Making important decisions about your business is challenging without the right analytics to guide you. Accurate data is crucial for analyzing historical performance, competitive landscape, market trends, future forecasting, growth potential, and more. However, different situations call for different metrics/analytics. For example, the data required to ramp up production with new machinery differs from the data required to create a new niche market.
So, while having data is essential, having the right kind of data is even more crucial to inform smarter business decisions. Here, we look at how to use data to make decisions for your business more strategically.
What Is Data-Driven Decision-Making?
Data-driven decision-making uses information such as key performance indicators (KPIs) for insights to improve business intelligence and make actionable decisions to produce specific results.
Why Data-Driven Decision-Making Is Important
Data-driven decision-making leverages verified analytics to ensure the data is action-driven and backed by research. It provides specific verified data to avoid making assumptions or relying on instincts that can lead you down the wrong path. With specific data, you can tap into valuable insights that drive your business forward, whether it is consumer insights to improve your marketing strategy, inventory data to improve your profits, or financial data to improve your forecasting and budgeting.
How To Use Data To Make Decisions
Data-driven decision-making requires a strategy or focus so you know what data types will provide the most value. Setting goals ensures you don’t get overwhelmed with irrelevant information that can detract from your objectives. Are you looking for insights on operations, finance, or productivity? Once you know where you wish to apply the insights gleaned from the data, you’ll know the best sources for that data.
From there, you can target the data and determine if it is robust enough to inform your decisions and answer your questions. If it seems too vague or lacks depth, you can determine how you can collect more valuable information from different sources, be they internal or external. By targeting data to create a consistent data collection method, you can meet your business objectives and save time and money by gathering the most useful information.
Next, ask yourself:
- Who in your organization is the most knowledgeable regarding this data?
- What departments should be collecting data, and what types of data should those departments collect?
- What external sources will prove the most valuable and reliable?
- What tools provide the best analytics and reporting for the KPIs you wish to monitor, track, and collect?
Your goal is to discover the simplest and most effective method to create a comprehensive view of your business and industry. However, effective analysis is also critical and requires skills to integrate data sources and find meaningful connections and insights.
In some cases, working knowledge of the department or steps needed to meet objectives becomes just as important as having skilled people analyze more complex queries. Therefore, you need to find a way to make data accessible, relatable, and understandable so your team can identify those all-important insights.
How To Turn Insights Into Actions
Data must be digestible to turn insights into actions. Therefore, the metrics you use need to come from reliable sources to ensure they represent true numbers. Assumptions aren’t always wrong, as you can use data to understand if your assumptions are correct. However, your decisions become more profound when you consider different data sets and results, to look for consistencies that confirm your beliefs. This way, you can take the most effective actions.
You always have to consider if independent variables impact the data and the results you expect to achieve. You also have to decide the type of analytical approach you wish to use to turn insights into actions:
- Descriptive analysis tells you what has happened
- Diagnostic analysis tells you why it happened
- Predictive analysis uses historical data to predict future trends
- Prescriptive analysis is used to inform future recommendations
You need to think critically about what has happened, the reasons it happened, and the historical results it produced to develop actional strategies, changes, or processes. For example, managers can use predictive analysis to consider when it makes sense to invest in upgrades to ramp up production when expanding to new markets.
However, they would also have to use cash flow reporting to understand when capital will be available for that investment. On the other hand, reviewing seasonal scheduling, increasing order demands, or overtime reporting provides valuable insights when considering whether it is time to hire more employees. Market reports are critical to understanding potential market share opportunities when expanding operations to additional locations.
Advantages Of Data-Driven Decision-Making
The value of data-driven decision-making is felt across your entire enterprise, allowing you to make critical business decisions that positively impact your operations. Advantages include:
Improved confidence with a data-driven culture: Creating a data-driven culture empowers your department heads and other key players to improve performance confidently. Instead of hesitating when presented with decisions, they use data to understand the situation clearly, find opportunities to resolve issues, and make improvements that increase market share, develop your brand, and contribute to profitability through smarter, informed money management.
Profitability: Informed money management allows you to improve profitability and save money with effective forecasting. Following trends and analyzing marketing metrics allows you to predict consumer needs and find niche market opportunities. You can enhance targeted marketing and see better ROI with higher conversion rates. You can also create a better budgeting strategy to balance your cash flow so you have the capital to expand.
Proactive leadership: Your team can rely on data to become more proactive. Proactive leadership avoids roadblocks and financial strains that negatively impact your sustainability and scalability. Data identifies future challenges so you can find a strategy to deal with all scenarios to improve performance in the longer term.
Because data is so vast and analysis methods are so diverse, having direction on leveraging data-driven decisions is essential. Enlisting fractional CFO services can help guide the types of data you should collect to provide actionable insights that keep your business sustainable and scalable.
Whether you need help with tax planning, corporate tax preparation, bookkeeping, or Fractional CFO services, Intrepidium has the expertise and experience to help you succeed. Call today at 778-800-7976 or click here to schedule a consultation.
