Data is important in decision making process, and that is the new golden rule in the business world. Businesses are always trying to find the balance of cutting costs while people able to improve their efficiency and productivity.
The secret weapon that businesses have to more successfully walk the path of reduced costs and increased productivity is through data and analytics.
Reading on, you can learn about the top trends in data and analytics in decision making as well as some of the best benefits of taking advantage of data and analytics to improve decision making at your company.
Nowadays, people are realizing the importance of data in making their day-to-day decisions, and thanks to the ever-growing pool of internet users, we have more abundance of data than ever before, helping decision-makers in more ways than they could imagine.
As a matter of fact, a recent survey by Mckinsey Global Institute has shown that data-driven organizations are 23 times more likely to get customers when compared to the ones still following the old ways. Certainly not a number you can ignore.
Here’s a list of 13 Reasons Why Data is Important for Decision Making
- Enables More Confident Decisions
- Reduces the Amount of Risk
- Helps with Saving Costs
- Fosters Fact-based Decisions over Assumption-based
- Increases Proactivity in Decisions
- Decrease the Bias in Decisions
- Strategic Decisions become Common practice
- Makes it easier to look back measure and Evaluate
- Agile and Flexible Decision making becomes possible
- It gives Control
- Stats and Trends Don’t Lie
- Opens a path to Analytics and better Future Decisions
- It makes decision making More transparent and objective
So, if you’re an aspiring entrepreneur or you often find yourself in places where you have to make important decisions affecting many around you, don’t forget to go through this article. I’ll be dropping 13 important reasons why the role of data in decision making can never be ignored.
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The Importance of using Data to Inform Business Decisions
The numbers don’t lie when it comes to just how important data in decision making is for businesses. In fact, according to PwC businesses that are driven by data and analytics for their decision-making within their organizations are 3 times more likely to have significant improvement in decision making when compared to those who don’t rely on data.[i]
John Ewert, CFO at Nvoicepay, discussed this topic in great depth with Forbes. He noted that utilizing advancing technology in various aspects of your business can add a lot of value to your business.
This is especially true when it comes to improving your organization’s ability to improve efficiency and the process for decision making. Using data and turning it into valuable information can be an essential part of the decision-making process.
You will make the most productive decisions and can give you the pros and cons to consider for more complicated decisions. Technology offers better data and analytics, which can significantly improve your business.[ii]
What does all of this mean for you? In short, data and analytics helps your business make smarter decisions. Using these tools, you can get the leg up on any competition that isn’t using data and analytics to drive their decision making. Every advantage help and this could be your secret tool against your competition.
13 Reasons Why Data is Important in Decision Making
- Enables More Confident Decisions
Data is logical and intuitive. Once you start backing up your decisions with the relative data involved, you will never feel double-minded about your next steps. The confusion will be wiped away altogether and since data doesn’t present you vague logics, you’ll know whatever it’s suggesting has to be true.
This confidence not only lets you steer your organization in the right way but also helps you implement your strategies in a better way since your self-confidence goes sky high. As sometimes, you might keep wondering for a long time after taking a decision that if it was the right step or not, which significantly affects your productivity.
Therefore, it’s always a great move to stop relying upon assumptions altogether and take what data has to offer. Trust me, once you get used to it, you’ll never settle without it.
2. Reduces the Amount of Risk
When you’re making decisions using your experience and intuition, things don’t necessarily end up in a risk-free manner. Not that your natural decisions are always risky, but when we compare them to the data-driven ones, it simply doesn’t match the accuracy.
Using the relevant data not only lets you access all the risks associated with taking a specific decision, but it also helps you find ways to avoid it. For example, if your data points you towards a certain risk to the organization upon taking a particular decision, you can not only avoid making that decision but also improvise and guard against those risks in your new decision.
In fact, risk evaluation is a fully developed field that is helping businesses grow by helping them fall into traps that may not seem obvious to the stakeholders or even the business analysts at first.
3. Helps with Saving Costs
Many times, people do not realize the cost-efficiency of their decisions. They see their organization taking benefit from it, and they think it’s all that matters in the end, even if there were better ways that could have saved them more money.
Now, when you introduce data into the equation, things change. Studying the data makes you realize there were actually even more cost-efficient ways of achieving something. So, data-driven decisions are not only outcome-based, but they take you there in the most efficient way possible.
4. Fosters Fact-based Decisions over Assumption-based
Intuition isn’t always right. Even though you might have a knack for intuitive decisions and it often ends up well too, it doesn’t necessarily always turn out to be right. On the other hand, data is consistent and if the data is qualitatively good, you’ll get the results you want at the end of the day.
While you are always subconsciously using assumptions in your intuitive decisions, whether you know it or not, it’s never the case with data-driven decisions. The concept of assumptions doesn’t even exist when we’re dealing with data and it’s totally driven by facts.
Needless to say, facts always outrank assumptions. Decisions that are based on actual facts and figures will always get you the best end results.
5. Increases Proactivity in Decisions
Taking decisions based on data often reveals opportunities to you which you couldn’t have discovered otherwise. Analyzing a set of data will often point towards a certain direction and sometimes, you will find that direction as a hidden opportunity.
However, there are some conditions for this. First, your data must be relevant. Second, you must be paying attention to all sorts of details while doing the analytical part. The data won’t speak to you, you’ll have to listen to it, and react accordingly.
If you follow this, I’m sure you’ll find a lot of hidden business opportunities in the form of trends, getting you a step ahead of your competitors. This is precisely the reason why data-driven organizations capture a huge part of the market when compared to the conventional ones.
Don’t get me wrong, one could also pick trends up with his intuition, however, it’s much more likely to miss them as a human mind cannot capture as tiny details as a computer could.
6. Decrease the Bias in Decisions
While a person can not help being bias at times, data doesn’t have any close relations or personal ambitions to look out for. No matter how neutral a person is, he or she will undoubtedly be more inclined towards certain people or policies at one time or another.
This comes off as extremely unfruitful for the organization as a whole. You might not be able to see it but eventually, a biased decision will never produce the results you’re looking for. Fortunately, this can be completely wiped off by using the data-driven approach.
Just make sure that the data you’re feeding to your system is not biased in itself. Otherwise, it will be more or less the same thing.
7. Strategic Decisions become Common practice
When you’re using data to back your decisions, you will always be very efficient in your approaches. Taking the help of data lets you direct the resources where they are actually needed. You will realize the areas where the resources are needed and direct them from other areas where there are plenty of them.
As an example, if there’s a shortage of computers at a certain office, the data will help you figure this out and fill this in by directing you to the offices where there might be unused computers and hence fulfill the need of the office facing the shortage. This way, nothing stays isolated, and the efficiency of your organization, as a whole, increases.
Now, this might sound like something you can achieve manually as well, but trust me, when you talk on big scales, such small things might not be very apparent.
8. Makes it easier to look back measure and Evaluate
Being easy to evaluate is one of the best things about data-driven decisions. Unlike the conventional decision-making process where you must make a certain decision first before evaluating how it played out, data-driven decisions can be evaluated before they’re implemented.
There are certain metrics that are directly affected upon taking decisions and those metrics are the mathematical values that can be calculated beforehand.
In easy terms, this essentially means that you can foresee in advance how the decision is going to affect your organization as a whole. So, in case the decision was not going well in the long run, you can avoid it before even implementing it; great, isn’t it?
9. Agile and Flexible Decision making becomes possible
With the changing trends, it’s important for a company to re-route their policies and stay up to date with the latest changes in the customer market. This is the only way they could stay in the competition. Otherwise, it won’t be long before a competitor crushes them.
Luckily, there’s nothing better than letting data catch these ever-changing trends and since it’s quite easy to spot changing trends with the tools I mentioned before, you will find your business much more reactive to the changing customer needs and hence take decisions according to it.
10. It gives Control
Even though this might sound a bit surprising, following the approach of data-driven decisions gives you more control over where you want to take your business or organization. There are a couple of reasons why this is true.
First off, the data you’ve gathered to help you in taking decisions is objective. It is totally based upon evidence and the parameters can easily be calculated, letting you decide if the impact is as you initially wanted it or not. On the contrary, you can hardly see if your decisions will end up doing the tasks you actually wanted done or not.
11. Stats and Trends Don’t Lie
There are countless examples in the business industry which have shown how companies over the years have enlarged their customer bases by switching to data-driven decisions. The trends make it pretty obvious how beneficial data-driven decisions are for a company.
As a recent survey by BARC states, the companies which switched to using big-data in their operations, mainly in the decision-making process, saw an 8% increase in their profits as well as a jaw-dropping 10% reduction in their costs. So, you’re not only capturing more customers, but you’re realizing a lot of cost savings as well.
For example, Corel Software was one such company which needed to redesign their ad-campaign and used data for it. A lot of factors were noted about their customers, such as the number of times they visited the page before making a certain purchase, the links they used to get there, and so forth.
As they launched their campaign, there was a 106% revenue increase seen. Now that’s seriously impressive when you consider all it took for the revenue increase was using the data collected in the new marketing campaign. There are hundreds of other examples as well if you look for them.
12. Opens a path to Analytics and better Future Decisions
Since the evolution of Data Analytics, there are countless exceptional tools out there to help you perform analysis on any kind of dataset in the most effective and time-saving way. In contrast, analyzing factors without using data could take organizations ages! Also, not only would they waste their resources doing so, but it’ll cost them a lot of manpower as well.
13. It makes decision making More transparent and objective
As I previously mentioned, data-driven decisions follow an objective approach and the parameters they are relying upon are totally objective and hence the calculations become much easier and straightforward.
In essence, what this does is that it makes the decisions transparent to everyone in the organization. There are no ambiguities left to explain and nobody has to be made accountable for the irregularities, since there aren’t any.
For example, if your clothing store stopped stitching fabrics coming from a particular fabric store, and this way a data-driven decision, the numbers will make it perfectly transparent why the decision was taken. The data will have concrete evidence and whoever took the decision, doesn’t need to be answerable for it.
Latest Trends in Data and Analytics for Decision Making
Even small businesses can take advantage of data and analytics for decision making, thanks to some of these biggest trends in data. Here is a list of some of the most recent trends in this industry.
1. Better AI
AI approaches such as NLP (natural language processing) and machine learning are starting to emerge as essential approaches to data. These approaches offer crucial insights and predictions, especially when it comes to the supply chain industry. AI is learning to be more flexible, allowing them to handle some of the more complex needs of businesses today. AI can scale to whatever your business needs, allowing it to have a more significant impact in your business.
AI is quickly replacing BI, offering the real-time insights that businesses need and any update-to-date information on changes or developments that occur in a specific part of their business. AI also allows a lot of the analytics-driven decisions to be made without the need for human intervention at its most advanced levels.
2. Better Customer Service
The customer service industry is one that is absolutely being driven by the data and analytics it collects. Offering superior customer experience is a major factor in a business’ success over their competition. That’s why it makes sense for your organization to take advantage of these tools. For instance, personalization is an approach to data and analytics that allows the business to better deliver a targeted customer experience. This gives customers the custom-tailored experience that they are looking for when they are working with another business. Personalized experiences can make a huge difference in which company a customer decides to go with. This personalized experience can also extend towards the end users including your employees.
3. Decision Intelligence
Decision intelligence is an area that brings together a few different principles including decision support and decision management. It is estimated that 33% of large organizations will be looking at decision intelligence by 2023.[iii] Why is decision intelligence going to be so popular? It uses a framework that helps people to better fine tune their decision models and processes to focus on the outcomes and behavior of the business. This will be a highly effective approach to handling the more complex decision-making processes that an organization will have to use to succeed.
4. Augmented Data Management
Using techniques from both AI and ML, augmented data management can both optimize and improve the operations at your business. It also provides the added benefit of converting metadata used in auditing and reporting to other systems. Augmented data management can take a look at large samples of data from the operations, including performance data and schemas. It uses the existing usage and the workload data, allowing it to optimize and fine tune a lot of operations around the business. This also allows the business to increase the automation in management tasks related to data management.
5. Expanding Data Ecosystems
In the past, data environments were insular systems that are contained within the walls of the business. Now a business is able to act on the data-driven insights through a connected ecosystem of various partners and customers, offering data from inside and outside the walls of the business. This allows businesses to get the best grown and innovation from their data and analytics.
Blockchains can greatly benefit data and analytics by overcoming some of the challenges that frequently occur with them. One way is that it allows you to see the full range of assets and transactions. It also allows for better transparency in those complex networks.
These are just some of the trends to consider when it comes to data and analytics.
Most of the top companies are gradually shifting their conventional decision-making process to data-driven and are getting promising results. It’s high-time every business realizes the importance of using data while taking all their important decisions. Sooner or later, data-driven decisions are going to become the new normal.
However, a key factor is the quality of data and how you collect it. While we’ve already established how it’s beneficial, you certainly won’t get the promised results if you’re looking at the wrong, manipulated, or incomplete data.
Nevertheless, if you perform the collection and analysis part of the data appropriately, there are no limits to the heights you’ll achieve by taking informed and calculated decisions.
Your business needs to be able to make informed decisions that are going to improve your operations, making your organization more productive and efficient. Collecting and analyzing data is the most effective way to improve your business.
As the technology and science in this area of data and analytics become more advanced, the more valuable information your business can gather. The importance of data in decision making cannot be understated, making it an incredibly important role in your company.