Data-based decision making involves making organizational decisions by leveraging actual and verified data rather than observation, intuition or experience. Decision making is a fundamental element in running small and medium-sized businesses (SMBS). In order to make informed decisions, businesses must use hard data to make their decisions instead of relying on gut instincts.
What is data-based decision making? Fundamentally, data-based decision making means collecting data based on KPIs and using it to analyze trends and derive key insights for purposes of developing strategies that will propel a business to the next level. With the ever-changing business landscape, strategic decision making based on actual data is now more important than ever. Every goal-oriented business understands that without actual data, bias and inaccurate assumptions can lead to poor decision making. Actual and verified data can help a business to improve customer satisfaction, cut costs and remain competitive in the crowded business environment.
How data-based decision making helps the bottom line? Data driven decisions save money and help generate revenue. By leveraging accurate data, businesses can identify ways to cut down operational costs and increase their revenue. For instance, a retail store can quickly identify the time of the year when they get more customers and the customer segment that spends the highest amount of money in their store. Data driven decisions create a culture of innovation. Innovation is absolutely essential in today’s fast-paced and competitive business environment. Without data, it would be nearly impossible for businesses to innovate better products and solutions for customers. Using data, businesses can identify products or services that are not doing very well in the market and make the necessary adjustments to attract more customers. Implementing a data-driven decision-making process helps businesses to scale their operations and achieve consistent growth.
How can you make data-driven decisions? Here are the four steps that can help businesses make data-driven decisions. 1) Define objectives The first step towards data-driven decision making is knowing what you want to achieve with the data. Do you want to improve customer satisfaction and retain existing customers? Or do you want to reduce operational costs? Having answers to such questions can help you focus your attention on data that really matter to your organization and weed out all the irrelevant data. Having clear business objectives will help inform the kind of strategy you’ll build around those objectives. 2) Gather relevant data Collect relevant data from both external and internal sources, so you can have a broader perspective of what is going on in your business. Unlike in the past, when businesses would struggle to acquire relevant data, improved technology has made it easier to cut through the irrelevant data and identify the right data sources.
When collecting data for purposes of decision making, be sure to check and verify data sources and rely on different sources instead of one source. 3. Analyze and understand the data Once you’ve collected the data, you’ll need to analyze it and derive useful insights that will inform strategic decision making. For purposes of effective data analysis, you’ll have to make use of integrated systems and leverage data analysts of different skill levels. The analysis of simple data requires no more than a working knowledge of excel, while complex data must be handled by specialized analysts. 4. Use technology to visualize There are multiple data visualization tools that can help businesses turn insights into action. Platforms such as Tableau provide tools that allow businesses to present data in a way that is more relatable and digestible for decision-makers. Effective data visualization helps decision-makers to see what actions need to be taken and how they can improve business performance.