There can be no doubt that good data plays a prominent role in making sound business decisions. The question is, “How significant a role does it play?” It’s hard to understate how critical good data is for moving your business forward.
However, let’s pause and first define good data. When we talk about good or high-quality data, we mean information that is reliable and relevant to your business performance; it’s complete and consistent.
What Is Data-Driven Decision Making?
Data-driven decision-making (DDDM, for shorthand) is precisely what it sounds like. It’s using good data to shape your business. It involves making decisions based on the information you’ve collected; it can come from many sources. Data can confirm your choices and direct you toward new ones.
When your business implements the use of data for decision processes, it has clear goals in mind. The data is the key to why a DDDM business steers the company in a specific way. Think of data as the feedback from the company; the decisions you make are how you respond to that feedback.
Data can be incorporated in many ways. It can be reactive (looking at your business’s past) or proactive (making predictions based on what the data indicates).
Data-driven decision-making is only as good as your data. This is why you need to ensure that the data you are working with is high-quality.
The Importance Of Data-Driven Decision-Making In Business
You use data-driven decision-making in your personal life all the time, and you probably don’t even realize it. For example, if you research product reviews before you make a purchase, that’s DDDM!
Data-driven decision-making gives you something concrete you can point to when planning your next business steps. And it helps you do it quickly; you don’t need to wait months to see long-term results. And the numbers don’t lie: according to one survey, businesses that rely on DDDM indicate improvements in their decision-making at a three times higher rate than those that aren’t as data-driven.
There are many valuable reasons to implement more data into your decisions.
Innovate Your Business
Data is a resource waiting to be used, especially when you want to take your business in a new direction. Incorporating your company’s data means looking for areas it can improve, and continual improvement keeps your business on the cutting edge, keeping up with the competition.
Feel More Confident About Your Decisions
When concrete numbers are staring you in the face, it’s hard to argue against them. Instead, data backs you up, giving authority to your sound decisions. It confirms when you’ve made a good business choice, so you don’t need to go with just your gut feeling and cross your fingers for the best.
When you and your team feel confident in the company’s actions, everybody can focus entirely on moving forward instead of looking back and second-guessing every move.
Still, it’s reassuring to know that the company is dealing with fact-based decisions and not making them based on bias. The company’s decisions are easy to trace and understand.
Cut Business Costs
Wouldn’t every business like to decrease spending? That’s one significant reason that many companies employ data analytics. Over 49% of companies report seeing their expenses decrease once they start making data-driven decisions. As a result, they can target wasteful spending more efficiently, as well as areas that simply don’t pay off.
Creates Openings For New Business Ventures
When you dive into your data, you may find that it points you to untapped opportunities for your business.
If you see a hole in your data, it may be because it’s a chance to supplement your output with a new turn of your business, leading you to new areas of opportunity.
Or, you may find room in new markets that you’ve completely missed!
More Effective Communication
Having reliable data helps business leaders communicate more effectively with employees. There isn’t any confusion when the numbers are right in front of the whole team. They can explain your business clearly, avoiding any misunderstanding in your words. You have a shared language.
Reduces Risk Factors
No business is without its risks. It’s inherent in any company; the goal is to minimize them.
Reducing risk doesn’t completely eliminate the chance that something can go wrong, but it does make that window of possibility smaller. If there are fewer opportunities for bad events to happen in your business, you’re already ahead of the game – the statistics game.
Noticing trends in your business can be wildly helpful in preventing your company from failing terribly. For example, your company won’t take a dive on a product or service that isn’t useful or wanted. Instead, the data should indicate ahead of time that there’s no market for it.
You can avoid spending too much in certain areas, like supply, and focus only on what your business needs. Predictive analytics can also warn of potential disasters, increasing your ability to be proactive in your decision-making.
Business Becomes More Flexible
Sometimes a business can’t react quickly enough to the world around it. Once an event or a trend is happening in the real world, it requires a lot of work to pivot and suddenly begin something new. And the decision-makers may take too long to come up with a course of action, delayed by decision fatigue.
However, when your business has data analytics in place, you can react quickly and in real-time. This is partially because your data is consistently flowing in but also because you’ll have the confidence required to move forward.
As a business leader, you need to make decisions every single day for your organization. Some feel relatively easy, but other decisions can feel nearly impossible. These impossible decisions are often the ones where you simply don’t feel that you have enough good information to make an informed call. That’s where analytics comes in; it helps to narrow down your options, creating a pathway for your business to succeed.
How Do Data Analytics And Data Integrity Make Your Business More Effective?