Across industries and around the world, organizations are trying to make effective use of data, analytics, and AI. In many cases, this is easier for young, digital-native companies, but it’s certainly possible for any organization that’s willing to invest in acquiring the right tools, building the right processes, and, most importantly of all, changing its culture.
This is what we call becoming a data-driven company, and it’s a transformation whose benefits extend across the entirety of the value chain. A recent Forrester Consulting study found that businesses that rely on data management tools to make decisions are 58% more likely to beat their revenue goals than non-data-driven companies. And data-driven organizations are 162% more likely to significantly surpass revenue goals than their laggard counterparts. Organizations that become data-driven are also likely to see faster growth, and according to McKinsey and Co., can expect earnings before interest, taxes, depreciation, and amortization (EBITDA) to increase by 15 to 25%.
But exactly what does it mean to become a data-driven organization? What are the benefits of doing so? And how can organizations make the shifts in mindset and culture that are part of becoming data-driven?
In the rest of this blog, we’ll answer these questions. In the next blog in this series, we’ll dig in deeper, taking a closer look at how organizations can build the kind of data platform that will democratize access to insights derived from data analytics.
Simply put, a data-driven company is one in which decisions are made on the basis of data. Or, as data scientist Abraham Enyo-one Musa puts it, “The term “data-driven” means that an entity is oriented to make tactical and strategic decisions based on data rather than gut instinct, personal opinions, general observations, or pure hope.”
Becoming data-driven takes the subjectivity out of decision-making across an organization. This minimizes disagreements, making it so that stakeholders are more likely to be aligned. When everyone in the company has access to the same information, and they all understand it to be true, they’ll all have the same grounds for decision-making. When everyone’s pulling in the same direction, the organization’s progress will be smoother and faster.
To achieve this ideal state, organizations need to do more than just collect and consult raw data, though. Instead, business decision-makers must analyze the data in order to derive relevant insights from it. Such insights could relate to current business problems, contribute to a deeper understanding of customers and markets, or make it possible to measure the business’s performance with an eye to its improvement.
The advantages that data-driven companies enjoy are numerous, extending far beyond the potential increases in revenue and profitability that were mentioned above. Because decisions large and small are made on the basis of evidence (rather than guesswork) in data-driven organizations, they tend to outperform their competitors.These benefits are far-reaching. Through informed decision-making, a data-driven organization can:
In addition to business advantages, a data-driven organization will often enjoy stronger and more focused leaders. This is largely a by-product of the cultural shift that must be undertaken to transform into a data-driven company: sharing data, analytics, and insights democratically across the organization encourages the elimination of internal siloes. Instead, there’s a culture of transparency and open collaboration. Because everyone shares the information that drives decision-making, organizational structures tend to become less process-bound and top-down. It’s easier to align stakeholders around a common vision in data-driven companies, since everyone has access to the data and insights from which that vision was created.
By now, it should be clear that implementing new analytics tools or building a data warehouse isn’t enough to transform a company into a data-driven organization. The necessary changes are instead deeper and more fundamental. Collaboration comes to the fore in data-driven companies, while leadership tends to be less centralized. Across the entire organization, people value ongoing information-sharing, realizing that making real-time data available to everyone improves situational awareness.
Like any cultural shift, it’s important to get people from all echelons of the company on board. Senior leadership can leverage data in decision-making for the benefit of the business, of course, but they can also serve as a change agent, visibly championing the new culture, and encouraging others to do the same.
In addition, the organization can implement training programs to build skills and data literacy among employees. This will look different for frontline workers than it will for senior executives, but it’s useful for both group—and everyone in between. It’s crucial to provide employees with the time, training, and support that they need to upskill. People should learn how to use tools, of course, but they should also be educated in design thinking, group problem-solving, and agile ways of working.
It’s important to gain buy-in from stakeholders everywhere in the company. Once sales teams understand how they can leverage data to improve their performance, they’re more likely to be enthusiastic adopters of the new mindset. If product teams see that having more data on how customers perceive their product can make their jobs easier, they’ll get on board as well. Quick wins that demonstrate the value of this approach over the short term can help to win over people who are initially reluctant.
Becoming data-driven is akin to learning a new language. It requires training, effort, and a shared focus from everyone in the business. The rewards make it more than worthwhile, though.
Check back in the coming weeks to read more about the technological and cultural changes organizations must make in order to become data-driven. Or reach out to a member of our team to learn how Netrix can help you advance your data maturity at speed.