Have you ever wondered how Amazon recommends your favorite products once you have shopped from it?
This is due to data-driven business decisions. Amazon suggests to its customer’s various products based on their shopping activities or the products they have viewed or added to their cart. They collect and analyze customer data and push recommendations.
Data-driven organizations are increasingly important because of the amount of data available today. Data is everywhere and it influences all aspects of our lives. Starting with marketing, sales and customer service to operations, innovation and strategic planning, every organization should embrace data to provide a competitive advantage in their field.
This article will explore what a data-driven organization is, how it can benefit your business, and how to build a data-driven organization.
What Does a Data-Driven Organization Mean?
The term “data-driven” has become a buzzword in the modern workplace. But what does it really mean? When we talk about a data-driven organization, we mean an organization that is built on the foundation of data.
Data-driven organizations are those that rely on data to drive their strategic decisions and actions.
It’s an approach that shifts the focus away from traditional approaches to management and towards a culture that values data and analytics over intuition and opinion.
Does being data-driven involve just looking at the numbers?
If you think data-driven organizations just collect the numbers and make decisions out of instincts or gut feeling, you’re wrong!
These data are more than just numbers. They are extracted for various purposes but organizations can make the best use of them only when they carefully analyze them and draw observations from them.
Data-driven organizations need to have a systematic approach to complex and powerful analytics to unlock their power and make valuable decisions.
Giant companies like Google, Netflix, Coca-Cola, and McDonald’s are continuously harnessing the power of data of their consumers and competitors to innovate new strategies, increase customer satisfaction, and revolutionize their industries.
Why Is It Important to Become a Data-Driven Organization?
Reports by McKinsey Global Institute say that data-driven organizations are 23 times more likely to attain customers, 6 times as likely to retain customers, and 19 times as likely to be profitable.
The first step is to become a data driven organization is to ,understand why organizations need to focus on data. The second step is for organizations to make use of data to improve their performance.
Data can help organizations to understand what is working and what is not, and also help them with decision-making. With the continuous need for data, the importance of data-driven organizations cannot be denied.
Four examples of the benefits of being a data-driven organization are:
1. Improves the customer experience
Data-driven organizations have a deep understanding of customer needs and behaviors, which enables them to deliver the right product or service at the right time. They can improve customer retention by providing customers with what they want before they know it themselves.
2. Surpasses your competitors
Data-driven organizations can outperform their competitors by leveraging the power of data for decision-making, product development, marketing, etc. It also enables you to understand and serve your customers better, thus keeping you ahead of your competitors.
3. Helps to identify business goals
A data-driven approach must align with your business goals. You need to know what you want from the data and how you will use it. This might be something like customer retention or increasing sales.
4. Define the meaning of success
With the help of data, organizations can define their meaning of success. This can be based on the goals you set when you identified your business needs or it could be something that you decide on later on in the process, but it is important to know what will make your organization successful when using data as a tool.
All these factors allow the organization to become more efficient, minimize risks, and maximize on-the-ground impact.
Benefits of Becoming a Data-Driven Organization
Data has revolutionized the way organizations are run in the past few decades. A report by PwC states that data-driven organizations can outperform their competitors by 6% in profitability and 5% in productivity.
Now, not only is it possible to spot trends and make informed decisions based on historical data, but also to predict future outcomes.
Data-driven organizations need to be able to take advantage of this information so they can meet their objectives and stay ahead of competitors. Some of the key benefits of a data-driven organization are:
1. Insight-Driven Innovation
Making the most of your data helps create an environment where valuable insights can be uncovered. These insights can then be used to create better innovation strategies and provide a strong foundation for new products and services.
2. Better Business Decisions
Data-informed decisions can ultimately provide a more effective way to operate. With a strong focus on data, organizations can be better equipped to explore new ideas, identify opportunities, and ultimately generate more profit.
3. Competitive Advantage
When used smartly, data can help drive a stronger business strategy and increase your ability to compete. By obtaining valuable insights and understanding your customers, products, and services, you can be ready to create new opportunities and drive growth.
4. Increased Strategic Agility
A stronger focus on the data across the business can create a more agile organization that can respond quickly to disruption and change. Organizations that can respond quickly are often able to avoid potential pitfalls and remain resilient during challenging times.
5. Higher Operational Efficiency
A significant benefit of a data-driven business is the ability to increase operational efficiency. By making adequate use of your data across the organization, you can be better equipped to analyze and interpret the information. This can lead to better decision-making, reduced costs, and an improved customer experience.
9 Steps to Becoming a Data-Driven organization
Building a data-driven organization is not just about a technology change. It also requires acquiring new skills, changing various processes, and a lot more. Let’s understand the steps that it takes to become a data-driven organization.
1. Understand the meaning of being data-driven
Data-driven organizations often talk about their “product roadmaps,” their “customer journeys” or their “digital transformation strategies.” But do employees know what those terms mean?
There’s a lot of jargon in the data world, but at the core of being data-driven is a culture of using data to make smarter decisions.
This means using data to understand what’s happening in your business, measuring how successful those efforts are, and then using that data to figure out what to do next.
Data-driven organizations are focused on sustained transformation. It’s about more than just one initiative for a quarter. It’s about creating a lasting culture that uses data in every decision.
2. Adopt new technology
Many companies use data to measure and report on their business. But only a few tap into the power of predictive analytics — or what some call “prescriptive” analytics.
Predictive analytics enables you to forecast future outcomes and make recommendations based on that data. It’s a valuable tool that could help companies understand how customers will respond to a new product, for example.
Other organizations are beginning to use artificial intelligence technologies to enhance their data capabilities. Data-driven companies aren’t afraid to embrace new technologies to unlock new types of data and insights. They’re also open to using data and tools from a variety of different sources, including external data sources.
3. Build a better culture
If most companies say culture is their number one barrier to becoming data-driven, that’s because it’s hard work to disrupt your culture. It’s challenging to change the way people have always done things. It takes time, persistence, and support from leadership.
Organizations that have managed to become data-driven have done so by creating a culture that values the importance of data.
For example, this might mean inviting the CFO to participate in a product development meeting, or having the CEO ask a data analyst to present the findings at a staff meeting. It also means investing in training both in the new technology and in how to use data to make decisions.
4. Enhance data literacy
Companies that rely on data to make decisions often struggle to find people who can analyze the data, according to a recent survey by the National Council of Corporate Directors.
Data literacy is important because it helps you understand what data you have and how to use it. People in various roles, from engineers to salespeople, may have access to data that could help the company make smarter decisions. But if they don’t know how to analyze the data or collaborate with the data analyst on findings, the data is useless.
Companies should train employees to use basic data analysis tools to build data literacy. That will help them work with the data analyst and understand what the company is trying to accomplish.
5. Provide the company with resources to deal with data
If you’re serious about using data to improve your business, you’ll need to equip employees with the tools they need to work with data. For many firms, that starts with making sure every team has a data analyst. But it doesn’t end there.
You also need to make sure your data is accessible across the enterprise — especially when it comes to customer data. You can link data from your customer service systems with customer data. This can help you understand which customers are having issues and why.
6. Review your descriptive statistics
Descriptive statistics are an important part of understanding your data. They refer to basic measurements of the data, such as the mean, median or mode.
A typical data analyst will start with descriptive statistics because it’s the first step in understanding the data and summarizing it. These are the most common ways data is represented, but the approach varies depending on the field.
What are descriptive statistics in your industry? Many data analysts will use a variety of different statistics to summarize different aspects of the data.
For example, they might use the mean to summarize how many customers are using a particular feature or they might use the median to summarize what percentage of customers have purchased a product.
7. Use systems to collect and handle data
Data-driven firms often start with an assessment of their existing data. They create a data map of where their data is stored — in transactional systems, in customer data, in HR systems, etc. Once they know what data they have, they can decide which data they want to collect.
Depending on the type of business, that could include data on customers, sales, engineering or other aspects of the business. Then, they implement systems to collect the data. Some firms partner with data analytics firms that can help them identify and collect the data they need.
8. Collect and analyze all available data around your business
Once you’ve identified all the data you have available, you can start to analyze it. Find out what data you have and where it’s stored and then start to think about the different ways you can analyze it.
Some basic data types to think about include, customer data, marketing data, operational data and financial data.
Every company has customer data, but it’s worth considering how you can make the most of it. One approach is to start segmenting your customers based on different characteristics, such as the type of device they use or the purchases they make.
9. Utilize analytics to help both employees and customers
Many firms are focused on using analytics to understand and improve their customer experience. That’s important, but it’s also worth considering how you can use analytics to help employees do their jobs better.
Analytics can help employees make better decisions, reduce errors, improve productivity, manage workloads, and more. It can also be used to help junior employees learn new skills more quickly or give managers insight into which team members need more training.
6 Best Practices to Follow When You Move to a Data-Driven Model
Once you have adopted a data-driven model, there are certain best practices to follow to make the best use of every data available.
- Know Your Purpose: If you don’t understand your purpose of collecting data, what’s the use of it? Understand your motive behind extracting those data and what you are trying to accomplish from it. This will make your data collection process much easier.
- Maintain Team Coordination: It is important to maintain team coordination when you move to a data-driven organization. Many things can go wrong if you don’t. If the team is not on the same page, then it will be difficult for them to work together and make decisions.
- Keep The Data organized: You should also organize your data so that it is easy for other people in the company to access it and use it for their projects. A well-organized database will help you find what you need quickly and efficiently.
- Encourage Improvement: Data should also be analyzed with room for improvement in mind and this will ensure that the organization is focusing on what they need to do better to achieve its goals.
- Focus on business objectives: To make the most of data, it should be aligned with business objectives. This will ensure that the organization is not wasting time on irrelevant information.
- Analyze accurately: Lastly, draw conclusions from your data. This step is important because it tells you whether or not your strategy was successful in achieving the desired outcome.
Capabilities of Data-Driven organization
Data-driven organizations are built on the ability to collect, analyze, and act on data. They rely on data to build a better understanding of their customers, make better decisions, and improve the services and experiences they provide. A data-driven organization must have three core capabilities:
agility, community, and competency.
An agile organization can respond quickly to changes in the market. The ability to make quick decisions and execute them is crucial for any data-driven organization.
It is important to have a team that can work together, communicate well, and collaborate on projects. A community of people who can share knowledge and work together is also a key component in an agile organization.
A data-driven organization must be competent in using the right tools for the right jobs, as well as understanding how to process large amounts of data efficiently.
For a data-driven organization to be successful, they need a knowledge of how they can use their information and insights from it strategically with their customers or clients.
Challenges to Become a Data-Driven organization
The importance of data in today’s world cannot be ignored. It is the key to unlocking the potential of any organization and it can help in making decisions that are more accurate and impactful.
There are many challenges that organizations face when they want to become data-driven. Some of them are:
1.Choosing the Correct Data
Choosing the right data that is relevant to your business is not an easy task given that there are many sources of data, with different types and qualities.
Firstly, you must find out what kind of data you need and what kind of decisions you want to make with it. This will help you determine which sources of data are most relevant for your business and which sources are not worth your time or money.
2.Integration of Data
To become a data-driven organization, you need to be able to integrate data from various sources and use it in a way that helps you make better decisions. Data-driven organizations are using data more than ever before. They can access vast amounts of information and use it for making better decisions.
3.Quality of Data
Obtaining high-quality data from the pool of information available is very important. organizations must collect and analyze only data that are accurate, consistent, and valid for it to be useful in decision-making processes.
4.Accessibility
You can’t be a data-driven organization if the data is not accessible. Data needs to be accessible by all stakeholders in the organization at all levels and promptly. The problem arises when it comes to finding the right people who can analyze it.
5.Making a Culture Shift
Creating the shift from using intuitions to being data-driven takes time. Organizations must encourage and train their employees on the importance of data and the right way to utilize it to make sound decisions.
Final Thoughts
Data-driven organizations are likely to be competitive and have strong growth. The benefits of being a data-driven organization are tempting but adopting the culture takes time. Organizations must change their mindset and processes of making decisions so that effective and strategic actions can be taken using data confidently.
Looking to make your marketing organization data-driven? Check out Growth Nirvana , our no-code marketing analytics platform that gives you your marketing insights in no time.
This means you don’t have to depend on any department to get you the data. Take charge of your insights with us and make crucial business decisions that boost your growth.
Schedule a demo now and connect to over 150 different data sources in just a few clicks.
Related Resources
