Today’s successful companies increasingly rely on data-driven decision-making (DDDM) to improve myriad business outcomes. Data analysis informs decision-making across a business’ functional areas. Top decision-makers are responsible for effectively leveraging and analyzing data to optimize operations, systems and strategy. Thus, data literacy is becoming a necessity within modern business.
Reflecting this, the online Master of Business Administration (MBA) program at the University of Southern Indiana devotes a course to the in-depth study of DDDM. Degree candidates can deepen their understanding of DDDM through elective courses on the advanced use and applications of data and business analytics tools. Through developing DDDM expertise, decision-makers can help their businesses take advantage of the wealth of critical insight data can offer.
How Is Data-Driven Decision-Making Defined?
According to Tableau, DDDM is defined as “using facts, metrics, and data to guide strategic business decisions that align with your goals, objectives, and initiatives.” Drive Research simplifies the concept of DDDM as “a process that involves analyzing collected data, and drawing insights, to benefit a business or organization.”
As an important distinction, DDDM is not making decisions based on gut instinct. Instead, Technopedia explains, DDDM “involves making decisions that are backed up by hard data rather than making decisions that are intuitive or based on observation alone.”
Intuition is subjective, meaning that decisions based on intuition can be influenced by emotion, bias and other uncertain factors. On the other hand, DDDM is based on hard evidence, facts and informed projections, adding more rationality, accuracy and certainty to the decision-making process.
The basic concept of DDDM is not new. Successful business leaders have long analyzed information to make informed decisions. However, the evolution of big data and advancements in data analytics technologies have dramatically increased the impact DDDM can have on achieving desired business outcomes. As a result, DDDM in the modern era generally refers to using technologies to analyze data and provide insight to inform decision-making.
What Does Data-Driven Decision-Making Entail?
In and of itself, analysis of big data does not necessarily provide actionable insight. To make the most of data analytics, business users start by identifying why they are analyzing data, in other words, what questions they need answers for and what problems need to be solved. Next, leaders must align the purpose or desired outcome of analyzing data with specific goals and objectives.
These data analysis objectives determine what data they gather and from where, ensuring relevant and targeted data collection. Data analytics tools organize and analyze relevant information, identifying relationships and patterns between data.
Visualization, dashboarding and other methods and tools represent targeted data analysis in interactive, easily comprehendible ways. Such tools help business users understand the story data tells, providing insight into decision-making.
These data analytics processes form the foundation of DDDM. Still, it is up to the business user to use data-informed insight and critical thinking to make decisions that drive business success.
How Do Data-Driven Decision Makers Help Their Companies Succeed?
DDDM helps managers identify inefficiencies, optimize processes, solve complex business problems and create effective strategies. From supply chain and logistics to customer relations, marketing to research and development, DDDM can result in lower costs, higher sales, increased revenue and improved customer loyalty.
Plus, the power of modern analytics tools allows business users to query, analyze and learn from data in real-time. This efficacy helps managers respond rapidly to evolving conditions, improving organizational agility in disruptive times. Predictive and prescriptive analytics tools further help managers accurately anticipate trends, risks and potential opportunities for securing competitive advantages.
As Tableau emphasizes, an essential aspect of responding to data-derived insight is sharing that insight with collaborators. Incorporating the collective expertise and critical-thinking skills of one’s team helps business leaders maximize and synthesize insight gleaned from data, driving better decision-making.
This collaboration allows data-driven decision-makers to impact their business on an organizational scale. By engaging others in the DDDM process and encouraging the use of analytics tools for informed action, business leaders can foster a data-driven company culture. Imbuing an organization with a data-driven mindset helps facilitate informed decision-making, effort and initiative at all levels.
Managers who make accurate, timely, data-driven decisions are integral to a modern business’ success. Managers who take this a step further through increasing organization-wide data literacy can magnify their positive impact, improving decision-making and outcomes across the board.
Learn more about the University of Southern Indiana’s online MBA program.