Understanding the Importance of Data as a Strategic Asset
Maintaining a competitive edge in business is an increasingly common challenge as management sifts through fast-changing trends and ever-evolving information. It’s an unavoidable fact that data sits at the heart of a company’s decision-making process. “Big data” has become a buzzword, but one with a concrete basis in a common business need; big data analytics helps organizations sift through reams of information to make informed decisions to steer the course of their business.
Using data analytics to inform decision-making allows an organization to remain agile and seize opportunities that might otherwise go unnoticed. Given the tremendous benefits accessible through data analytics, it can be tempting to dive in immediately. However, embracing the use of this emerging field requires thoughtful implementation and a clear understanding of data-informed vs. data-driven approaches to decision making.
Simply put – it’s easy to put a lot of faith in data while ignoring its context and what it means as part of the greater whole.
Big Data and its Role in Business
The concept of big data emerged from the need to understand patterns, preferences, and trends in huge databases created by the interaction between people and systems. Shifts to digital processes and technologies in an organization have made data collection incredibly easy while creating a mountain of information for these organizations to parse and sort.
Analytics simplifies the sorting processes, presenting easy-to-digest data in convenient and customizable interfaces. By analyzing your data, you can identify trends, letting you take advantage of these opportunities before they pass.
Of course, it’s always easier said than done, and it’s easy to go too far with using data as part of your decision-making process. Data is a concrete point of reference, which makes it a powerful tool, but it’s easy to ignore that the data you gather may not reflect the strategy you have in place. Context is absolutely vital when it comes to understanding your organization’s data to avoid false positives.
In fact, one of the biggest pitfalls an organization faces when using data analytics is approaching their information with a data-driven mentality instead of using data to inform their decision-making.
Data as an Innovator
Research from MGI and McKinsey shows exactly how prevalent data and analytics have become. Alongside labour and capital, “data has swept into every industry and business function and is now an important factor of production.” Their research estimates that in 2009 (nearly a decade ago), nearly every 1,000-employee company in every sector in the US economy alone had, on average, a minimum of 200 terabytes of stored data.
That number has only grown with the adoption of data analytics throughout organizations globally. Simply put, there’s a vast wealth of information available on everything from company sick days to inventory management. Close analysis of this data and an open mind offer tremendous opportunity to innovate, implementing new practices informed by close analysis.
Data-Informed vs. Data-Driven: What’s the Difference?
At first glance, these terms can easily be used interchangeably, but they are remarkably different approaches to a single issue.
Data-driven is a term that gets thrown about a fair amount but can carry a negative implication. As mentioned earlier, data is a concrete point of reference, the ultimate tool for the skeptic — “What does the data show us?” But this approach, treating data as an infallible point of reference and using it as a key indicator to inform decision-making processes, is inherently flawed.
Data is simply one part of the equation. Your data reflects a current audience and a current approach, a small subset of all the information that’s actually available. Your data is a snapshot, not a photo album, showing what’s possible in your existing market, but not necessarily giving you the insights you need to expand out of it.
To put it bluntly, data can easily be systematically biased without appropriate investment in its interpretation and application. That’s why a data-first-and-only approach is frequently flawed.
Data-informed approaches acknowledge these limitations and focus on incorporating data literacy amongst the workforce to put human decision-making at the forefront of the processes. For example, GPS systems give you optimized routes, but you’re still the one behind the wheel, and you will use your experience and knowledge to make a decision as to which route you’ll take and whether deviating from it will work for you in the long run.
Developing a Data-Informed Culture and Decision-Making Process
Data-informed decisions start with a good strategy. What are you looking to achieve? Putting your data to work for you requires a vision. From there, you can develop a strategy. This strategy should tell you where you are, where you want to be, and how you plan on getting there. By laying out the core principles surrounding your IT and data needs, your organization determines its approach to these massively important aspects of its operation and identity.
In turn, understanding these principles and using them to shape and guide your organization’s approach inherently impacts culture. The decision-making process doesn’t need to be complicated, either. Remember, you’re using data to answer questions, so put those questions at the heart of your decision-making process:
- What happened?
- Why did it happen?
- What do we do next?
Data offers concrete insight into these common queries, as we’ve mentioned before. We need to make decisions based on facts, using instincts and goal-based plans with those facts and analyses in mind.
It’s also important to understand that sometimes data will fall short of being able to provide an adequate picture. Some markets are simply so large that their full scope prevents data-driven approaches, with a data-informed mindset being the only viable alternative.
All this is to say that your organization will inherently be pushed towards data-informed approaches. Data analytics as a service is not a magic cure-all for the challenges you’re facing. It takes careful understanding and a thoughtful, creative approach to generate stunning results. Analytics are a set of tools, and your success depends on how well your organization employs them.
If you’re keen to dive into the world of analytics, but aren’t sure where to start, contact IDS Systems today to discuss your organization’s needs. Our consultants are always happy to discuss what we can do to help you achieve your goals.