Wouldn’t it be wonderful if businesses have their own magic crystal balls and wands, which let them peek into the future and point them towards the right decisions? Well, they actually do have a powerful magical tool in the form of their corporate data. Generating data insights is fundamental for uncovering the accumulated knowledge in your organization. They will lead you towards improving your KPIs and overall performance. Unlike decisions made merely by “gut feeling”, data can help you predict future events, market demand, consumer behavior, product performance, etc. In this sense, companies truly have a gate to the future, but in order to open it, they need to learn how to use the key, hidden in their data.
“Data-driven decision making” involves analyzing and embracing your corporate data over intuition. Due to the advance of modern technology, companies can analyze huge databases to uncover, what is happening throughout the organization, how they compare to rival companies, and even test different scenarios to predict how their actions will impact their future performance. According to a study by McKinsey Global Institute, companies that are making decisions based on data are “23 times more likely to acquire customers, 6 times as likely to retain customers, and 19 times as likely to be profitable as a result”.
The Power of Data Insights
In the past due to the lack of appropriate technology to collect and leverage data, managers had to rely on their experience and intuition to predict trends and make strategic decisions. However, nowadays we have cutting-edge analytical tools that are transforming the modern business landscape in unprecedented ways. We can employ data-driven decision making to analyze our current strategies, past performance, and make informed decisions for setting future business goals. Unlike intuitive decisions, which will be significantly affected, if some of the highly experienced top managers leave the company, the quality of data-driven decisions will stay consistent. Furthermore, using facts and data not only dramatically increases the speed of decision making, but also companies have reported on average 4% rise in their productivity.
Data-driven organizations tend to be more customer-centric and have better insights on their customer journey and expectations. They are better at measuring qualitative characteristics such as satisfaction and have a clear understanding of what differentiates their services, compared to rival companies, and how to provide a personalized experience to their customers, in order to drive their loyalty. McKinsey has found out that companies such as Amazon, Netflix, and Google, for which measuring and analyzing their customer behavior is in the center of their corporate strategy, outperform their competition by “85% in sales growth and over 25% in the gross margin”. Consequently, the study predicts that companies in the long run, which fail to adopt a customer-centric, behavioral data-driven approach, will lose their competitive edge.
As we mentioned earlier, when it comes to predicting the future, companies have their own crystal balls in the shape of “what-if analysis”, which allows them to predict the outcomes of specific events and concepts, without the need to execute them first. At its core “what-if analysis” shows, by combining both real-time and historical data, how changing one or more variables will affect the outcome of a certain scenario. It can help you to be ahead of your competitors by letting you distribute your resources better, reducing cost overruns, forecasting bias, and other inaccurate estimates and risks. For instance, it empowers you to run complicated data analyses across your projects and see the outcomes on costs and labor, based on numerous variables.
By transforming their corporate data into valuable insights to drive their decision-making processes, companies can evolve in such a way that truly seems like magic. Yet, a survey by Gartner, showed that 91% of the participating companies have not yet reached a “transformational” level of maturity to embrace their data and use them as a compass to navigate their future strategy and not just to argue decisions based on their intuition.
Nevertheless, like any other “magic” we need to be aware of its dark side. Although data is objective and, in many cases, reliable, it can bring as many insights to the users as they can draw from it. As a result, we must not follow it blindly but identify, which data and metrics will bring us value. In order to achieve, that we can employ several criteria such as applicability, showing if the data set, can be applied in all practice cases; relevance referring to the level of consistency between the data content and the area of interest of the user; integrity ensuring that the data has not gone through any accidental modifications from its original source.
Besides, for a data-driven strategy to be effective, it must flow through the whole organization and its members need to have a high enough data literacy to interpret it correctly. This will ensure that they do not use data inaccurately to support and validate decisions, made purely on instinct. High data literacy does not mean that we should expect all our employees to be specialized in the same way as data scientists, as by utilizing data storytelling we can communicate the information behind the data in understandable terms to the main decision-makers.
For companies to unleash the true magic of their data insights, they must transform into data-driven businesses, where data is at the very heart of the organization. Thus, they need to recognize the great responsibility, related to the impartial evaluation of results and their impartiality in the name of predictability, assessability, and business growth.
Author: Stoyan Terziev