Once upon a time in the business world, managers that gave their organizations a competitive edge possessed superior analytical and observational skills. Although natural analytical and observational skills remain an integral component that defines the best managers, mastering digital tools that process data and analytics has emerged as the most important skill to develop.
Digital tools that process data allow managers to observe processes in real time and acquire analytical results in a matter of just a few seconds. By leveraging data and analytics, your organization can make much better business decisions. However, because organizations process an overwhelming amount of digital data, it can be easy for managers to become lost in a sea of information.
This means many companies do not take advantage of the power of data-driven decision-making.
This brings us to possibly the most important business dilemma faced by contemporary managers. How does your organization leverage data and analytics to reach its full potential?
Why is Data-Driven Decision Making Important?
Before we learn how to leverage data and analytics for improved decision-making, you first should understand why it matters to optimize the power of digital tools.
One of the greatest advantages of your organization making data-driven business decisions concerns costs. Any business decision made typically involves some degree of financial risk. Basing business decisions on interpreting data and analytics reduces the chances of making the wrong decisions, and thus, costing your organization money. On the revenue side of the profit equation, data and analytics help you make decisions that give your customers what they want, which translates into more sales and an increase in profit margin.
Data-driven business decisions are easier to make because you reduce or even eliminate inherent biases. Instead of managers making decisions based partly on opinion, all business decisions derive from the interpretation of facts,
What Is Data-Driven Decision Making?
Data-driven decision-making represents the process of analyzing information that forms the foundation of the actions you take as a manager. With data and analytics driving your decision-making process, you can do a much better job of tracking sales and marketing KPIs. Leveraging data and analytics also allows managers to monitor the performance of different products in real time. For example, deploying a site-wide tagging tool helps you monitor your organization’s customer conversion rate.
Data and analytics also improve your ability as a manager to observe customer behavior and purchasing patterns. Instead of guessing how consumers react to a marketing campaign, data and analytics give you insight into how consumers behave when introduced to various promotional campaigns. Visualizing data through the development of dashboards provides managers with real-time information that helps them make better consumer-centric decisions. One of the many benefits of building a dashboard for data visualization is it gives you the ability to watch fluctuations in consumer behavior as it unfolds.
One of the keys to leveraging data involves understanding how artificial intelligence (AI) improves the processing and analysis of digital data for developing successful marketing programs.
What is the Role of Predictive Analytics?
Predictive analytics represents a tool that allows managers to predict future trends and events based on acquiring digital data. For business managers, this means accessing historical data to predict which strategies deliver the most successful results. One of the most common types of predictive analytics tools is called regression analysis, which determines the relationship between two or more variables. For example, using a regression analysis tool can help you determine the relationship between the price and demand for a product or service.
Professor Jan Hammond of the Harvard Business School describes the benefit of using a regression analytics tool. “Regression analytics allows us to gain insights into the structure of a business relationship and provides measures of how well the data fit that relationship. Such insights can prove extremely valuable for analyzing historical trends and developing forecasts.”
What Tools Can Help Me Leverage Data and Analytics
Using the right tools can help you make better decisions for your organization. Business intelligence (BI) tools collect data to help managers find a solution to different problems. Customer relationship management (CRM) software obtains an in-depth profile of each customer to help your organization improve service, while adapting to changes in consumer behavior. Market research tools provide you with information that helps your organization identify customer needs and whether your company currently meets those needs. User experience research tools help your organization improve the performance of current products by analyzing how your customers use the products.
The Bottom Line
Leveraging data and analytics might not solve every problem faced by your company. However, by using the right tools, managers can make sound decisions based on the collection of hard facts instead of playing the guessing game that costs their companies money. Trying to develop a better understanding of how a target market behaves can keep business managers up all night.
Leveraging data and analytics for improved decision-making should turn those restless nights into tranquil nights of sleep.
Additional Resources
Improving Businesses Processes for Increased Efficiency
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