Data Driven approach: the importance of data in business decisions

We hear more and more about Data Driven, but what exactly is it all about? In recent years, data has gained global market attention, to the point of being recognized as a  the world’s most precious resource. More than oil and commodities (The Economist, May 6, 2017). For the past few years, the consolidation of concepts such as Big Data have led to a radical change in business strategies. One of the most important revolutions is undoubtedly the Data Driven approach, or Data Driven Approach. This is a new strategy in which, using the data available to the company and  the appropriate analysis tools, it is possible to use the information to make strategic decisions, based precisely on objective data, eliminating the elements of indeterminacy characteristic of traditional decision-making processes.

Data driven: meaning of the term

In its simplest definition Data Driven means that progress in an activity is entirely constrained by data, rather than by intuition or personal experience. The fields of application are many, but of particular interest is the  Data Driven Marketing, a form of digital marketing strongly based on data analysis, for example through the use of techniques such asA/B testing.

An even more radical approach is also developing around the concept of Data Driven, which has led to the emergence of Data Driven Companies, companies in which the entire management process relies on data and its analytical use.

Embracing the Data Driven Approach, or setting out to become a Data Driven company means applying a major paradigm shift, which brings with it some important benefits.

The benefits of the data-driven approach

The first and most important advantage is undoubtedly in eliminating subjective elements from the decision-making process. In fact, in this case it is the data that drives it,  eliminating any form of bias personal bias and nullifying the risk of making rash decisions, or based on a sense of urgency or the personal perception of stakeholders.

The second advantage concerns the ease of supporting decisions: since these are data-driven, it is much easier to make them clear and understandable to all actors in the decision-making process.

Finally, once theData Driven approach is consolidated, according to a study from Harvard Business School it also makes it easier to identify future trends, to prevent problems and make decisions more proactively.

In order to apply the Data Driven approach systematically and effectively, however, it is necessary to have excellent data analysis and management tools. A Next-generation ERP and the integration of intelligent solutions for user management can facilitate the collection and subsequent analysis of internal data while facilitating production and management processes.

An interesting article from 2018 recounts the experience, for example, of General Electrics, a pioneer of the data-driven approach. In this Sergey Patsko, Engagement Leader explains how managers of data-driven companies, among other things “Challenge the traditional, often empirical approaches that exist within their organizations.”

Much more pragmatic, and much earlier the experience of UPS, which by equipping its fleet with sensors and monitoring delivery parameters, creates optimized routes for each courier.

Data driven decision making: an important trend in business development

Also according to the above Harvard Business School study, referring to the U.S. market, more than half of people rely on intuition when it comes to making decisions, even in a business context, even in the face of information demonstrating the potential risks of such decisions.

However, companies that rely on data, achieve significant improvements with a frequency three times more than traditional decision making.

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