Data-driven decision making became a hot topic when we entered the era of big data. Many businesses already use this approach to drive growth decisions.

Data is objective, unbiased information. Data-driven decision making is the process of studying large amounts of data, analyzing it to identify patterns, obtaining actionable insights, and using that insight to make business decisions. 

Intuition is subjective, and business decisions should be made based on objective information. Intuition is effective when you don’t have data or the time to think logically before making a decision. And even though you can develop intuition based on knowledge and experience (a type of data), it’s still risky to use it in business decision making.  

Experts almost unanimously agree that data-driven decision making is more reliable than intuition-based decision making. Cold, hard numbers are simply more dependable than intuition.

Experts suggest relying on data, not intuition

Experts almost unanimously agree that data-driven decision making is more reliable than intuition-based decision making. Cold, hard numbers are simply more dependable than intuition.

Nobel Prize laureate, Daniel Kahneman, says humans formed intuition as a tool to alert us to potential risks. It aids in our survival when we’re faced with fight or flight situations. However, Kahneman claims that using data to make decisions is critically important because it decreases our propensity to make poor ones.

Nevertheless, reliance on intuition is still widespread in business today. Let’s dig deeper to understand why.

Challenges in data-driven decision making

Businesses have the data at their fingertips, but how do they organize it in a logical way? Many still struggle to understand how data is used to make decisions.

Too much data for the human mind to analyze

There is so much data in the world today that it would take over 180 million years to download it. That poses a challenge for businesses because the human mind can’t analyze terabytes of data on its own. Gartner sums this challenge up perfectly, “Organizations have access to unprecedented volumes and variety of data, but deriving insights continues to be a struggle.” (1)

Struggling to effectively leverage data

A 2019 survey asked CEOs which factors impeded their ability to leverage data to make more informed decisions. Surprisingly, 54% cited a lack of data-driven skills and analytical talent. Additionally, 51% blamed data silos, and 50% pointed to unreliable data.(2)  

Rampant skepticism around data accessibility & reliability

Humans can’t process and analyze so much data manually, but technology can. Many successful companies comfortably rely on customer relationship management (CRM) software to crunch the numbers. 

Regrettably, many leaders either don’t trust their data or haven’t adopted the technology to analyze it. A recent Deloitte survey revealed that 67% of business decision makers aren’t comfortable basing decisions on data pulled from their current technology.(3)

What’s worse, another survey uncovered that 53% of senior executives feel they are too old to learn data analysis skills.(4) Yet, being an effective business leader increasingly requires data analysis skills. This is forcing a shift in thinking about data, all the way from the C-suite down to entry-level employees. 

Considering the statistics above, how can businesses successfully transition to leveraging a data-driven approach to decision making?

How to become a data-driven company

Given the importance of data-based decision making, businesses must first understand the benefits involved. Then they must learn how data is used to make decisions and implement measures to begin a company-wide transformation.

Lead the way

When CEOs champion data-driven business cultures, performance results and revenue increase. The Deloitte survey illustrates that when CEOs lead the charge, businesses are 77% more likely to significantly exceed business goals. Plus, they are 59% more likely to gain new insights from the metrics they track and to use data analysis to drive business decisions. (5)

Create a company culture that supports data-driven analytics

Only 13% of businesses claim to have the proper culture, technology, and skills to support data-driven decision-making.(6) That doesn’t mean it’s impossible.

Identify “data champions” who can lead change across your entire organization. You can also hire a chief data officer to work closely with the C-suite on designing and implementing initiatives that foster a data-driven culture.

Gaining buy-in from your sales director is crucial. This will also create a trickle-down effect across the entire sales organization. The majority of data that decision makers want to see comes from sales. If the sales director enforces consistent data management, her team will be more likely to fall in line.

Use the right technology

Many (perhaps most) companies today use CRM software to capture and analyze decision data. CRM technology has evolved and businesses can now leverage unified CRMs that include tools to measure sales and marketing performance.

This delivers three key benefits. First, when all your data is stored in the same system, decision makers find it much easier to rely on the data and analysis these systems produce. Second, when you have all those functions in one system, you reduce software costs while giving everyone in your company access to decision-making data. Third, all your teams are better aligned with one centralized source of truth on customer data. Without the right technology, creating a data-driven business culture is exponentially more difficult. 

Look to younger generations for support

Younger employees are more comfortable with data than “analog” generations. It makes complete sense—they grew up in the digital era. We should turn to younger decision makers for support in championing the transition to a data-driven business culture.

Plus, younger generations are more willing to embrace change. In fact, 76% of executives in their 30s or younger look for opportunities to leverage new technology to achieve business goals. Plus, 67% of them see risk as opportunity, not danger. (7)

In the coming years, we can expect to see more young people in decision-making roles. They will employ more technology—like CRMs—to capture and analyze data for decision making. Why? Because they more clearly recognize the vast array of benefits gained from CRMs and data analysis technology.

What does the future hold?

Increasingly more businesses are adopting a data-driven approach to decision making. But it may be a few years before this trend starts to dominate business. We still see laggards across industries despite the data that indicates businesses grow faster and outperform their peers when they leverage data to drive decision-making. As competition increases in the digital economy, using data insights won’t be a matter of preference, but rather of necessity. 

 

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Sources:

  1. “Tie Your Data and Analytics Initiatives to Stakeholders and Their Business Goals,” Gartner, 2020
  2. “22nd Annual Global CEO Survey,” PricewaterhouseCoopers, 2019
  3. “Analytics and AI-driven enterprises thrive in the Age of With,” Deloitte, 2019
  4. “The State of Dark Data,” Splunk, 2019
  5. “Analytics and AI-driven enterprises thrive in the Age of With,” Deloitte, 2019
  6. “Data-Driven Mindset Report,” Mention, 2019
  7. “How Younger Generations are Reshaping the Future Workforce,” Inavero, 2019