There isn’t one, singular thing that makes up a culture. There are several areas that must be aligned and measured in order for an organization to function effectively and efficiently. This starts by being well informed. Data-driven organizations are seeing upwards of 20-30 percent improvements in earnings before interest, tax, depreciation, and amortization (EBITDA) due to unlocked efficiencies and more granular financial insight.
Finances are not often brought up in the culture conversation, but are, of course, vital to any business. However, there are huge gaps between the ways different organizations use financial information to make business decisions. Some implement knee-jerk reactions to financial losses that only end up setting them back down the road. Others are too conservative with their financial planning and never leave room for risk, which ultimately prohibits teams from innovating. What’s needed is a balance that allows for growth, improvement, and innovation.
To achieve this, companies need to improve greatly in three main ways: data source management, analytics optimization, and leadership discipline toward a data-driven culture. By taking this approach, goals are measurable and outcomes are more predictable.
Managing Multiple Data Sources
A data-driven approach involves understanding which data sources are relevant both internally and externally. After identifying the right sources, company leaders must centralize the data and extract thoughtful reporting that can be communicated to the team.
This data source management is not a one-time initiative. It’s an ongoing job that requires the ability to adapt to the changing financial landscape of a business and its industry. Certain data sources may become less or more important over time and it must be actively monitored and adjusted in order to be effective.
Once the sources are identified and organized, the next step involves gathering an experienced team who knows how to create dashboards or other models that will predict outcomes. Through the optimization process, teams can more clearly recognize areas of efficiency that need to be addressed. It also helps to reduce unnecessary costs. If this data is unorganized, inaccurate, or hard to manage, there will be missed opportunities to optimize. The cost? Money, time, and resources down the drain.
Every leader has a different style, but data is objective. What leaders decide to do with the data is a different story. Here lies the crucial part in planning a data-driven approach. If a company does not take the initiative to improve in the first two ways (data source management and analytics optimization), it will never create the ability for leaders to make beneficial decisions for the company.
Leadership discipline means adopting the process of a data-driven approach. It also means asking questions to fully understand the data being presented. If there is miscommunication people are not on the same page, the decisions become opinion-based rather than supported by data.
Taking a data-driven approach isn’t a unique concept. We use data to drive our decisions daily, whether we realize it or not. The weather forecast affects what we’ll wear that day. Health codes let us know which restaurants are deemed safe to eat at and the list goes on.
Just as we use data in our lives to better ourselves and our experiences, companies also need to apply it to their methods of doing things as well. The result will mean happier employees, happier clients, and more longevity in the market.