Instinct. Intuition. Experience.
Instinct. Intuition. Experience. Business leaders rely on these undefined qualities every day to make the best decision for their companies. While this has led to some of the most successful business moves that transformed society, it has also led to some of the biggest business failures.
Such success can be seen through Henry Ford’s choice to increase employee wages when consumer demand was decreasing. Ford called it the best decision he ever made as productivity soared and Ford Motor Co. doubled its profits. However, Kodak’s hesitation to introduce their digital camera technology due to their strong film sales didn’t produce such stellar results. When Kodak finally got in the digital game, they were selling their cameras at a loss. Today, the data-driven decision-making (DDDM) process is becoming an essential tool in empowering executives to make smarter and more positively impactful decisions than ever before. DDDM is about leveraging insights gathered from your data and data analyses to drive your decision in the right direction. The ubiquity of big data and the affordability of strong data analytics and business intelligence technology has made this type of decision-making process available to businesses of any size.
Much of the drive for an increased reliance on data comes from the massive competitive advantage that being data-driven creates. This was initially demonstrated by the biggest tech companies and then quickly adopted by the giants of every industry. Target initially focused on predicting customer pregnancy amongst its shoppers to send them more targeted coupons. While this story broke when they sent these offers to a pregnant teenager, Target continues to harness their database to send its customers relevant product advertisements. The use of data allows companies to act fast and accurately to meet consumer demand and stay ahead of competitors.
Data-driven decision-making has many advantages to propel your company into the top of your industry:
The most significant benefit that companies see when they use big data to guide their decisions is cost-cutting. The Harvard Business Review released a study of the Fortune 1000 that found that nearly 50% of these businesses have started using big data and 80% of executives classifying this as a successful strategy for their business.
Making changes to the service or product line is one of the more costly decisions a business can make. Significant portions of an annual budget can be spent on research and development, product or service testing, and its launch. Data-driven decision making can prevent companies from wasting money on products or services that consumers do not want or are not willing to spend money on. It can also point executives toward market opportunities that they may have otherwise missed. Forbes recently highlighted the fact that about a third of business leaders surveyed have stated that the use of big data has transformed their R&D practices.
A culture shift
Company culture is not generally amenable to change. However, because every industry is disrupted by technology and innovation, organizations need to encourage the workforce to embrace change. This is where data-driven decision making comes in. When employees see the facts and figures that data offers, they will better understand why certain business systems and processes will benefit from change. This understanding leads to a greater acceptance of potential changes, which then leads to more success when changes occur. About 60% of executives know they will become obsolete if they do not get their organization on board with big data.
A promising future
Relying on data for business strategy guarantees increased agility. Companies can use it to become more nimble against their competition. Data analytics can inform them in real-time about changes in public sentiment, disruptions in the industry, issues with production, and so much more. These business insights allow organizations to pivot and right the ship either before any damage is incurred or in a way that puts them a step ahead of their competitors. In other words, it significantly increases not only business survival rate, but also a company’s ability to thrive. McKinsey recently found that when retailers harness the power of big data analytics, their operating margins see an optimization of roughly 60%.
Dmitri is a former J.P. Morgan investment banker and hedge fund analyst who used data to improve investment outcomes. Dmitri is passionate about democratizing data science methods and bringing the tools of data-driven decision-making to people who want to improve the quality of their decisions, careers, and lives.