4 Things You Need to Know to Benefit From Data-Driven Decisions
A recent report by the Economist Intelligence Unit (EIU), based on a survey of more than 500 senior executives, primarily C-level, indicates that companies making decisions based on data tended to do better financially.
To a certain extent, this sounds like a no-brainer: Companies making decisions on actual data do better than companies that make decisions based on gut feel? Wow! Who knew?
But increasingly, companies like Amazon and eBay are finding that the data about their customers is at least as valuable as anything else about them. “While companies will still sell product and software, it is the data and analysis that is going to add the extra value and this is what customers are going to be demanding moving forward,” writes the Smart Data Collective.
Here’s what the report, Fostering a Data-Driven Culture, found.
Data is for everyone. This is what some are calling “data democratization.” “Let us start with what a data-driven culture is not,” the EIU writes. “It is not a belief that data are an issue for someone else in the company, a job for a data specialist or perhaps the IT department. There is still a perception that a data specialist, perhaps a recent statistics graduate, should be parachuted in to an organisation to advise on how to work magic with data, much as a computer security expert would be called on to help shore up a company’s IT networks. This is ?awed thinking. IT security is indeed a job for experts, but data are everyone’s business.”
Like innovation — and from the same basis — data needs to be part of the company culture from the top down and the bottom up, not with specific Data People. And that includes the C suite as well, which might be hard for some executives — like Mad Men’s Don Draper, used to dealing on hunches and experience — to get used to. The other advantage of making data available to everyone is that it requires that the complex be simplified enough for everyone to understand it, the EIU writes.
The purpose of data is not to reinforce decisions already made. “[Forward-looking companies] are tolerant of questioning — even dissent — about business decisions being made, as long as the questioning is based on data and their analysis.” The problem with data is it doesn’t always give you the answer you expect. If you aren’t willing to accept that, and instead just cherry-pick the data that agrees with your point of view, then all the data in the world isn’t going to help.
Almost a third of respondents at companies that lead peers in data use say that employees across the organization should be applying data analysis techniques compared with 17% at companies that trail peers in data use, the survey found. ”In data-driven companies, leaders have to be open to counter-intuitive theories and unorthodox strategies — as long as these are backed up by data,” the EIU writes. “It is one consequence of empowering employees.”
Incidentally, a similar study by the Harvard Business Review found that data-driven companies not only made better decisions, but made them faster.
Collecting data is just part of it. “Data often exist in silos, for example, sometimes overseen by protective divisional heads,” the EIU writes. (Hmm, sounds like frogs in wells.) For one thing, people need training in how to use data — especially since hiring data specialists can be hard and expensive. Moreover, concerns about security and privacy often stymie data sharing. On the other hand, there’s not much use in collecting more and more data if you don’t let people see it.
Size doesn’t matter. People get hung up on the “big” thing for data, but even “small” data is useful. “There is little correlation between ?nancial performance and a company’s de?nition of “big data,” the number of datasets that a company uses, or the number of employees whose job responsibilities include analysing data,” the EIU writes.
Finally, the EIU writes, don’t expect the process to work overnight or without a few bumps along the way. The whole point of being data-driven is to try different things and test how they work. And that’s as much true for becoming data-driven as any other business process.