Making better business decisions with a data-driven approach
Data-driven companies usually have a sustainable competitive advantage over those who aren’t.
Data is king. Everyone says so. But what does that actually mean on a day-to-day level within a company? Sure, you may be collecting data, but what are you actually doing with it? If you lost access to that data for a day, how significantly would your workflow be affected? If the answer is ‘not very much’, your team is not as data-driven as you think.
So what does it actually mean to be data-driven? At its core, it means acting based on objective data rather than on a gut feeling, or because ‘that’s the way things have always been done.’ In other words, looking at data - whether it’s customer activity, purchases, warehouse logistics etc. - in order to inform your business. This means that decision making is a lot more streamlined - it’s a lot easier to optimize based on what the data is telling you vs. trying something and hoping that a) you’ll see a difference, and b) that it’s a positive one.
Why it’s worth the effort to adopt data-driven practices
How exactly does this help you make better business decisions? First of all, it’s scaleable. By letting data tell you which direction to explore, you build up a cycle of continuous improvement across the entire business. By basing this on existing data, we already have an idea of what the outcome is likely to be - we verify the effort investment before committing resources.
Secondly, as mentioned before, it’s objective. Rather than making changes based upon a senior executive’s gut feel, or rushing to copy a competitor, letting data drive your decision-making is based upon the actions of your existing customers, or those who are interested in you. Data gives you evidence as to where the opportunities to improve your business lie.
Third, it’s agile. Building on the two points above, if we know which direction to explore, and minimize the input needed for verification, research, approval etc., we can move at a much quicker pace to optimize our flows and gather new data for future iterations.
Create a sustainable competitive advantage with data
Not sold yet? Companies that are data driven have a distinct competitive advantage over those who aren’t:
Not easily replicated. Building up a data culture and associated product lifecycle takes a lot of time and effort. It need to be embraced company-wide, from lower levels to upper management in order to truly deliver results.
More customer motivated. By their very nature, data-driven companies know their customers better - they have deeper insights into their behavior, motivators, and goals. This allows them to create a better product that delivers on customer expectations.
Quicker to market. Before wider market trends become apparent to everyone, data can give companies a head start on new opportunities so they can be first to market, becoming a market leader, rather than follower.
How can I adopt data-driven practices within my business?
Being data-driven is not a yes/no situation - it’s a sliding scale of how much impact data has in your business’ daily operations. Here are some starting questions that will help to inform your overall data strategy:
What are your KPIs?
It’s easy to try and track every single little piece of data, especially given all the hype around big data. But it’s easy to overwhelm yourself by getting caught up in the details, measuring so much that you never have a chance to utilize any of it. Instead, focus on the data points that will have the most impact on your business goals in the beginning. Things like customer churn rate, conversion rates by channel, or profit per product.
Where will you get the data?
Think about what data you already collect, whether manually or through third party platforms. If you already use Google Analytics on your website, there’s a wealth of user activity available there. If you have a CRM, what kind of customer data do you already have available? From here, you can already start to get an idea of what resources you have, and where you may have gaps.
What data points will you look at?
What specific questions are you looking to answer, and what are the numbers you need in order to do that? Think about where you’ll need to look for it (the source), but also the particular metrics you’ll need. For example, to calculate conversion rate, you’ll need the number of potential customers (e.g. users on a website/app) divided by the number of purchasers.
How will you collect and organize your data?
This is usually a question that comes once a business is more data-evolved, but it’s an important question to consider upfront, as it may influence your future strategy. Thinking about how all your data sources could feed into one central place (e.g. a DMP or Data Warehouse) for cross-referencing across different platforms. You’ll also want to consider who or which teams are responsible for maintaining this central system and its various feeds.
How will you analyze and report on the data?
Data is useless if it’s not in an understandable format. Raw data needs to be processed and visualized in a way that is easy to digest, so that its insights can be utilized by decision makers. Consider what data is needed by which team(s), and what format would be best for them. For example, for a high-level exec, a dashboard with an overview of the most business critical KPIs is the best choice. Whereas the Sales team would need detailed transactional data, broken down by product, time, brands, variants etc.
Good data takes time
Becoming data-driven doesn’t just happen overnight. As we can see from the considerations above, there are a lot of factors at play just in terms of gathering the data.
However, data is only as valuable as you make it. Even if a business has the best data collection strategy possible, it’s all for nothing if it’s not being used. We need to take action from the data, and that requires a cultural shift within the business. It’s not easy, but as teams start to look at reporting and consider how these tools can make their job easier and more efficient, change will come from within.
Getting upper management on-board is crucial, as a data-driven culture needs to come from the top if it’s to filter through to all areas of the business. Demonstrating value through quick wins is therefore critical to proving the value of data early on, so that teams see their efforts paying off and stick with the process.
It’s a long journey, but one that ultimately all businesses will need to undertake, or risk being left behind as their competition strides ahead.