Every single business is well-aware of the consequences of making the wrong decisions; however, these mistakes waste resources and time and sometimes even impose irreparable costs on the entity. Repeatedly, these mistakes are due to not having an appropriate prospect of the status of ongoing processes in the organization. Wrong advertising decisions, for example, are one of the hugest wastes of resources in any organization.

To resolve the matter, thanks to the data that shows you the status of different marketing channels, you would be able to identify the channel that benefits from the highest rate of return on investment, or investigate the reason for the inadequate performance of other channels and accordingly, plan to improve.  This approach shall help you out to make more profit without increasing the cost of advertising. However, data-driven decision-making does not limit to advertising strategies but also helps you to better understand and improve processes in all scopes related to the business to achieve higher revenues by reducing money and time wasted.

What is Data-driven Decision Making?

The essence of business decision making would break up into two groups:

  1. Experience, understanding, knowing, and educating the individual
  2. Case or field study of specific information called “Data-Driven Decision Making”.

In straightforward and basic terms, however, it is a decision-making process based on data. In the process, information is the decision-maker, rather than the straight or implicit experience and knowledge of individuals. Data-centric does not mean that all personal perceptions and experiences are unnecessary; rather, every business founder can use data-driven information to improve decisions, in addition to their tacit and educational knowledge.

Why does “data-driven decision-making” important in business management?

In the digital age, data is constantly being produced and increased, and enormous decisions must be made based on the data. There are countless benefits to using the data, including:

  • Make organizations create new opportunities;
  • Will generate more revenue;
  • Make trends predictable;
  • Will optimize current operations and generate measurable insights;
  • Can be adapted to any situation.

To determine the importance of data-driven decision-making, it should note that digital business surveys have shown that firms with data-driven decision-making are at least %4 and %6 more productive and profitable, respectively.

Data-driven, opportunity or necessity?

In latest years, the development of business intelligence software has made it possible for even users with no technical expertise to analyze the data. However, analyzing data and accordingly, making decisions create new opportunities for businesses: giving them practical insight, assistances anticipating future trends, and ultimately leading to a significant increase in business revenue by optimizing the performance.

Bearing this in mind, there is no room for ambiguity that in today’s competitive market the data-driven business turns out to be a necessity.

Principles of data-driven management

The key to success in data-driven management lies in five factors: proper problem recognition, measurement, analysis, improvement, and control. Nevertheless, it is important to note that the importance of data lies in consistency and reproducibility. Therefore, the five factors should be constantly iterated in an interconnected cycle. To reach this goal, remember 10 basic steps:

  1. Avoid prejudice; do not let your instincts or previous experiences influence the interpretation of the results.
  2. Define goals; determine the key performance indicators to determine where you have started data analysis.
  3. Gather relevant information; inadequate and irrelevant data leads to erroneous conclusions.
  4. Find unanswered questions; what are the questions and needs of your business right now? It is best to prioritize the questions.
  5. Find the data needed to solve the questions; examine what data might answer your questions?
  6. Analyze; search for the answers to your questions by analyzing the selected data in step 5.
  7. Do not be frightened to review and re-evaluate; often, by challenging the results of your analysis, you would realize more reliable results.
  8. Present the results meaningfully; the results of data analysis are only prized if they are understandable.
  9. Specify measurement criteria for evaluation; you would only determine the success or failure of your effort if you have a standard to measure it.
  10. Finally, continue to evolve your data-driven business decisions.

Successful illustrations of data-driven decisions

With a little inquiry into diverse sources, you will come across countless instances; however, here we will suffice with only three.

  1. Google

Do managers play a role in the success or failure of startups? This is a question that Google employees started to answer in a completely data-driven way. At first, qualitative data were obtained from a survey of employees, which showed that all managers are up to an acceptable optimal level. Nevertheless, by collecting quantitative data and using different statistical models, they were able to categorize the managers into different clusters. The results showed that better managers provided more revenue for Google and happier employees. The next question was what characteristics make a person a good manager?

The results of the study led to the formation of the Google Oxygen Project in 2008, which began by exploring data from executives’ performance appraisals, guidelines, and other resources to cultivate better managers.

  1. Walmart

In 2004, Walmart launched a study that looked at goods that people were more likely to consume and store during storms.  In other words, by anticipating what was going to happen, he wanted to prepare himself to deal with it and make more profit, instead of waiting for it to happen. However, you may also be interested to know that strawberries, tarts, and beer topped the list. The decisions made based on the results of the research resulted in significant profits.

  1. Southwest Airlines

One of the industries that are always dependent on data is the aviation industry.  One fruitful example is Southwest Airlines, which used data analysis to secure a profound understanding of its customers’ demands and to create new, more popular services in addition to offering the best rates for its services. However, the result of the success of these measures for the brand is a significant increase in customer loyalty rates at the end of each year.

How to have data-driven insight?

I believe you would agree with us now that the importance and impact of data-driven business success cannot be overlooked. However, if you are also concerned about how to strengthen your vision-driven scope, then follow these trio tips:

  1. Look for patterns everywhere; attempt to discover the factors influencing different events and how they linked to each other.
  2. Link each decision to the data; make well-versed decisions based on analytical rather than instinctive judgment.
  3. Realize the meaning behind the data; “any story data has to be told”, so do not miss these stories.