The notion of a data-driven organization - where people have easy access to the insights they need to guide their decision making - has spread fast over recent years.
Even before Covid, organizations of all sizes were facing chaotic and uncertain trading environments. Globalization and advances in technology meant that new threats and opportunities could emerge at a moment’s notice. Industries were transformed almost overnight.
The names Blockbuster, Kodak and Xerox were once giants in their respective industries. Now they serve as salutary reminders that organizations must evolve and adapt quickly to keep their competitive edge.
Adapting requires a deep and fundamental understanding of what is happening to the organization in as close to real-time as possible. And it means turning that insight into action without delay.
Small businesses can rely on human intuition when making decisions, because it is easier for their leaders to have a holistic picture. But you cannot manage a larger organization that way. Large and medium-sized companies are too complex to manage by gut-feel. They are also less agile, and have much more to lose than their smaller counterparts.
At the same time, the world is becoming more aware of the limitations of the human mind. The Me Too and Black Lives Matter movements have led many to recognize how emotions and biases can distort decision making, stunt progress and leave large parts of society (and the workforce) feeling ignored and marginalized.
Academic studies show that more diverse organizations tend to deliver higher sales, profits and shareholder returns. Leadership teams with a wide range of experience and backgrounds are proven to produce more innovative products.
Data-driven organizations, especially those with a robust way of tackling any bias in algorithms, find it easier to become more inclusive and embrace the benefits of diversity, because evidence helps to correct prejudices and preconceptions. They are also equipped to recognize and react to changes in their businesses and the wider world faster and with more certainty.
How well are we using data today?
Although the majority of organizations we speak to recognize the importance of becoming more data-driven, there is a data-divide at the heart of the UK’s business community.
Research commissioned by Peak Indicators shows that most organizations are struggling to move to this new way of working. Our study found that:
- data is now a core part of most business decisions in 28 percent of organizations with more than 250 people
- just eight percent of big businesses use data insight to help inform every decision
- almost half (43 percent) of leaders at large organizations still rely exclusively on leaders’ hunches to inform most business decisions
- a fifth (21 percent) frequently disregard the data they do have at their disposal.
Even where systematic data analysis is in place to support decision making, it can be slow and prone to human error.
A third (34 percent) of large organizations still rely on individual and departmental spreadsheets for collating data. Although tried and trusted, spreadsheets require lots of human interaction and are not well suited to revealing new insights fast.
Our study found that the situation was worse at medium-sized businesses.
- Only a quarter (25 percent) of 51 - 250 person companies surveyed said they consistently used data to support decision making.
- 31 percent continue to use spreadsheets to gather and store information.
- 13 percent still fail to collect or collate data in any systematic way.
Poor data practices paralyze decision making. They make it harder for large businesses to react to new threats and opportunities, and increase the risk of making ill-informed, biased and emotional decisions.
The technical foundation is important …
In many bigger businesses, the data already exists to support more data-driven decision making; it just needs to be surfaced, analyzed and presented systematically.
IT professionals can play a crucial role here by owning the data-management process.
Almost half the medium and large companies we spoke to currently store data in a series of departmental databases and specialist cloud-based applications. This siloed approach may suit a set of current and defined needs in each department, but it doesn’t provide the holistic, historical or real-time view that strategic decision-makers require.
And it doesn’t allow organizations to surface new, potentially game-changing insights that can only be obtained by combining disparate data sources.
IT professionals can up an organization’s data-game by supporting the adoption of a centralized data architecture. Here, all data assets are brought together in a single cloud or hybrid environment to improve reporting and analysis. Sixteen percent of large companies and 11 percent of medium-sized firms have already taken this step.
IT people can also determine the most appropriate analytical approach to take. At the outset, that may mean presenting data in reports and dashboards. As data strategies and governance practices become more mature, IT can bring in predictive and prescriptive analytics, often involving machine learning, which indicate what might happen in the future. Those insights allow leaders to act to affect those likely outcomes.
Data governance should also be a key concern for IT. Organizations looking to analyze trends over time need complete, coherent and robust data sets, and clear governance procedures to produce reliable, unbiased and valid outcomes.
There’s no magic wand for this. Improving data quality often needs an investment in the source systems - collating disparate data and enhancing data entry. This pays off through much better insights and by making reporting much less tricky and time-consuming.
… but business goals must come first
While becoming data-driven requires a solid technical base, it is not just a technical exercise. IT professionals have an essential role to play in establishing a strong cultural foundation for a data-driven business.
This is harder to define. Getting user adoption and creating a solution that works for everyone is a challenge unique to each business.
The first question we ask any business leader is ‘What is your end goal?’ A clearly defined objective is crucial. Instead of shoehorning the business into what the technology can offer, technology must be molded to what the business needs.
Engaging users early significantly boosts the chances of success. We encourage clients to identify where employees are finding challenges that data could solve. Collaborating early ensures a fuller understanding of what the business needs, and how best to get results that are right for everyone.
The ability to make well-informed, data-driven decisions has become a crucial source of competitive advantage, and those on the wrong side of the data-divide will be left behind by better informed and more agile competitors.
Understanding technology and digital change is a fundamental piece of the jigsaw puzzle. But successful transformation of decision making through data requires that this technology is applied to pressing business needs - in close partnership with those who will benefit most.
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Kenneth Neilson, Managing Director, Peak Indicators