Society has instilled the concept of "intuition" as a synonym for a reliable source for making decisions. While it can be a useful tool, it would be a mistake to base all decisions on a simple feeling. Today, data-driven decision-making is replacing intuition—we'll tell you why!
While intuition can provide a hunch or a spark that leads you down a particular path, it's through data that an activity is accurately verified, understood, and quantified. According to a survey of more than 1,000 senior executives conducted by PwC, highly data-driven organizations are three times more likely to report significant improvements in decision-making compared to those that rely less on data.
Are you interested in learning how data-driven decision-making can help your business become more effective? Below, we explain what this type of decision-making is all about, as well as its benefits.
Data-driven decision-making is the process of using data to uncover crucial insights and validate a given course of action before committing to it. In business, this takes many forms. For example, a company might:
Exactly how data can be incorporated into your decision-making process will depend on several factors, including your business objectives and the types and quality of data you have access to.
Data collection and analysis have long played an important role in corporations and enterprise-level organizations. But with the advent of digitalization, humanity generates more than 2.5 quintillion bytes of data every day. It's never been easier for businesses of all sizes to collect, analyze, and interpret data into real, actionable insights. Although data-driven decision-making has existed in business in one form or another for centuries, it is a truly modern phenomenon.
Once you start collecting and analyzing data, you'll likely find it easier to make confident decisions about virtually any business challenge. Whether you're deciding to launch or discontinue a product, adjust your marketing message, enter a new market, or something else entirely.
Data serves multiple purposes. On the one hand, it serves as a benchmark against what currently exists, allowing you to better understand the impact any decision you make will have on your business.
Beyond this, data is logical and concrete in ways that instinct and intuition simply aren't. By removing subjective elements from your business decisions, you can instill confidence in yourself and your company as a whole. This confidence allows your organization to fully commit to a particular vision or strategy without worrying unduly that the wrong decision was made.
However, adopting data-driven decision-making doesn't mean the process will always be correct. Data may show a particular pattern or suggest a particular outcome; if the data collection or interpretation process is flawed, then any data-driven decision would be inaccurate. This is why the impact of every business decision must be regularly measured and monitored.
When you first implement data-driven decision-making , it's likely to be reactive in nature. The data tells a story, and you and your organization must react to it.
While this is valuable in its own right, it's not the only role data and analytics can play within your business. With enough practice and the right types and amounts of data, it's possible to leverage them more proactively—for example, by identifying business opportunities before your competitors or detecting threats before they become too serious.
There are many reasons why a company might choose to invest in a big data initiative and strive for data-driven decision-making for its processes.
One of the most impactful initiatives is using data to reduce expenses. Of the organizations that launched projects designed to reduce expenses, more than 49% have seen value in their projects. Other initiatives have shown more mixed results.
Big data is already being used to improve operational efficiency, and the ability to make informed decisions based on the most up-to-date information is quickly becoming the norm.
If you're aiming to become more data-driven in your business approach, there are many steps you can take to achieve that goal. Here's a look at some of the ways you can approach daily tasks with an analytical mindset.
Data analysis is, in essence, an attempt to find a pattern or correlation between different data points. It is from these patterns and correlations that insights and conclusions can be drawn.
The first step to adopting data-driven decision-making is to make conscious, analytical decisions, both in business and in your personal life. While this may seem simple, it takes practice.
Whether you're in the office reviewing financial statements, waiting in line at the grocery store, or traveling on the train, look for patterns in the data around you. Once you've noticed those patterns, practice extrapolating ideas and trying to draw conclusions about why they exist. This simple exercise can help you train your analytical skills.
Whenever a decision arises, whether business-related or personal, do your best to avoid relying on instinct or past behavior when determining a course of action. Instead, make a conscious effort to apply an analytical mindset.
Identify what data you have available that can be used to inform your decision. If data doesn't exist, consider ways you could collect it yourself. Once you have the data, analyze it and use any insights to help you use data-driven decision-making . As with the pattern-spotting exercise, the idea is to practice enough so that analysis becomes a natural part of your decision-making process.
Data visualization is a huge part of data analysis. It's almost impossible to derive meaning from a table of numbers. By creating compelling visuals in the form of charts and graphs, you can quickly identify trends and draw conclusions about the data.
Familiarize yourself with popular data visualization techniques and tools , and practice creating visualizations with any form of data you have available. This can be as simple as creating a chart to visualize your monthly spending habits and draw relevant conclusions. You can then use this information to create a personal budget for the next month. After completing this exercise, you'll have practiced data-driven decision-making .
If you're not comfortable learning how to incorporate data into your decision-making process on your own, there are several educational options you can pursue to develop the data science skills needed for success. You can take an online business analytics or data science course, or even delve deeper into a career path related to this field.
Data-driven decision-making has many benefits, but it's important to keep in mind that you don't need to take an all-or-nothing approach to get there. By starting small, benchmarking your performance, documenting everything, and making adjustments along the way, you can empower your organization with data and thrive. Would you like to learn more? Email us at cu **** @ **** bi.com and ask about our training.
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