Managers need to make decisions every day, whether those decisions are about hiring employees, prioritizing certain products, expanding business operations, or something more mundane. Many managers trust their instincts in situations like these, but those decisions are not informed. These days, businesses have access to a wealth of data, data gathering methods, and analytics reports that help them make more objective decisions.
One excellent way to gather data is by using Lumiform’sdigital checklists that record and store observations about business processes, to help you optimize operations.
Start making data driven decisions with Lumiform today.
Relying on data driven decisions helps ensure that your choices have the biggest positive impact possible on your business. There are many ways to gather information about your business, your customers, your products, and anything else relevant to your success – information you can leverage to optimize decision making.
Table of contents
2.1. More efficiency
2.2. Increase revenue
2.3. Fewer risk
3.2. Source data
3.3. Organize your data
3.4. Draw conclusions
3.5. Act on your analysis
What is data driven decision making?
Data driven decision making is exactly what it sounds like. It’s the concept of using data collected from various sources to make choices about almost every strategic business decision. There are two halves to the process; first you gather business data, and then you translate that data into a course of action.
Data driven decisions are factual and (ideally) free of bias. Instead of being based on a gut feeling, decisions that come from business data analysis are backed by evidence and observations. The most useful data to have is real-time data, because it offers the most precision.
Common examples of data driven decisions include:
- How to increase sales and profits
- Developing a management strategy
- Optimizing operations
- Improving team collaboration and performance
Every manager or decision maker in a company, no matter which department they work in, can benefit from data driven decision making. Changing the way you work to be more data oriented is a cultural shift. It means encouraging your employee to collect information constantly and think critically about what this information means for the business.
What are the benefits of data driven decision making?
Data driven decision making benefits you, your employees, and your customers. Decisions that are taken objectively based on patterns of data take into account consumer preferences and behavior, meaning that they privilege things that the consumer wants. And data gathering in real time means your business will have the necessary information to make decisions more quickly.
Customers expect better and more personalized service now than they used to. This combined with the fact that more and more companies now rely on data gathering means that data driven decision making is not only beneficial, it’s necessary. The good news is you’ll enjoy several benefits.
Data gathering translates to faster decision making. It also translates to more accurate decision making, which means there is less chance of having to revise your course of action later. That saves you time and money.
That said, just because decisions are based on data doesn’t mean they are always correct. But a failed strategy with data behind it is still easier to analyze and learn from than one without data behind it.
Data driven decision making doesn’t just keep you from wasting money, it also brings in more money. With the right data, you can identify gaps in the market, customer needs that aren’t being met, and emerging trends before your competitors do.
Seizing these opportunities early helps you build your brand and attract new business.
Gathering as much data as possible improves your capacity for risk management. The better you understand your surrounding environment, the more information you have on the potential risks within it.
Data gathering also helps you anticipate market changes and their impact, so you can mitigate any potential losses. Real-time data is the most accurate way to predict the future viability of your business strategy.
Better customer service
One of the biggest perks of business data analysis is understanding your customers better. Recording every interaction you have with customers gives you information about their preferences that you can use to inform your product focus.
You can also use data to assess customer satisfaction. Find out what customers think of your service and your product so you know what you can improve.
Internal data gathering can help you make informed decisions about the way your company operates and complete tasks more efficiently. The more you know about common roadblocks and issues that your team faces, the better your strategies for resolving those issues.
How can you best implement data driven decision making?
Data driven decision making is a two-part process – first, you need to source your data, and then you need to know how the data translates into actionable decisions. The most important data for your business to gather relate to:
- Who: Who is your customer?
- What: What does your customer want or need?
- Where: Where can your target audience be reached or found?
- When: When are the strong and slow periods for your business?
- Why: Why do customers support you over competitors?
These are the questions that will yield vital business data you can use to make smart decisions about the future. Transforming information into data driven decisions is easier when you work in stages.
Understand your business goals
The first step in data driven decision making is to contextualize your data. In order to know how data driven decisions could help your business and what sort of data to gather, understand what your business wants to achieve.
These goals could be shorter or longer-term objectives, like increasing sales revenue, driving website traffic, or building brand awareness. It’s a good idea to look at existing yearly objectives (OKRs) and key performance metrics (KPIs) for insight into the reasons you’re gathering data.
The good news for anyone interested in data driven decision making is that there are a wealth of tools available for data gathering. When you’re looking to collect data about internal processes, the simplest solution is a universal reporting tool, which you can use to measure operations across your organization.
To collect data from external sources, such as general market trends or competitor analysis, use Microsoft Power BI or similar software. Finally, it’s important to ask people throughout your organization to share data that their departments have collected.
Organize your data
The sheer volume of data that companies collect can be overwhelming to sift through, which is why clearly presented summaries are important. Visualizations are key to enabling anyone, regardless of data analysis background, to draw conclusions based on observations.
One way to organize data is according to the goal it’s related to. Creating charts for each business KPI helps you see connections between your various goals. Understanding which factors are correlated helps direct your focus.
Now that your data is neatly organized, it’s time to analyze. This is where it’s helpful to have at least some competition data as well, so you have something to compare against. You’re looking for patterns, which are easier to base conclusions on than isolated observations.
Looking at your organization’s data alongside competitor data helps you identify which share of the market you both appeal to, where your strategies differ, and why differences in performance exist.
Act on your analysis
The final piece of data driven decision making is the deciding. Once you’ve identified a pattern or a significant correlation, share it with others in your business so you can start designing solutions. Use your observations to adjust or set new business goals.
It’s also important to remember that correlation does not imply causation and data driven decisions should always be revisited. Every action you take will lead to more data points that you can use to evaluate and refine prior decisions.
Data driven decision making is easy with a data gathering and analysis platform like Lumiform. The range of checklists and templates available empowers you to collect insights on internal processes, and advanced yet intuitive reporting software helps you identify patterns quickly.