Why Businesses Need Data To Make Better Decisions

WHY BUSINESSES NEED
DATA TO MAKE BETTER
DECISIONS

© 2021 Bernard Marr, Bernard Marr & Co. All rights reserved
WHY BUSINESSES NEED DATA TO MAKE
BETTER DECISIONS
Data has become one of today's most valuable business assets.
A key reason for this is that it massively improves decision-
making. In this article, we look at the importance of data to
drive evidence-based decisions.

In just about every area of life, we are increasingly generating ever-larger volumes of data, and
one of the most valuable uses businesses are finding for it is helping them to make better
decisions.
This happens all the time and can be a manual process – for example, taking the time to review
the LinkedIn profiles of job applicants to help make better hiring decisions. Or identifying markets
where our products are popular in order to target sales resources. The most exciting applications
of data, however, are automated and used to solve big problems that businesses are facing. For
example, UPS made massive savings in fuel and wage costs and hugely reduced its energy
footprint when it started using location data and traffic information, combined with artificial
intelligence (AI) to route its network of delivery trucks. Similarly, retailers including Amazon and
Walmart use customer purchase history to predict, with increasing levels of accuracy, what
products customers want to buy. Netflix learns about its users purely from how they use its
service, learning about what content they enjoy and what makes them switch off, in order to keep
them hooked on its service. This happens automatically, without any human employee having to
lift a finger!

Smarter decision-making means making decisions that are most likely to
help companies move towards their goals. Traditionally, the driving force
behind decision-making has been the experience and instincts of business
leaders. And unfortunately, that’s one of the primary reasons behind the
unsettling statistic that 90% of small businesses and start-ups fail. Experience
and instincts are valuable, of course, but research confirms that businesses
that base decisions on data – not instincts or experience – are 19 times more
likely to be profitable.

There are lots of reasons for this – one of the biggest is that the world changes,
as do customer expectations and behaviors. Our own individual beliefs and ideas,
on the other hand, tend not to. That is, once we hit on something that works, we
don’t expect it to stop working. And we can’t always trust that we will have the
presence of mind and forethought to predict every disruptive event or
competitor that could emerge and turn our world on its head. Think of
Blockbuster Video turning down the opportunity to buy Netflix, or even Yahoo
turning down the opportunity to buy Google’s PageRank algorithm for $1 million.
In both cases, and many more that happen every day, bad decisions were made
because business leaders – successful ones with proven track records, who had
taken their companies to new heights of success – based decisions on their
instincts and experience.

DATA-DRIVEN ORGANIZATIONS
Today most companies claim to be data-driven to some extent - it’s a very
trendy thing to say. But I am sure many people reading this will have had the
experience, at some point in their careers, of working for a company that says
it is data-driven but is only really data-driven when the data happens to align
with the beliefs or instincts of the leadership!
Becoming truly data-driven means looking to your data as the single point of
truth when it comes to making decisions. This means all decisions, from high-
level ones about strategy and objectives, right down to issues involving
individual customers or employees.

There are four key areas where data can help make better decisions. Those are:
Decisions relating to customers, markets, and competitors - This involves understanding as
much as you possibly can about who your customers are and the choices that are available to
them. This is how companies like Amazon, Walmart, and Tesco learn how to advertise
particular products to particular people, how they should be priced in order for the business
to be competitive, and how habits may change over time as the world changes and people
move through different stages of their lives. Here, data means we can more efficiently meet
customer expectations and stay ahead of rivals.
Decisions related to finance - This is where a business looks at sales trends, cash-flow cycles,
revenue forecasts, and the movement of share prices in order to make decisions around
budgeting and cost-saving measures. Being data-driven here means more accurately and
efficiently balancing the books and driving growth.

Decisions related to internal operations – This is where companies like UPS drive efficiency by
automating planning of its delivery routing, and manufacturers reduce costs (and increase
profits) by optimizing the operation of machinery and processes using AI, enabling paradigms
such as predictive maintenance – knowing in advance when breakdowns will occur and
repairs will be necessary, to minimize downtime and plan the distribution of replacements
and spare parts. Being data-driven here means less waste and reduced operational costs.
Decisions related to your people – Making sure you have the right people in place to carry
out the jobs you need them to do, ensuring that they are supported in all the ways they need,
and sufficiently compensated for their time that they won’t be tempted to leave you for a
rival, taking all their skills and expertise with them. A good example here is Google which set
out to learn what they could from their data about how different qualities of their managers
affected the performance of their teams. Using data, they were able to identify eight core
qualities of managers– including “is a good coach” and “has a clear vision for the team” that
correlated with successful teams. This helped them make better decisions about who should
be promoted to managerial roles.

SHIFTING TO DATA-DRIVEN DECISIONS
Becoming data-driven often involves an investment in technology – as we
covered earlier, the most ground-breaking and valuable data initiatives are often
automated, involve huge amounts of datasets (falling into the category we often
refer to as “big data”), and advanced analytics capabilities like AI. This is a big
challenge and requires a strategic approach, taking care that projects and
initiatives are in line with overall business goals and priorities. Ensuring your
organization has all of the necessary skills is also important – whether that means
upskilling people, making new hires, or partnering with outside agencies.

Just as importantly, however, it often involves a cultural shift. In many organizations,
employees are used to doing what they are told by their manager because they are their
boss and not having to put much thought into it past that! Being data-driven means
developing a culture where everyone is willing to put their hand up and say “actually…”
when they uncover data or insights that suggest a different course of action might be
more effective. Managers should expect their teams to bring data to the table when they
ask for ideas and input, but likewise, employees should expect managers and bosses to
back up their decisions with a clear line of data-derived reasoning.
This can be a sensitive area when it comes to making changes – as egos bruise easily,
particularly if managers and leaders are used to things being done the way they want,
“because I say so.” But it’s an important cultural adaption that any company has to
undergo when it wants “data-driven” to become an operational reality, rather than just a
trendy buzzword or box that has to be ticked.

Transitioning to data-driven decisions can be a rocky road for companies of any size,
but it's a particular challenge for larger organizations with deeply entrenched values
and beliefs. However, in today's climate of fast-paced technological change and
digital transformation, it's increasingly becoming the deciding factor in whether a
company will rise to the top or get wiped out by more forward-thinking, digitally
adept competitors.
Using data to make decisions is just one of the topics covered in depth in the second
edition of my book Data Strategy – How to Profit From a World of Big Data, Analytics
And Artificial Intelligence.

© 2021 Bernard Marr , Bernard Marr & Co. All rights reserved
Bernard Marr is an internationally best-selling author, popular keynote speaker,
futurist, and a strategic business & technology advisor to governments and
companies. He helps organisations improve their business performance, use data
more intelligently, and understand the implications of new technologies such as
artificial intelligence, big data, blockchains, and the Internet of Things.
LinkedIn has ranked Bernard as one of the world’s top 5 business influencers. He is
a frequent contributor to the World Economic Forum and writes a regular column for
Forbes. Every day Bernard actively engages his 1.5 million social media followers
and shares content that reaches millions of readers.

hello@bernardmarr.com
www.bernardmarr.com

Why Businesses Need Data To Make Better Decisions

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