What Is a Data-Driven Company?
One of your most important jobs as a leader is making decisions. This can be something as simple as approving this month’s marketing spend. The lasting effect that a new market has on your business or teams can be significant. It is important to make the best decision possible and to keep making good decisions.
In the past, leaders made tough decisions based on their intuition. This was before data was easily accessible, and people usually relied on their own experience and luck. Decisions based on emotion are often inaccurate and difficult to replicate. This often resulted in businesses being ruined by just one bad decision.
Although data and information are important, data science has given rise to a new era where they are valued above everything else. Many companies save data in the hopes of finding information that will help them do better than their competition.
An EY survey showed that 81% of interviewed companies saw the value in data for a successful business. However, most of them fall into a trap here. While having data is important, it is not enough. Organizations that know how to use their data properly have the advantage.
What does it mean to make business decisions based on data? And how can you make sure your business is using data to its full potential?
Being data-driven means making decisions based on data. You should make sure that data is treated as a strategic asset in your business so that you can use it to make informed decisions.
This means that your teams can take all the relevant factors into account when making a decision. The most important thing is that they can keep doing this over and over, resulting in even more positive outcomes.
Now that we know what data-driven organizations are, let’s explore some of the characteristics they have in common.
Characteristics of a Data-Driven Organization
Without a doubt, all companies use data to some extent. You probably have a lot of customer information and regular sales or usage reports. The average person only uses a small portion of the features available on their phone, with up to 73% going unused, according to a Forrester report.
And this is what sets data-led companies apart. They consider data a key resource and take steps to ensure that all employees are able to access and use it. Following are some characteristics that ensure this:
Leaders Championing the Data-Driven Approach
People who are in charge of companies that use data to make decisions understand that it is important for them to set a good example. It is the responsibility of leaders to show how they use data in their decision-making process and view it as a valuable asset.
It’s important to note that being data-driven doesn’t just mean focusing on metrics or key performance indicators. A researcher’s mindset is an asset, as is the willingness to analyze the data and identify insights that may not be immediately apparent.
This means that leaders who are running organizations that rely heavily on data are usually very curious and willing to question what is seen as the norm. Companies that are willing to take risks and innovate with data and AI will be the ones to shape their respective markets, instead of being disrupted by new competitors.
In summary, how you deal with data will also affect how your teams perform. If you want to create a data-driven culture in your company, it’s important to lead by example. But more on that in the next section.
A Strong Data-Driven Culture
The culture of your company has an impact on every aspect of your business, from the employee benefits you offer and how your teams communicate, to how they approach and solve problems. Data-driven organizations often have a culture in which data is used to make decisions.
A culture where data drives decisions helps leaders to see data as a valuable asset to their organization as a whole. This allows teams to see the value in data and how it can be used to improve their work.
Leaders can help their employees to understand the business better and their role in its success by building a data-driven culture.
Data Is Democratized across the Company
A company that is data-driven has information that is accessible to everyone who needs it immediately. If everyone has access to the data they need, decisions can be made quickly, which helps the business to be agile.
The ability for everyone in an organization to access data helps to avoid data being isolated in different departments and verifies that there is one accurate version of the data. This doesn’t mean that data should be centralized or that there needs to be someone who approves everything centrally.
If centralization goes too far, organizations will have a complicated approval process that is often a huge waste of time and energy. Data-lead companies avoid this problem by focusing on self-service systems.
High Level of Data Literacy
The ability of a team to interpret data and draw conclusions that can be implemented is known as data literacy. Companies that rely on data to make decisions place a high importance on digital literacy.
organizations have company-wide programs to help employees improve their skills in this area. Gartner reported that 80% of businesses in 2020 were actively working on improving their teams’ data literacy skills.
If teams are able to data literacy, they will be able to make better decisions more quickly. However, that is not the only benefit. This also reduces the amount of work for IT as they don’t have to deal with small data requests or issues every day. They can focus on strategic activities and lower IT costs.
Automated Processes around Data
Data-driven organizations understand that just having insights isn’t enough to stay ahead of the competition. They want the data insights to become part of the business process so that automating the data management will be less of a burden.
You may wonder why automation is so important. Generating intelligence reports and dashboards manually takes a lot of time. A study conducted by the MIT Sloan School of Management suggests that 50% of employees’ time is spent on monotonous data-related tasks.
Automating business processes can help data-driven companies save money and respond more quickly to changes in the market.
Improve the processes behind making those data-driven business decisions that matter
Your company’s culture really needs to be reflective of being data-driven.You can say it. You can think about it. But, the actions behind the thought are most important. Leaders must use data to analyze and guide new decisions on strategies.
Data-driven leaders should think about how their organization is structured and staffed in order to create a data-driven environment. The three teams mentioned are essential for a business to be data-driven.
The key point to take away from this is that leaders need to back up any conversations about data strategy with actual commitments.
As a data-driven leader, think about a couple of critical points:
#1: Start with a question and define what problem you are trying to solve
You need to know what data strategy or vision you want to achieve. In order to be successful, you need to have a clear idea of what that success looks like to you. Your question has to have your customer in mind.
#2: Start simple and stay focused on the part that is important
Think workshop and not full-scale factory. In a world full of data, it is easy to get overwhelmed and lost. So that you can move quickly, learn to recognize the metrics that are important, and validate your data quality.
#3: Use the tools that are available to you
There is no need to start from scratch when you are in a leadership position. There are many analytical toolsalready available. Think about speed. To get the most out of your data, you need to be processing it in the right way.
#4: Take action with impact in mind
Once you find the insights, act on it. You can always try something different if your current plan isn’t working. You will only be successful if you can show that your ideas create value for your organization.
One key point to take away from this text is the importance of being process-oriented. However, it is also important to give teams and leaders the time to be curious and analyze data. You might end up finding something you weren’t even looking for!
The benefits of data are clear—you can make more informed decisions, be more proactive, and save money. You need to be good at accounting for the disadvantages and planning for them.
Data Quality
Data quality is one such disadvantage. One of the reasons why a company might have low data quality is because its employees have to enter data manually. In order to create efficient data processes, you must take into account all aspects of the process. Then step out of the way and focus your attention on more strategic and creative tasks By introducing automation, bots, and AI to do all the functional and tactical work, you can then step out of the way and focus your attention on more strategic and creative tasks.
Misinterpretation of Data
I want to mention that the misinterpretation of data can cause people to blindly trust it. Data is a tool that can help you make decisions, but it won’t provide all the answers you’re seeking. You need to combine the data you are getting with the knowledge of your subject matter experts as well as what is already known. This combination of knowledge and experience will help you to better understand how to handle the problems you are facing.
Key Takeaway: Make sure your data is clean. Don’t have blind faith in it.
Shift the focus to an overall data strategy instead of isolated data roles
When thinking about how to store your data, you should also consider the foundation and infrastructure that would support it. Just about everything in life requires a foundation in order to be successful. Information is critical for businesses in order to have a data-driven approach to enterprise. Having a group dedicated to data within the company is essential to success. This team manages your data, ensuring its quality and making it usable by transforming it as needed.
If data scientists do not have a strong foundation, they will not be able to reach any useful conclusions from the data.
Ensure that you’re making those data-driven decisions that are free from bias
The data has to be properly interpreted in order for analytics to be effective. Cognitive bias is choosing data that specifically supports a belief or theory and also choosing to ignore data that contradicts it. Be careful of cases where you could introduce a lot of bias.
Do not assume that your trends are always connected. You need to be very skeptical. The way you have approached things and understood them in the past does not necessarily mean that this is how things will be in the future. You should always be willing to validate your assumptions to ensure that they are correct. You can use your data to get a clear idea of where you’re going.
Core capabilities that organizations need to establish or develop:
The most important aspect of being a data-driven organization is having a senior leader who is committed to that goal. A leader who relies on data to make decisions is necessary for an organization to be successful.
Data can be seen as a product, which can be beneficial in the long term.
It is important to ensure that your data is flowing through the correct channels and that it is being captured correctly.
A symbiotic relationship between data and analysts is key to advancement. They need to be a group that enables each other and drives further advancements.
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