Key Points

• Data-driven decision-making is an approach utilizing hard data.
• It can reduce costs and help achieve goals.
• Data-driven decision-making can help re-orient your organization to realizing short-term and long-term goals.

What is data-driven decision-making? Chances are you’re used to seeing data-driven being bandied about, considering this you’re on our site. However, that isn’t the full approach we’re discussing today. Six Sigma is a methodology driven by data, but it isn’t the whole picture for this new set of tools coming about in the modern era.

With that in mind, let’s dive into what it is, how it works, and how to implement it into your business.

Overview

So, how do you define data-driven decision-making? It is a decision-making methodology that relies on analytics, metrics, facts, and other data points to guide actions in your organization. It doesn’t rely on things like human bias, hunches, and so forth.

Instead, it leverages the power of data, hard empirical information that you can use to guide and shape future decisions. Implementing it in an existing organization isn’t necessarily hard, provided the culture itself embraces a certain degree of creativity and critical thinking.

Getting on the trend now might give you the competitive edge you need to stay afloat in this information-driven age. You certainly don’t want to be left in the lurch, especially if your organization has already embraced the Lean Six Sigma principles.

What Is Data?

Rather than assuming you’ve got data on the brain, let’s take a minute to break it down. So, what exactly is data? Think for a moment about your customers and the products you sell. Those alone are two separate data points. You can break those down even further, by demographic, location, and so forth.

These data points are the foundation of data-driven decision-making. Put simply, data is information that you can leverage to fuel your own decisions. It is one of the foundational elements of Six Sigma and Lean methodology, and if you go perusing our site, you’ll find plenty of articles related to the subject.

Why It Matters

Any organization generates data, that’s just a hard fact of life. However, what you do with that data in the wake of generating it makes all the difference. Think about your current decision-making processes, which any team has in place. You might defer to seniority, historical trends, forecasts, and so forth.

What if you didn’t have to rely on hunches and human biases? What if you had the clear means to step forward and make the right decision every time? Data-driven decision-making isn’t necessarily a panacea for all that ails you, but it’s quite close.

Using the power of data-driven decision-making makes for clear decisions and can encompass the whole organization, from HR to manufacturing, regardless of your industry. There is a fair bit of legwork you’ll have to consider before you start reaping its benefits, however.

The Benefits

So, we’ve defined and shown the power behind data-driven decision-making. However, we have yet to show the benefits behind it. With that in mind, let’s dive in and see what data can do for your team and organization.

Confident Decisions

Once you start paying attention to your data, you’ve got a solution for just about every challenge that arises. Data comes in many forms and fills several different roles. You can use it as a benchmark for processes you already perform, or for steps to improve them.

We’ve discussed tools that leverage data in the past, like the Gage R&R and MSA among others. However, data applies to all strata of your business. What I can say is that data is concrete and immutable. Data points don’t lie, they don’t mislead, instead, they simply state the facts.

Paying attention to your data allows you to make decisions confidently, with solid backing. It might not always be the correct decision, but you’re committing to a new strategy, so missteps are expected.

Proactive Measures

When first embracing data, it can be easy to react. That’s to be expected when you’re utilizing data-driven decision-making for the first time. It’ll take time and practice, but eventually, you’ll start using this data proactively. You’ll make decisions that identify opportunities.

Further, you can use this data to identify threats before they compromise your organization. Speaking from experience, your IT staff is already using data-driven decision-making to keep your business safe, you can do the same.

Cost Savings

Investing in data analysis can be costly at first glance. You need staff versed in parsing raw data and interpreting it. However, once that initial step is out of the way, you’re on the fast track to efficiency. Data-driven decision-making can be utilized to reduce costs, yielding better returns as a result.

Not every organization is going to utilize this method of decision-making in the same way. There is no blueprint or guide on how to properly incorporate it into your business. However, many companies are already seeing massive returns and increased efficiency.

Real-World Examples

So, are you ready to see how major corporations are leveraging data-driven decision-making? The Charles Schwab Corporation is one of the leading and largest financial service firms in the United States. Historically, this is a data-oriented industry.

Charles Schwab has embraced data-driven decision-making to improve its customer experience, reduce risk, and leverage said data for better opportunities. Further, they’ve incorporated data-rich visual analytics, rather than sticking to the old-fashioned way of spreadsheets and number-crunching.

By embracing data-driven decision-making, Charles Schwab is moving fully into the information age, creating actionable data they can promptly move forward on. They are just one of many corporations using the power of data to create new opportunities.

Ways to Incorporate Data-Driven Decision-Making

Now, I’ve said there isn’t a clear-cut blueprint, but there are some proactive steps you can take to incorporate data-driven decision-making in your business. These are going to differ from organization to organization, but the general concept can stay the same.

Identify Your Goals

What are your goals for incorporating data-driven decision-making? Before you start on the legwork, you need to identify what you want out of this approach. Whether it’s increasing sales, minimizing risk, or simply driving traffic to your social media platforms it needs to be identified.

Why start here? Well, there isn’t much point in starting a whole new shift in your organization without a finish line. You might see the benefits across the board afterward, but having a simple goal is going to be the impetus to get you there.

Think of it like exercising, you set a goal before you start doing the hard work. The same proverbial muscles need to be prepared in your organization.

Survey Your Teams

Your business is constantly generating data, whether it’s from external or internal sources. However, just like you might survey customers to gauge, you’ll want to do the same with your teams. Each team will likely have its own goals, which can help drive how you begin to interpret your data.

This is just one component of data-driven decision-making. Starting internally poses less inherent risk than starting the process with your customers. However, the data points you receive from your team are going to impact the rest of your implementation of this approach.

Collect All the Data You Need

You need trusted and reliable data. As such, your employee surveys need to be rich in detail. Once you’ve gathered the data, you’ll need to prepare it for exploration and analysis. Now, you could go about this with spreadsheets like it’s 1995. However, in the modern era, we’ve got plenty of software suites that allow you to leverage that data.

Explore the Data

Now that you’ve got your data, it’s time to explore it. If you’ve properly informed it, you can start noticing insights and patterns in your data. This is the core of data-driven decision-making and an important process.

Organization is going to differ based on what your overall goals are. If you’re looking to increase traffic to your social media profiles, you’ll likely be looking at what posts succeed and which don’t. Make sure you identify the criteria you’re using to explore your data.

Analytics and Insight

If you’re a keen practitioner of Six Sigma, you’re likely familiar with statistical analysis. It is one of the cornerstones of the methodology, so this should be well-tread territory for anyone versed in the subject. What insights can you glean from the data?

Analysis is a key step in any data-driven process. Understanding how to interpret and explain your data to the less statistically inclined members of your organization is paramount. There are numerous tools ready to explore and visualize your data.

Whatever your approach, it needs to be clear and concise. You need to illustrate your points and how they relate to your goals. From there, you can start developing a plan of action.

Act

With data and insights in hand, you’re ready for the next step. This final step can come in the form of a presentation or simply acting upon your data to spring forward into a new era for your organization. Whatever you decide, it is important to understand the goals you set at the beginning of the process.

We’ll return to the example of a social media profile. If you’ve noticed and quantified which posts are doing well, you can start putting a plan of action in place to capitalize on this information. Now, you’ll want to keep in mind that data-driven decision-making isn’t a recipe for success.

However, with any luck, you’ve achieved your goal, and are ready to set more goals and repeat the process all over again.

Other Useful Tools and Concepts

We’ve talked at length about data-driven decision-making, but those aren’t the only tools at your disposal. Speaking of data, you might want to look into how AQL applies to your production. The Acceptable Quality Level is a metric that readily allows you to see if the products you’re making meet customer expectations with a smaller sample size.

Additionally, if you’re looking for more decision-making tools, paying attention to MSA is certainly worth a look. This is also a data-driven approach toward verifying the accuracy of your measurement systems. Customers have expectations, and MSA can make sure you’re reaching them without more flaws appearing in your projects.

Conclusion

Data-driven decision-making is making its presence known more and more. While data has always been at the heart of the modern company, never has it been leveraged to create a blueprint for proactive decision-making.

As such, you would do well to incorporate it into your organization. With companies of any size embracing this approach, it is the way of the future. Just like you have to adapt to the changing of customer expectations, you have to pay attention to the trends and tools everyone is using to succeed.

The image featured at the top of this post is ©Ground Picture/Shutterstock.com.