Knowledge is power. And in today’s business world, knowledge comes from data.
Incorporating data into the decision making process can be a game changer for all kinds of businesses. Big or small, local or national, construction or manufacturing – it doesn’t matter, data can help you succeed.
At a high level, incorporating data into the decision making process gives leaders more clarity. Without the right data, leaders are effectively guessing every time they make a decision – no way to run a successful business. Armed with the right data, leaders can weigh the pros and cons of every decision, explore potential consequences, and make the best decision for their business.
Data-driven decision making comes with many benefits. Here are four of the most impactful benefits of embracing data-driven decision making:
- Increased confidence
- Ability to unlock new efficiencies
- Shift to a more proactive strategic approach
- Improved ability to quantify performance
Read on as we outline these benefits in greater detail and explore how, together, they can have a transformative impact on the way your business operates.
Strothman+Co is a full-service accounting and data advisory firm that serves partners in Kentucky, Indiana, and beyond. Our data advisory team provides a wide range of solutions that enable local businesses to embrace the power of data and improve business performance. Contact us to learn more.
What is Data-Driven Decision Making?
When a business commits to data-driven decision making, they commit to using data, statistics, performance metrics, and other numeric variables to make better decisions. This enables leaders to make decisions based on real-world evidence, rather than relying on their intuition.
Examples of Data-Driven Decision Making
There are countless examples of data-driven decision making. Here are several common scenarios:
- Before deciding which new market to expand into, a business commissions research that quantifies the revenue and growth potential of every option, then launches in the area with the highest potential.
- A business performs an analysis of its customers to determine which are the most profitable, and then offboards unprofitable customers and expands its relationship with profitable customers, boosting profits.
- A business needs to promote internally to fill a sales leadership position, and analyzes the revenue generated by current sales representatives to determine who is the most effective, then promotes that individual.
Today, all successful businesses use data in a wide variety of ways. Together, this increasing level of data literacy adds up to improved decision making at every level of the organization.
Four Reasons for Businesses to Adopt Data-Driven Decision Making
Leveraged correctly, data-driven decision making delivers a wide variety of benefits for businesses. Let’s explore them in more detail.
1. Increased Confidence
Comprehensive data analysis yields impactful insights that help leaders to make better decisions. Whether it’s uncovering profitability at a product line level, identifying opportunities to cut expenses, or something else, data enables executives to make decisions with higher levels of certainty over the potential outcome.
That empowers leaders to make decisions with greater confidence. Armed with powerful insights from their data, leaders can allocate resources more effectively and build long-term strategies that have a higher probability of success.
2. Unlock New Efficiencies
Every business in the world contains some level of inefficiency. Wasted spend, unprofitable customers, unproductive employees – they’re everywhere. What separates strong, profitable businesses from those that lag behind is the business’s ability to diagnose and resolve these issues.
Harnessing the power of data enables businesses to identify new opportunities to streamline all kinds of processes within their business. This frees employees up to work on projects that will make a meaningful difference to the performance of the business, instead of spending all day focusing on busy work.
3. Embrace Proactive Strategies
Many businesses that fail to reach their potential do so largely because they are reactive. Instead of shaking up the marketplace with new ideas, they react to the actions of others: their competitors, their customers, government regulation, and so on.
Successful businesses are proactive: they see change as opportunities, anticipate upcoming events, and lay the groundwork for their business to be successful. Mastering this demands a business analyzes its data in a relatively sophisticated way in order to predict trends and understand customer behavior.
Once businesses have an inkling of what’s around the corner, it’s far easier for executives to ideate and implement strategies that will help their business be successful for years to come.
4. Improved Ability to Quantify Performance
If you can’t measure it, you can’t manage it.
Incorporating data into your business’s decision making process enables leaders to better understand the success (or failure) of a business decision. Here are a couple of scenarios that illustrate this point.
Bloggs & Partners, a law firm, has had a bad year and wants to understand client retention. They poll their partners, asking who has lost a client in the past twelve months. A couple of partners admit to losing small, unimportant clients. But overall, the firm’s leadership remains unsure of where the losses are actually coming from and has no idea how to stem the flow.
Jones & Partners, a competing law firm, tracks every dollar every attorney bills at an individual client level. They’ve had a great year, adding dozens of new clients, and want to understand which partners deserve the largest bonuses. Instead of quizzing everyone, they simply log into their billing system and analyze the data to determine which partners have billed the most and which have signed major new clients to the firm. They get an answer in a matter of seconds and set about writing some generous bonus checks.
Who would you rather be? Bloggs & Partners or Jones & Partners? This is just one example, but the ability to quantify performance is undeniably important. And by incorporating data-driven decision making, you can improve your business for all stakeholders: leaders, employees, and investors.
Embrace Data-Driven Decision Making with Strothman+Co: A Leading Kentucky and Indiana Data Advisory Firm
Any business can start leveraging data to make better decisions. But success demands a well-thought-out approach that incorporates various best practices related to data analytics: the right software, the right processes, and above all, the right people.
At Strothman+Co, our data advisory services group marries people, processes, and technology to help your business build a winning data strategy. Our team is available to help your business take its first steps toward data-driven decision making or elevate your existing data analysis practices to the next level.
Interested in learning more? Contact Strothman+Co today.