Often business is considered synonymous with Profit. Better profits come from better decisions, especially for day-to-day business activities. The profit margin of any business depends on multiple variables at a time. The cost of raw materials, transportation, infrastructure, etc., are recurring & dynamic in nature. ‘Right Quantity’ & ‘Right Time of Purchase’ are the two most important decisions that can widen the gap between cost & Profit. Findings of such nature should only be determined based on past performance & future predictions. That is when we need data & reliable insights to make actionable decisions. Data-driven decision-making is as simple as validating a decision more accurately before committing to it.
In 2008, Starbucks had to shut down 100s of outlets. The CEO then pledged to change how decisions were made for the store locations. The company appointed a location-analytics company to target ideal store locations based on data like demographics & traffic patterns. The organisation adopted a more analytical way to understand & analyse the data. Before making any decisions and investments, they used data and insights from the regional team to determine the likelihood of success. Data sounds very ordinary, but when utilized correctly can change the direction of the business.
Benefits of Data-Driven Decision Making
- You Will Make More Confident Decisions
It doesn’t matter how small or big the business is; while collecting and analyzing the data; you’ll know that data performs multiple roles. When you rely on data, you’ll find it easier to reach a confident decision. Your decisions are not based on thoughts but on logic & facts. Whether you are planning to launch or discontinue products, adjust your marketing message, or expand into a new market, you will better understand the impact of every decision you make for your business. On one side, data analytics gives you current practical positioning of where you stand & on the other side, serves you with extra time and room to improve & implement better solutions.
- Pre-empt the Opportunities and Threats
Data tells you both opportunities and threats, keeping you confident & alert in advance. By identifying the business opportunities before your competition or by detecting threats before they grow too serious, data leverage your business to become proactive. At times, more than just the right decision, the right time plays a significant role. Some mistakes can be rectified with better solutions, whereas some can not be revised, and the impact lasts for an extended period. Proactiveness helps the business to eliminate various unanticipated events and improves readiness.
- CBA (Cost Benefit Analysis)
Data Analysis aids in framing CBA strategies. It majorly helps in decreasing expenses as everything is now pre-planned. The workforce, order & re-order level, storage, shortage issues, downtime, and supply chain are well strategized. Many companies already use big data today as it highly improves operational efficiency with visible results.
The ability of businesses to make informed decisions based on the latest up-to-the-moment information is rapidly becoming the mainstream norm. Data Analytics or Data-Driven Decision Making is a tool that decides who has the competitive edge in the present market.