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Organisations’ needs are constantly changing, and they are facing challenges to cope with this change. Keeping pace with digital transformation and taking advantage of the tremendous opportunities offered by technological innovation is paramount.
Data-driven decision-making is defined as using facts, metrics, and data to guide strategic business decisions that align with your goals, objectives, and initiatives. When organisations realise the full value of their data, they make better decisions. However, this is not achieved by simply choosing the appropriate analytics technology to identify the next strategic opportunity.
Organisations need to make data-driven decision-making the norm, creating a culture that encourages critical thinking and curiosity. People at every level need to have conversations that start with data, as they develop their data skills through practice and application.
Establishing these core capabilities will help encourage data-driven decision-making across all job levels so business groups will regularly question and investigate information to discover powerful insights that drive action.
But as the title of this article, the key to making progress is giving the data a purpose. In the same way, we cannot have the technology for technology’s sake, we cannot have data for data’s sake. The rallying cry for the data community is that data is the new oil or gold. But in business terms data is only of value if you derive value from it.
The one question I was always asked when presenting a dashboard or other data view to executives was, “So what. What decision do you want me to make?” In simple terms to get started with data-driven decision-making, is to start using it to make decisions. Ok, there is a little more to it than that as I will cover in this article.
Data-driven decision-making has multiple benefits, here are the ones I think are most prevalent:
If you are data-driven, your decisions will be consistent, because they’ll always be based on the same principle: “what does the data say about it?”. Using key data within all major decision-making processes ensures a business achieves consistent results. Individuals can leave, and priorities can shift but, if you’re a data-driven organisation, this won’t impact the way key decisions are taken.
When data is effectively utilised, it’s easier to understand what’s coming, and the impact of prior actions and quickly respond, whether that is a customer behaviour, a changing requirement or a technology-driven opportunity. Business decisions aren’t made in the dark or based on insufficient information. As soon as data is acquired and analysed, decisions can be made as less time is required to gain sufficient understanding to support a decision.
Information is an incredibly valuable commodity in the data-driven organisation. Whether it’s understanding how customers behave and feel about the business, or providing real-time access to performance figures and forecasts, the relevant information is available throughout the business. Collaboration of this kind ensures everyone is pulling in the same direction. It encourages loyalty and responsibility as every member of the team knows exactly what’s happening, what their role is and how they contribute to the organisational outcomes.
Making decisions based on data leads to a more transparent and accountable process. It shows staff the reasons behind every decision. Showing that choices are based on hard data and numbers can help people embrace it, even when it’s not a very favourable choice. These practices also help employees understand how data can support them in their own roles. If they know the importance of solid facts, they can gather data, so their request or idea is supported and more likely to succeed.
Becoming a data-driven organisation won’t in itself cut costs. However, you can use the data you collate to identify possible cost-cutting measures in all areas of the business. My experience, in the adoption of cloud services, is that organisations lack visibility into costs, making efficiencies harder to identify. Data-driven organisations are able to quickly identify cost savings opportunities and take advantage of them before the costs have been incurred.
Indecision is the enemy of progress. Without effective data to support your decisions, projects can move slowly, especially if there’s a disagreement over options. Data-driven organisations can move much quicker and with greater confidence in their decisions. They use evidence to support their ideas so there’s less of a need for a lengthy debate. They also gain confidence that will see the impact of decisions through data, enabling them to adjust to reduce the impact of incorrect decisions.
Since everyone has visibility into key metrics, data-driven decision-making makes it easy to find out where and how you can improve a process. Making data visible can show bottlenecks, unnecessary costs and missed opportunities in the right context, and can help you identify them on time. And since this decision-making process is based on facts, it can be delegated, empowering staff across the organisation There are no hunches or feelings on why something didn’t work in the past, but hard data to show you how to improve in the future.
The benefits are clear and have been talked about at length, so what’s holding organisations back?
Being data-driven has been a priority for Governments and organisations for many years now, with large investments made in supporting infrastructure, but many have seen limited success. According to executives, company culture remains a significant challenge, far more than any technical or data problem. On top of that, the continuing explosion of the amount of data and growing concerns over privacy and data ownership and sovereignty, keep making the task harder.
In the latest NewVantage Partners annual survey, which looks at data and AI investment within organisations, executives reported that cultural change is an ongoing challenge. Put simply, data and AI initiatives are becoming well-established, investments are paying off, and organisations are getting more economic value from data and AI. But organisations continue to struggle with a lack of progress in data-driven culture and the people-centred barriers to greater success.
A 2018 IDC study noted that organisations have invested trillions of dollars to modernise their business, but 70 per cent of these initiatives fail (there’s that failure statistic again) because they prioritised technology investments without building a data culture to support it.
It should not come as a major surprise to anyone involved in Digital Transformation in any way, that cultural change comes slowly, particularly in the case of large, organisations that have operated very successfully, under their legacy operating model, for years if not for more than a century. It’s worth noting at this point the current New Zealand Public Service celebrated its 100 years of service in 2013.
So, the cultural change aspect is an understandable problem, that is perpetually underestimated. Becoming data-driven is about the ability of people and organisations to adapt to change, with long-established organisations unlikely to change overnight. Adoption has normally been through digital transformation efforts, which also continue to underestimate the cultural impact of the changes.
Although data-driven initiatives tend to be driven from a business perspective, they commonly fall into the same traps as legacy technology investments. Searching the internet, you will find many examples of suggested approaches to data success, that start with; understanding the data you currently have, collecting and preparing it in some sort of technology solution, and then viewing and exploring data looking for insights, usually centred around a data science or analytical team. Others will talk about establishing data governance strategies and standards. None of these approaches tackle the cultural impacts or answer the ”so what” question.
The real cultural challenge in this is an insight relating to Agile I was told many years ago, that I think equally applies here. “The issue with agile is that doing even part of the processes, to a reasonable degree, will deliver some success”. It won’t have the impact you anticipated but becoming data-driven, even in a limited way, similarly to agile adoption, will deliver some success. That means organisations believe they are being successful while missing out on the real data-driven dividend.
For organisations to make any meaningful inroads it’s important to recognise the cultural impact and define an approach that has interventions that support the necessary cultural change.
To make better decisions based on data, you need to identify how data can help you achieve your organisation’s goals. The process needs to demonstrate to staff how data can be used to support decision-making and how it benefits their work.
I suggest don’t look at operations, but focusing on your strategic change initiatives. That is where your key decisions are being made, every day.
To achieve this, I look to the principle of Investment Logic Mapping (ILM). ILM is an early-stage technique that assists in developing and documenting the logic that underpins a potential investment decision, before specific solutions are identified, and before a decision is made.
It is a technique to ensure the ‘story’ about any proposed investment makes sense and to test and confirm that the rationale for a proposed investment is evidence-based and sufficiently compelling to convince decision-makers to commit to investing in further investigation and planning. Usually used as part of the Treasury Business Case process for significant investments, it provides a model to break down strategic goals into a series of activities or investments.
Now, I am sure some readers just let out a groan about business cases and documentation. I’m not suggesting that. What I am suggesting is using data to support a technique to help organisations, understand the problem, measure the impact of changes, and identify and prioritise initiatives to deliver the strategic goals.
By applying an ILM-based technique, organisations can link their data initiatives directly to their strategic goals. This means that data-driven initiatives immediately have a business context and staff can see where data adds value to their work. It stops being data for data’s sake and becomes another tool in the toolbox that staff can use to support decisions they require.
The ILM Technique does include defining Key Performance Indicators and metrics against benefits, but I think the increased emphasis on data at the individual initiative level would add greater value. By defining data-derived measures at each layer of an organisation’s strategy, organisations can gain greater insight into their progress, as well as use it to adjust direction as greater insights are derived.
This provides a pathway for adoption, giving all staff an opportunity to learn and understand the benefit of data-driven decision-making, and supporting cultural change.
Digital leaders recognise that becoming data-driven requires a different mindset. Organisations must support staff, providing opportunities and being prepared to think differently. There is no shortage of technology solutions, data platforms and analytic algorithms. These need to be matched by critical thinking, human judgement, and a view to creative innovation. Becoming data-driven involves data-driven conversations among employees, promoting richer interactions between staff members.
Digital leaders understand that individuals and organisations learn through experience. Organisations should appreciate that the data journey is a transformation effort that unfolds over time. Becoming data-driven is a process. Dr Frances Hesselbein stated it rather nicely, “Culture does not change because we desire to change it. Culture changes when the organisation is transformed – the culture reflects the realities of people working together every day.” If we want to become a data-driven organisation, we need to enable staff to see it and engage with it, every day. The transformation will grow, so focus on the long-term, not the short term.
Organisations must actively work to avoid the pitfalls of the past, and by linking to their organisational strategy, organisations can embed data-driven decision-making as part of their operating model.
If you would like to talk more about how data-driven decision-making can support your organisation’s strategic goals, or how you can leverage simple, low-cost, technology solutions to support your data journey, contact me via the link below.
https://www.hemlockconsulting.nz/contact-me