Vast swathes of data are now accessible to all businesses, regardless of their size. The rise of digital technology has made it possible to collect data on everything from internal processes and financial performance to customer behaviour. Did you know that the average company now collects data from around 400 different sources?
But gathering this data is one thing; it’s another thing entirely to utilise it effectively. This requires efficient analysis and understanding of the data so that it can inform your business decisions. In this post, we will look at the importance of data-driven decision-making to your business.
What do we mean by ‘data-driven decision-making’?
Data-driven decision-making (DDDM) is the process of making strategic business decisions based on data. This hard evidence is a stronger basis for decision-making than intuition or industry rumours. To facilitate DDDM, you must collect and analyse both historical and real-time data to find patterns and insights.
With these at your disposal, you can react quickly to changes and make more accurate predictions for the future. This enables more prudent investments of resources into marketing campaigns or when to order new stock.
In a nutshell, data can enable you to make informed decisions all over your business, including in areas like:
- Budgeting.
- Branding.
- Customer Service.
The digital technologies that facilitate DDDM are now available to all businesses from startups to huge, established enterprises. There have never been so many opportunities to gather and evaluate data, and this should be seized upon to improve your decision-making.
Why is data-driven decision-making important?
There are various key areas to make informed decisions, but perhaps none are quite so important as budgeting. Smaller firms cannot afford to throw money away on technologies or strategies that may not work. But if you make those investments with data to back up the decisions, you’ll be more confident in that spending.
With data-driven decisions, you can also boost efficiency to reduce costs. Detailed, actionable insights into your operations allow more prudent choices for internal processes. SMEs need to retain existing customers because it is more expensive to acquire new ones, so strong internal processes can help you increase customer loyalty and grow sustainably through referrals.
Modern consumers spend a great deal of time online, and they leave behind an extensive data trail that helps you understand their needs. This data also helps to predict the behaviours of your target audience based on previous activity and current trends. This data is invaluable for making strategic decisions about things like marketing techniques and products that are worthy of your focus.
Essentially, being driven by data gives you a competitive edge by identifying opportunities early on. It can even be used to gather data on your competitors and discover gaps in the market that you can fill.
What are the challenges of data-driven decision-making?
Big data can make life easier for businesses, but it presents some challenges as well.
The sheer volume of data at your fingertips can be overwhelming, and it can hamper your ability to make a decision sometimes. If you don’t have high-quality data, or are swamped with data that is not relevant to your needs, it becomes difficult to make smart decisions. And if data literacy is low in your organisation, individuals may not know how to properly leverage the data collected.
You may even encounter resistance to adopting a data-driven culture. Some may perceive it as added work, and it may be a significant investment to hire a data analyst. There can also be a dip in creativity if everyone relies too heavily on the facts.
Confirmation Bias
If you are already focused on pursuing a certain path, you may only allow yourself to see that data that supports that decision. This can negate the true value of the data. There are also people who resist evolving to more modern beliefs, even if the data shows that they should.
Data Ethics
Collecting and storing customer data is a big responsibility. It is down to you to keep that data safe and remain in full compliance with privacy laws and regulations.
What are the main uses of data-driven decision-making?
Let’s take a look at some real-world examples of DDDM.
Supply Chain
DDDM can be very helpful for effective inventory management. With a real-time view of stock levels, you can determine the best time to replenish and the right amount. You even have data on seasonal fluctuations to predict demand as part of the decision-making process.
ERP solutions include DDDM as part of warehouse management and order fulfilment modules. This allows you to collect data on order quantities and the efficiency of delivery drivers. This informs you of opportunities for improvements and you can use the automation tools of the ERP system to implement them.
Customer Service
With a data-driven approach to customer service, you can make decisions on the basis of surveys, feedback, call centre metrics and more. The CRM part of an ERP solution will enable you to identify areas of satisfaction and dissatisfaction so you can make improvements to the customer experience.
Human Resources
Data is important for HR teams to understand considerations like:
- Hiring.
- Diversity.
- Turnover.
- Productivity.
Data can be used to adjust staff scheduling and understand the drivers of employee engagement. You can also make predictions about personnel who are likely to leave or who might deserve a promotion. Data also indicates the recruitment and onboarding strategies that work best.
Final Thoughts on Data-driven Decision-making
There are a few things you can do to make sure DDDM works for your business. These include:
- Setting clear goals for what DDDM needs to achieve.
- Creating a data-driven culture among your workforce.
- Using the right tools, like ERP systems and other integrated resources.
- Getting organised by planning for the management and analysis of data.
- Encouraging collaboration, which can be facilitated with ERP software.
- Visualising the data with reporting tools.
- Tracking and measuring progress as you go.
All these things can be supported by the use of ERP technology. With its central database and integration of so many disparate departments within your organisation, an ERP system can be instrumental in making DDDM work for you. If you want to learn more, get in touch and we can discuss your business needs.
Why choose Eventura to be your ERP implementation partner?
Eventura has been providing robust business solutions to countless organisations for over two decades. We are ERP experts and can identify all of your business needs, and deliver a comprehensive ERP solution that works for you.
As Sage 200 Partners and NetSuite Solution Providers, we can help you identify which solution will fit your business needs the best. Our expert team of business analysts, developers, consultants, technicians and support staff can guide you through your entire project, from initial scoping through to implementation and on-going support.
We’re also managed IT service providers meaning we can help you identify your entire IT infrastructure requirements from day one. If you would like to speak to one of our ERP experts to discuss your options or request a free demo, you can request a free call back here.
