If Data-Backed Decision Making is Important to Businesses, Why Aren’t They Utilizing It?
Research shows that 91% of companies say data-driven decision-making (DDDM) is important in growing their business, yet only 57% said they base their business decisions on their data. There are always risks involved in business but utilizing data for decision making can help lighten that risk. Organizations that use big data experience profit increases of 8–10% and see an overall reduction in costs of 10%.
What exactly is DDDM? It’s the grouping together of historical information to analyze trends and make decisions for the future based on what’s worked in the past — rather than only relying on your gut feelings/opinions. You position data at the core of your decision making. For their most successful projects, 60% of companies say using customer feedback as part of their decision-making projects was a big contributor to the success.
What’s surprising is that a data analyst spends most of their time devoted to cleaning and organizing data — about 80% — and only about 20% actually performing analysis. This can be a problem because the goal is to develop algorithms and build machine learning models based on what this data shows you. But you cannot skip this step because without the data you cannot create a good model.
Why Analytical Thinking Matters
- Many find basic statistics to be confusing. The lack of talent in this area makes it difficult for companies to leverage their data.
- Managers use it every day. A study by Harvard Business Review found only 13% strongly agreed they’re confident about their decisions and only 16% strongly agree they’re confident in the accuracy of most of the data underlying their business decisions.
- Data can accelerate many — even most — business strategies. This is possible because it improves the processes and empowers the people needed to execute them.
In order to train yourself to become more analytical, both in business and your personal life, start looking for patterns everywhere. Whether you’re in the office pouring over financial statements, standing in line at the grocery store, or commuting on the train. Once you’ve noticed the patterns, practice extrapolating insights and try to draw conclusions as to why they exist. This simple exercise can help you become a more data-driven individual.
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Written by Rachel Strysik