6 Benefits Of Data-Driven Decision-Making

“Data is a force, and that force can turn into something of a burden — or something that truly liberates you, your business and the things that you do. Data, when tamed, can be an asset like nothing else.”

Sri Shivananda, SVP and CTO of PayPal.

Your ability to tame data is ultimately about your ability to use data to drive effective decision-making. Whether or not your company succeeds or fails comes down to the decisions people make – so, this isn’t something to take lightly. With so much at stake, how can businesses ensure that the decisions they make come with less risk and increase their chances of long-term success? One survey reported only 20% of employees believe their organisation excels at decision-making, and more than half feel time dedicated to decision-making is used ineffectively.?As a result of these struggles, more businesses are looking to implement data-driven decision-making. It’s not hard to see why, as data-driven organisations are:

• 23x more likely to acquire customers
• 19x more likely to be profitable

In this article, we’ll explain how data-driven decision-making can transform your business, helping to drive productivity, efficiency, and consistency across all areas of the organisation.

What Is Data-Driven Decision-Making?

Data-driven decision-making is the practice of using insights derived from data to make better-informed business decisions, optimise strategies and drive successful outcomes. It sounds simple enough on the surface, but the decision-making part is the endpoint of a complex process involving the following steps:

• Data collection:?Raw data is harvested from multiple sources across the business
• Data cleaning:?The data is then cleaned and sorted in preparation for analysis
• Data analysis:?Next, the data needs to be analysed before the results can be shared with key stakeholders
• Data visualisation:?The results of the analysis stage are presented with a visualisation that highlights patterns and insights from the data

Now that we’ve covered what data-driven decision-making involves, let’s dive deeper into some of the benefits of becoming a data-driven business.

#1 Make Better-Informed Decisions

Traditionally, businesses relied on the experience, wisdom, and gut feeling of key decision-makers to guide them in the right direction. This put a tremendous amount of responsibility and pressure on decision-makers and magnified the potential harm caused by poor decision-making. In a world of constant change and unpredictability, this approach becomes even riskier. Today, there is a different way. By harnessing the power of analytics, we can make smarter decisions based on data — decisions free from bias or human error. For example, according to a recent report, data-driven decision-making makes your business:

• 23 times more likely to acquire customers
• 6 times more likely to retain them
• 19 times more likely to be profitable as a result4

And that’s just scratching the surface. Whether it’s customer acquisition, process management, marketing or e-commerce, companies that leverage data-driven decision-making have a huge advantage over those that don’t. Ever wondered how Amazon manages to ship products so quickly despite an ever-increasing customer base? It’s simple. The largest e-commerce business in the world leverages the power of data analytics to predict demand. In other words, they know what people are likely to purchase and when. They then use these insights to ensure that distribution centres are well stocked.

#2 Improve Productivity?

Data-driven decision-making has a direct impact on business outcomes. By making better-informed decisions, you can streamline processes, reduce inefficiencies, and predict outcomes — all of which boost productivity. One such example is?econometric modelling, which involves understanding the relationships between variables to forecast future developments. Econometric modelling allows you to understand with a high degree of certainty how adjusting a process or modifying an action might have an impact on sales, turnover, or other key business metrics. Data analytics allows you to build accurate models that can predict future outcomes across a wide range of business functions. Here are some examples:

• Understanding the variables that result in productivity allows you to create a workplace environment conducive to high-output, high-value performance
• Understanding skills gaps, talent shortages, and potential flight risks allows you to take a proactive, rather than a reactive, approach to recruitment and succession planning

Whatever the department or process, basing your decision-making on data rather than human instinct results in improved productivity. For example, in an attempt to boost employee engagement and productivity, Google — a company well known for taking a data-driven approach — created a People Analytics Department. Using performance reviews and employer surveys, the department crunched the data to understand what makes a great manager, settling on eight key behaviours. They then measured managers’ performance against these behaviours, helping to make them even more effective at motivating and leading their teams. Motivated employees perform better and stick around longer.

#3 Optimise Campaign Performance

In highly competitive and evolving markets, well-thought-out and expertly executed marketing efforts can go a long way to ensuring a competitive advantage and long-term success. However, that requires businesses to obtain a number of significant insights into their customers. To improve the outcomes of their marketing tactics, businesses need to acquire an enhanced understanding of:

• Who they should target
• When they should target people
• How users are engaging with marketing material
• How and where to make optimisations that drive success

Within the context of the end of third-party cookies, which provide powerful insights that enhance and inform digital marketing efforts, this is a particularly important focus for businesses at the moment. Fortunately, data can provide a solution. In the cookieless future businesses now face, first-party data looks set to play a big role in helping businesses make crucial marketing decisions. That’s because by collecting data and gleaning insights using predictive analytics, businesses can better understand their customers and subsequently target them more effectively.

As a result, data holds the key to making effective decisions around marketing tactics moving forward. In simple terms, data is allowing businesses to enhance their marketing approach and plan for a future without third-party cookies simultaneously.

#4 Drive Internal Efficiencies

Data-driven decision-making also increases efficiency across your business. All those wasted hours discussing options in an attempt to understand risks and outcomes are saved. Now, in the era of?big data, hard work is done for you. In the long term, this frees up business leaders to focus on other important areas, including market research or developing their products or services. The process of collecting and analysing data also shines a light on any inefficiencies in your business, allowing you to overhaul processes, systems, and strategies that don’t work — and replace them with ones that do.

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