When you hear the term “data analysis”, what’s the first thing that comes to your mind? Tables and charts, numbers, figures, descriptions and graphs that seem too obscure for you to understand?
For anyone who’s not into it, data gathering and analysis can be boring, but do you know they play an essential role in the progress of every organization? To ensure continuous growth and development, an organization should always be evolving, innovating, and challenging itself. It’s imperative to have the right tools to gather facts and interpret the data in the most efficient manner.
That’s why a data-driven approach is considered highly critical to any entity’s success—business or organization. What does it mean to be data-driven? How can you use data in the decision-making process of your business? Let’s find out.
What Does Being “Data-Driven” Mean?
The act of being data-driven involves developing the correct tools and means to interpret and analyze data objectively. It involves collecting data, analyzing them, and coming up with decisions based on what was gathered. One essential step in this approach is the setting of measurable goals or key performance indicators (KPIs) that will indicate progress or success.
Being data-driven is important because it enables individuals and businesses to create and maximize more opportunities, predict future trends, and optimize current operational efforts. Moreover, being data-driven will guard you against your biases, define objectives, and find answers to unresolved questions.
In order to come up with a data-driven decision, here are some of the tools and processes that you need to establish in your business:
- Data collection. Gather information after setting a clear goal and purpose. In this phase, you’re expected to collect both qualitative and quantitative data. Qualitative data is information that isn’t defined by numbers, namely videos and interviews, while quantitative data focuses on statistics and data.
You may extract the needed information from your clients or consumers, employees, assessments, evaluations, and other variables that are involved in the specific goal or criteria which you’re making the decision for.
- Data access. This refers to the ability to retrieve, copy, modify, or move data within the various information technology (IT) systems. Organizations should have a well thought out method of granting data access to each specific user.
When gathering data from systems, make sure to ask consent from organizations first to avoid any complications in the future. Keep in mind that you cannot gather personal data without an explicit consent from the person concerned. Before stronger data protection laws were in place, just a few years ago, political data-gathering analytics firm Cambridge Analytica and Facebook were embroiled in a scandal for gathering data without users’ consent. These days, it is harder (but not impossible) to commit data breach.
- Data reporting. This process typically involves the presentation of organized data through visual representations such as tables, charts, and graphs to track progress, losses, or any fluctuation. These can alert you of issues that need attention and where possible problems lie. At the same time, you’ll be able to recognize wins and what decisions worked for your company.
Data reporting is a highly valuable component of a data-driven organization. It dwells on what has been done and allows you to see through other possibilities.
- Data analysis. This is perhaps the most important factor in having a data-driven approach to things that matter in the organization. This forward-looking action aims to dig in and explore the “whys” more than the “whats”.
For example, if your business experienced profit losses for a month, data analysis will allow you to come up with answers as to why the occurrence happened. Data analysis answers the “whys” as you look at past data—giving you an idea of the factors that might have caused the problem to happen.
It’s easy to look at the numbers to see what’s happening to your business – whether it’s growing, losing, or in a standstill. Is your business losing because of the competition? Are you delivering the goods and services that your target audience really needs? Are you in the right location? Analysis allows you to look at things on a deeper level to understand why your business is in its current situation, and what you can do to improve or turn things around.
An organization’s data analysts generally look at two types of data critical to the success of the organization:
- Quantitative analysis, as the name implies focuses on numbers and metrics. You may encounter words like standard deviation, median or average, among other statistical terms. As the opposite of qualitative analysis, this type is measured rather than observed.
Quantitative analysis is important for business management because the data gathered can help entrepreneurs assess the performance of their business, determine the allocation of resources, and manage projects.
- Qualitative analysis focuses on the data outside the numbers. It is based on observation rather than measurement. Qualitative analysis is vital because it allows you to interpret data in non-mathematical ways and is often used to analyze the strength of research and development, and labor relations.
This type focuses on the “hows” and “whys”. Hence, they’re most often used by ad agencies and companies eyeing to develop a new product or service before spending a large budget in its implementation.
One type is not better that the other. Both methods are needed to arrive at a data-driven decision. In a nutshell, quantitative research can help you get insights on how your business stands vis-a-vis the market, while qualitative research allows you to learn more about the customers’ beliefs, values, and opinions. Both are essential in creating business strategies to increase sales, develop market strategies and predict market behavior, among other business-related matters.
But if your budget allows it, you should use both types of research as these complement each other. Using both type of methods will make it easier for you to achieve a deeper level of insight with the problem at hand as you can utilize the explanatory nature of research, and then use statistical evidence to support your decisions.
What Is Data-driven Decision-making?
Data-driven decision-making is a careful process that involves the collection, interpretation, and analysis of data primarily to develop, change or retain specific goals and objectives as well as internal or external processes. Equipped with these tools, organizational think tanks are assured of making more objective and solid decisions that drive growth.
But business owners, analysts, and top executives are not the only ones who can benefit from a data-driven decision-making process. When you adopt a data-driven approach when making decisions, you’ll become a more accountable and leadership-ready entrepreneur, making it easier for you to sustain the operations of your business. With this, you’ll continue to provide opportunities to every shareholder of the business – from partners, customers and employees.
Once you work on your data, know exactly how to handle it. It would also help if you’d define data handling methods that you need to avoid.
A data-driven decision-making approach is key to helping business organizations thrive and grow. By analyzing your past and present performances, you’ll be able to predict future outcomes, helping you avoid the mistake of flying blind when it comes to running your business.
There are various tools that can help you in arriving at data-driven business decisions, ranging from simple spreadsheets, digital dashboards, to complex analytical or business intelligence programs. Whichever tool you wish to maintain, the quality of data gathered is essential, which in turn improves the analysis and decision-making processes.