What is data-driven decision making?

Every day, we use all types of data to make decisions in our personal lives. We may use the data collected in product reviews to drive our purchasing choices. We may rely on our GPS to help us choose the best route to where we are going. We rely on data because it is impersonal. It has no agenda. It tells a factual story. Yet many business decisions are often made using a gut feel and that's why things can go wrong.

While many employees have great instincts and the expertise to make predictions that propel their company forward, we are all only human. As humans, we make mistakes because we cannot oversee everything that is happening within our business. We rely on mental heuristics and biases to make sense of the world around us, which is helpful in many ways, but unfortunately also prone to error. This can lead to missed sales opportunities, an inaccurate estimation of profitability, or lost capital in unsold goods taking up warehouse space as dead stock.

In an ever-increasingly competitive business environment, using data analysis to develop fact-based strategies takes the guesswork out of tasks such as marketing a new product or service, managing employees, or even navigating a merger.

Challenges in traditional decision making processes

Information coming from disparate sources leads to multiple versions of the truth, leaving executives with a muddled perception of their company's overall performance. And while many businesses do utilize reports pulled from their ERP systems, this is not ideal because it requires time consuming custom queries, and produces static reports. This means that every time you want more information about something you see in your report, you need to go back to IT so that they can generate a new report. Needless to say this is not very efficient. Because of this lengthy process, reports and insights are often outdated by the time they reach the relevant manager's or executive's desk.

What is Data driven decision making?

Data driven decision making, when it applies in the corporate world, is the process of collecting relevant data, either big, quantitative data sets, or qualitative customer data, making sure it’s high quality and up-to-date and then enabling business leaders to make well informed decisions for your business using this data.

How to encourage data driven decision making

At the core of the data driven decision making process is data management. From data collection to data cleaning to data visualization and reporting, the right data analytics systems and processes can reveal the valuable insights locked within your data to anyone in your company. The key is to automate as much of the process as possible so stakeholders can the trust data quality they are basing their decisions on.

Where do managers start with a with building a data management system? Mid-market companies have a limited tech budget, and many digital initiatives take a long time to implement. A simple path to data clarity is with data analytics software, which works as a platform or interface that collates all data sources in your business, such as your enterprise resource planning system, customer relationship management tool, or general ledger.

What technology best supports data-driven decision-making?

You'll want to select software that is compatible with your current tech stack — this way, implementation will be relatively straight-forward, and you will be better able to scale and add more data sources.

Phocas is designed to be used by non-technical users with minimal training. It allows you to collect data from ERPs and integrates it into secure databases that gives users a way to slice and dice data without fear of corrupting a static report of excel spreadsheet. Dynamic dashboards are updated automatically, representing real-time insights, and can be personalized with relevant KPIs and metrics.

An easy to use data analytics tool frees up your IT team and data analysts (if you’re lucky enough to have a dedicated data scientist), while speeding up the rate and quality of your strategic decisions.

Benefits of data-driven decision making

Business strategy

When decision-makers use up-to-date data, the facts can be used to guide their long-term view of the market and competition. Gut-based decisions won’t hold up any longer in our data-driven world. Due to the unbiased nature of data, different departments are empowered to utilize it when making decisions that benefit their specific business goals.

Sales forecasting

For instance, the sales department can better identify sales opportunities. Sales reps informed with real-time product, pricing and customer data will be able to use these strategic insights to increase sales.

Inventory management

A warehouse team may use the same data to forecast demand and avoid understocking or overstocking items that aren’t selling and so are at risk of becoming dead stock.

Recovery from economic disruptions

We’ve all experienced of large global changes over the last 5 years - Covid 19, supply chain disruptions, and high rates of inflation - all effecting businesses in different ways, and underlining the necessity of being able to adapt and pivot to meet the market as it changes.

Data analytics platforms that utilise machine learning and predictive algorithms to give early warning of a shift in customer behaviours and allows businesses to maintain customer service levels in a downturn and respond quickly as customer confidence returns.

When executives adopt a data driven approach, they are able to improve operational efficiency and directly impact the bottom line. According to 'The BI Survey' by BARC, as many as 84% of companies who have implemented BI reporting making better business decisions, and 41% report increased revenue. Phocas has consistently performed best-in-class in BARC's reviews on KPIs such as 'Business benefits', 'Recommendation' and 'Price-to-value'. This way you can trust that Phocas will enable your business to increase customer satisfaction, reduce costs and make better decisions.

How to transform to a data driven organization

Promoting a data-driven culture can be accomplished by using business intelligence (BI) tools with financial planning and analysis, such as Phocas. With Phocas, automated data collection from your ERP and other data sources brings all of your key financial and operation information into one source of truth. This information is accessible from anywhere via mobile devices such as smartphones or tablets to facilitate decision making even when out of the office.

To remain competitive in today’s data-driven economy, business decisions must be based on more credible and reliable proof than anecdotal or subjective evidence. BI enables fact-based decision-making by identifying actionable insights and effective strategies for each area of your company.