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. Data-driven decision making is fundamental for uncovering the accumulated knowledge in your organization, that will lead you towards improving your KPIs and overall performance. Unlike decisions made by mere “gut feeling”, data can help you predict future events, market demand, consumer behavior, products 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 taking 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”.
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 of 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 differentiate 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.
Related Articles: The Magic of Data Insights Part II
Author: Stoyan Terziev