Data-Driven Decisions: Rethink Your Approach
Neurologists have proven that no decision can ever be independently made without emotion. Decision-making is obviously prevalent in the workplace, and executives are not immune to falling back on emotion and intuition when they act. The myriad mental trapsthat managers fall into when making business decisions include everything from anchoring—basing a decision off of an initial figure that may or may not be purposefully inflated—to over confidence—being overly confident in our ability to make estimates and forecasts. In fact, there are so many various ways managers can make a bad decision that it’s hard to decipher where to begin in training oneself not to make them. One way to avoid bad decision-making: the utilization of data and associated insights.
And today, data is more widely available than ever. Big data is no longer looked at as the great unknown; it’s a part of everyday business life, helping organizations gain more comprehensive insight than ever before. Without insights that help managers revolve through the stages of decision-making with irrefutable data, every company decision maker is a slave to their own culture and experiences.
How Results Really Help
A common misconception among executives is that data should confirm decisions that have already been made. However, to realize the true benefits of business intelligence (BI), it’s best to utilize both internal and external data to inform the decision-making process. Many don’t realize that data can be used for more than just reporting results it can be forward looking when the right indicators are analyzed. A more efficient and effective use of data helps to reduce the fear in the board room, also through the use of the right tools, technology can help to support any mission at hand.
Business planning based on BI and predictive analytics is still uncharted territory for many executives, particularly those without IT backgrounds. What complicates this process is that CEOs often feel that analytics are too complicated to incorporate into their workflow, and sometimes find them constraining rather than offering a range of options.
These misconceptions and ideas around BI leads to an ironic challenge: The data is there to reduce the fear in decision-making, yet the inability to utilize it and the lack of trust in it perpetuates “go with your gut” as a standard business practice. This needs to change to promote better business practices that will truly show an impact on any company’s bottom line.
With multiple company decision-makers orienting themselves with data in different ways, the answers to important business questions are often open for interpretation. This creates conflict and uncertainty. Before even thinking about technology, an enterprise must ensure they understand the key drivers for their business. Determining set Key Performance Indicators (KPIs) can help guide executives toward examining the progression of goals over time.
Many companies, often without really realizing it, look actually at Key Results Indicators (KRIs), or indicators that show results rather than progression indicators that look at the past rather than prepare for the now and the future. When results are the primary focus, the data that is utilized is often already obsolete and does not form a solid foundation for a company aiming to be data-driven. The remedy to this is simple identify your most important leading indicators, or indicators that are predictive, and look at them in real-time.
To better understand a leading indicator versus a lagging indicator, think, for example, of the fuel gauge and speedometer in your car in terms of planning to refuel. The fuel gauge represents a leading indicator because it allows you to monitor your gas level and predict when you’d need to get to the gas station. The speedometer represents a lagging indicator it would only alert you that gas levels were low when the car rapidly slows to zero at an empty tank. The speed represents the KRI, or lagging indicator in this instance.
As you can see, data doesn’t necessarily translate to answers. Even with extensive data at their disposal, many executives are finding it difficult to let go of habitual processes. Rather than embracing a newfound ability to incorporate factual insights and findings into decision-making, many in the business world continue to let emotion, or that gut instinct, trump all else in the board room.
Facts Beat Fear
Company-wide adoption of a business intelligence solution calls for a shift in company culture. One that will ultimately create a new company environment that is more agile, informed, and ready to act with confidence. A robust BI platform takes the heavy lifting from the decision process and delivers what used to be confusing, convoluted, or distorted data in a clean, concise, easily understood, and-perhaps most importantly-accurate dashboard, report, or analysis.
At the personal level, data can help fuel that courage necessary for big decisions by providing an extra layer of reinforcement. That’s why, in many ways, BI is the business of courage. BI platforms make data easy to analyze even for the not-so-IT-savvy employees in any organization. With the ability to make adjustments based on different purposes and user portfolios, individuals no longer need to rely on someone from IT to compile and visualize a report. That first-hand practice with data helps to demystify it, leading to increased trust and a more routine data-centric thinking process.
Having a solution that can be customized for different user types also helps organizations overall, as it makes data analytics possible for the entire company. This increases scope, ROI, and project adoption. With no margin for error in manual entry as in Excel alone, this eliminates the aged way of tracking data and leads to more trusted information company-wide.
Access to data allows executives to back up their courageous decision with more facts than ever before. With the right tools at hand, it is not necessary to be a data scientist to dig into data sets and read them like a story. As executives embrace this new way of business, more successes will be realized from smart decision-making rather than luck and chance.