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What Is Data-Driven Decision Making?
Data-driven decision making is the process of applying comprehensive data analysis to the decision making process. Data-driven decision making seeks to identify opportunities and risks, predict outcomes, anticipate challenges, estimate needs, and refine product development processes. By analyzing data and applying the findings of analysis to business decisions, businesses can see a variety of improvements in overall outcomes.
There are many advantages to using data to inform business decisions, ranging from cost reduction to more successful employees to happier customers and investors. Data-driven decisions contribute positively to nearly every aspect of a business’s development, and can even get struggling companies back on track for success. Here are some of the benefits of using data to make business decisions and how it can affect outcomes.
By studying consumer data, such as how and why products are purchased and used, companies can reduce costs through the elimination of unnecessary features, substitution of cheaper materials that do not negatively impact sales, limiting advertisements to the most beneficial demographics, and avoiding overproduction. These strategies all reduce overhead and improve profitability, making otherwise impractical products and services more viable.
By using data to drive product and service development choices, businesses can expect to see an increase in customer satisfaction. Through analysis of customer needs and wants, a business can more easily cater to those factors and provide more valuable products and services to their client base. Without data-driven approaches, businesses can, at best, guess what consumer trends are going to develop and what features or functions a given consumer population will be looking for in a given sector.
With recent advances in data management capabilities, businesses can now study their customer base and identify trends associated with repeated purchases. These trends can be cross-referenced with attributes of established customers and used to predict who will and won’t be likely to purchase a given product or service. This streamlines advertising, allowing for targeted marketing campaigns, and helping to eliminate wasted advertising dollars.
By making decisions that are supported by the data available, businesses are more likely to be successful than those that rely on intuition or traditional thinking. With this increase in success comes increased confidence in the decisions made in product development, marketing, distribution, and production. Increased confidence positively impacts company valuation and makes potentially controversial business decisions easier to sell to stockholders and management.
The availability of data on customers, purchasing behavior, and industry trends allows companies that properly analyze and apply this data to anticipate opportunities before competitors. This provides access to a greater share of their industry’s market and can help ensure the continued success of the company, even in competitive fields such as custom application development.
Though helpful for many industries, those handling coding, networking, and information technology recruitment in particular benefit from data-driven decision making, as there is likely to be a large body of empirical data on prospective candidates available for review in the hiring process. By examining the real-world outcomes that applicants have contributed to, a hiring manager can make informed decisions.
While the advantages to making data-driven business decisions are numerous and significant, the process is not without its challenges. Failure to use high-quality data transfer software may lead to incomplete data transfers between old and new systems, which can disrupt previously successful data analysis and application. Looking out for these and other technical issues can reduce the likelihood of negative data-related impacts.
Ensuring you have the most complete and relevant data is necessary to achieve the best results from your data-driven business decisions. There are many ways to collect data at various stages, and properly utilizing each data collection opportunity ensures the best possible data, and as such will help your company achieve the best possible results for your product or service.
Here are some of the most common ways companies gather data used to make decisions about their products and services:
