The 5 Steps of Data-Driven Decision Making For Businesses
As the ability to gather information and organize it in meaningful ways becomes more and more possible in our technology-driven world, it’s increasingly important that businesses harness the power of data-driven decision making. Staying at the cutting edge of data analysis, reporting, and consumer insights can empower companies to stay competitive and meet customer needs.
Take BOLD, a job agency that connects people with companies. BOLD implemented business intelligence software to help their company better leverage data-driven decision making. The results were fast and substantial — a development time 60 times quicker than it was previously, a decrease in work time from one week to 30 minutes, and a huge drop in the company’s chargeback rate which saves the company $30 per prevented chargeback.
Another example is Sysco, who wanted to help their customers help themselves. The COVID-19 pandemic had further emphasized the need for their customers to be able to identify and fulfill their inventory needs rather than counting on a sales representative to help them place their orders. The company began to use a data visualization tool to produce a dashboard that brought the various tracking systems the company had been using under one roof.
That way, sales representatives were equipped with needed information.
“This helped us promote the self-service model,” explains Megan Oertel, director product analytics at Sysco LABS, “because we could see by account or by geographic area where our e-commerce platform was being used, which customers were engaging with it, and where they needed help from the reps.”
“Our digital transformation has focused on analytics that ultimately produce a better experience for our customers,” says Oertel. The numbers agree. Those data visualizations weren’t just a neat new tool that the sales representatives occasionally scanned. Instead, they were a transformative agent for the company — driving a 46% increase in customer-placed orders.
While BOLD and Syscos' results are impressive, they are just two examples of organizations using data to make smarter decisions and automate processes, saving both time and money. Every company, and every leader, can take a step toward data-driven decision making for business. WIth the right approach, goals, and tools in hand, organizations can leverage data analytics to increase their efficiency, sustainability, and profitability in the marketplace.
The 5 steps of data-driven decision making
Data-driven decision making can lead to transformative changes within companies. Profits increase, inefficiencies decrease, and companies better connect with their target customers. There are five steps company leaders can take to build data-driven decision making into their standard business operations:
- Determine your business objectives: choose a specific, measurable goal that is in line with your company’s overall values and mission.
- Gather relevant data: ask precise questions that will lead you to the most pertinent information.
- Visualize and analyze your data: invest in tools that can provide visualizations and dashboards for both internal and external stakeholders.
- Develop and implement a strategy: establish a focused strategy based on key insights.
- Ask the right questions of your data-driven decision: analyze results and measure success.
By following these steps, company leaders can guide their teams in making decisions that are best for everyone. Harnessing data and bringing it into conversation with professional intuition, institutional knowledge, and creative thinking can lead to innovation and transformation. The first step toward that bright future? Working to find a clear, important, and measurable goal.
1. Determine Your Business Objectives
Experts agree — there’s no better place to start making data-driven decisions than at the crossroads of ideas and priorities. By asking your team which ideas are most important to pursue, and aligning them with company values, you can establish clear objectives that are prioritized in ways that fit with the overall goals and culture of the company.
Here are a few examples of what it may look like to determine clear, graspable business objectives:
- Tableau, a data analytics platform, emphasizes the need to establish a common understanding of your company’s overall goals. Then drill down from there into the specific goals that you want to prioritize first.
- Rather than focusing on promoting all products your company sells, focus on one product instead. For example, as software delivery management solution Plutora recommends, a clear objective might be “increasing sales for Product Y by 50 percent using online advertising.”
- If you want to increase more subscriptions for your company’s mailing list, you may be initially drawn to a broad brush approach that thinks of the entire marketplace as your target subscriber. But, as CRM company SuperOffice recommends, honing in on a specific target audience or demographic segment is much more likely to be successful.
When it comes to best practices for setting business objectives, workflow solution company Asana recommends using a framework such as SMART goals or OKRs. They also emphasize the importance of working with key stakeholders, like team leaders of other departments, so that your objectives align with whole-company values. In fact, Forbes goes so far as to recommend whole-company input on objectives. Exactly who is in the room may vary based on the company or focus, but in any case, business objectives should be established by a diverse team of stakeholders.
2. Gather Relevant Data
There are many ways that companies can gather the data that will help them make strong, data-driven decisions. As SuperOffice says, the key word is “relevant” when it comes to gathering data. Be precise about the data you’re seeking and only ask questions that will produce data that relates to the specific question you’re trying to answer.
Possibilities for gathering relevant data include:
- Soliciting customer feedback: surveys, social listening tools, business intelligence platforms, CRM software, website analytics
- Gathering sales analytics: profit margins, return on capital, benchmarking, competitor analysis, sales/contribution/profit per employee
- Measuring marketing performance: website analytics, inbound links, social media analytics, referrals, campaign ROI, overall ROI
These are just some of the ways that companies can gather data that will help them make better decisions, which emphasizes the need to gather only the data that’s relevant to the question you are asking. You may need to mix and match your data sources—perhaps a social listening tool, a competitor analysis, and insight into the ROI of a specific campaign will help you set your goal. Bring strategic, focused thinkers together to determine the best data and the ideal way to gather it based on the goal at hand.
3. Visualize and Analyze Your Data
Data is great, but on its own and without a system in which to view it, it’s hard to manage or learn from. That’s where visualization tools and intelligence come in and make all the difference. Tableau details a few examples of visual elements that can demystify data analysis and make it as useful as possible:
- Bar charts that allow for comparison
- Maps that display spatial data
- Line charts that share temporal data
- Scatter plots that compare two measures
Through tools like these and more, your company can identify patterns and trends that are relevant to the problem you are trying to solve or goal you are trying to achieve. Intelligence dashboards feature live, real-time data that key stakeholders can easily access, interpret, and act on. These dashboards may feature information relevant to sales performance, project management, executive insights, and much more.
4. Develop and Implement a Strategy
Now it’s time for gaining insights and planning how to implement and communicate them with others. Visualization tools and data analysis software can empower your team with compelling presentations and focused statistics that will make the problem, and the solution you envision, plain to key stakeholders, leadership, and colleagues.
It’s critical at this juncture to keep your clearly defined goals and objectives top of mind, and to build on those goals to create new goals that are based on the data you’ve uncovered. Be specific when it comes to the challenge at hand, the proposed solution, and the outcome you foresee. SuperOffice gives the following example of a good strategy, which shows how brief, specific, and concrete a great strategy should be: “Erik and Miriam will set up a points-based rewards program to increase customer retention rates within the next 2 months. This will improve customer loyalty and increase retention by 15%.”
5. Ask the Right Questions of Your Data-Driven Decision
Other ways to think of this final step include analyzing your results and measuring your success. Consider questions like:
- How did it all work out?
- Did the strategy you built based on the data lead to the outcome you desired?
- If so, how can you replicate the strategy when it comes to future problems?
- If not, where may the strategy have misstepped, and how can you better use data next time to increase your chances of reaching the outcome you desire?
Data-driven decision making isn’t exactly a formula — it’s a way of using tools to create change and increase positive outcomes. Mistakes will happen and the process won’t always go how you expect. But the beauty of relying on data analytics is that you always have a set of statistics, stories, and systems to come back to and you aren’t left with simply your intuition or prior experience. The numbers, and stories they tell, can support you as a leader.
Lead the future of business with data-driven decision making
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