enable their teams to thrive and their organisations to make more money.