If you're anything like me, then you've rewatched the Christmas classic, Love Actually, far too many times. Perhaps this song verse will bring back some memories...
"I feel it in my fingers
I feel it in my toes
Love is all around me
And so the feeling grows" - Wet Wet Wet
Hopefully, you've at least seen some of the Love Actually memes circulating and so your brain automatically changes "love" to "Christmas" or some choice expletives Bill Nighy might've used... To get to the point though! If we were to make a 2022 remake of Love Actually with a re-remake of the Wet Wet Wet song, it would be more accurate to say "Data is all around me".
In the time of Big Data and AI, data really is all around us. There's never been a time in history where we've had access to as much data as we do now. We generate more than 2.5 quintillion bytes of data every day! And we've seen time and again that when businesses make data-driven decisions, they do better than when they rely on assumptions or gut feelings.
The ways in which you then incorporate this data in your decision-making process depend upon your goals and the quality of data you have access to.
What is data-driven decision-making?
Data-driven decision making is the process of using data to help you make decisions and to corroborate a certain course of action. You make a plethora of decisions every day - from what you will wear to what you'll eat for breakfast, to which lane to drive in on the way to work. Sometimes, these decisions are based on a whim, a fleeting feeling. Or maybe you go for a scrambled egg bagel because you saw it on Instagram last night. In the long run, it doesn't make a big difference if this isn't the most optimal choice in terms of health or efficiency, but perhaps you see your business decisions a bit differently and take them more seriously than these minuscule quotidian decisions.
All entities have financial data available in the form of the transactions they and their customers make on a daily, monthly, or yearly basis. But you can also collect data from customer surveys, user testing, or the launch of a product or service in a test market, and so on.
The ways in which you then incorporate this data in your decision-making process depend upon your goals and the quality of data you have access to. The kind of data you collect and analyze varies. For some companies, people analytics are used to improve employee retention rates, while for others location analytics are used to pinpoint ideal store locations according to traffic patterns and area demographics.
You can also tap into data to tweak your business model, recruit and manage talent, improve operations, scope out the competition, and identify trends.
PwC conducted a survey of more than 1,000 senior executives and found that highly data-driven organizations were three times more likely to report significant improvements in decision-making compared to those who rely less upon data. According to PwC's findings:
"Companies that inject big data and analytics into their operations can outperform their peers by 5% in productivity and 6% in profitability."
When it comes to making smarter, more informed decisions, we have what we need at our fingertips. So what's holding businesses back? In this article, I'll outline 5 obstacles preventing you from making the best business decisions and how to overcome these.
Obstacle one: Mindset
It's all well and good to say that you are committed to making data-driven decisions, but what about the rest of your organization? In the Harvard Business Review, David Waller argues that "the biggest obstacles to creating data-based businesses aren’t technical; they’re cultural". The issue isn't so much getting hold of the data; it's making sure that the rest of your team is able and willing to access, analyze, and use it effectively.
Waller argues that "the biggest obstacles to creating data-based businesses aren’t technical; they’re cultural".
To make sure that everyone is on the same page, you need to inculcate data-based thinking into the company culture. It is easy to describe how to use data in the decision-making process. What's a greater challenge is normalizing this, making it automatic.
Solution 🧪: Invest in tools that make data analysis easy for staff members to find the data they need and make sense of it. And lead by example.
Managers who set an expectation that decisions ought to be anchored in data enforce the notion that this is a normal approach, not a special one. Therefore, employees are more likely to follow suit.
Obstacle Two: Data entry hassles
To make data-informed decisions, you need data. However, the process of gathering the correct data and entering it into spreadsheets, forms, and accounting software can take so much time that you don't get around to actually making those decisions. According to a recent report from Sage UK, small and medium-sized enterprises (SMEs) globally spend an average of 146 days and £49,000 a year on admin! But there are solutions available to help make data entry less time-consuming.
SMEs globally spend an average of 146 days and £49,000 a year on admin!
Solution 🧪: Automate as much of your data entry as you can.
Certain software solutions extract data from PDFs, documents, images, emails, or websites, and present the relevant information in a structured format. By automating data entry, you can:
Reduce overall costs
Save time
Process documents intelligently
Lessen human error
Increase productivity
Handle large volumes of data and sudden spikes in data entry demand
Improve employee satisfaction
And, most importantly, this will empower you to transition from a focus on data entry to a focus on data analysis.
Obstacle Three: Hesitance to delegate
Many entrepreneurs are hesitant to delegate responsibility. I get it. This business is your baby and leaving your baby in the hands of a new teacher or baby sitter can be daunting. But it has to be done. As your business grows, you need to be able to delegate responsibilities. This may entail training others to take on authority and make important choices.
Solution 🧪: Train your staff in data analysis and allow different members of your company access to data that is helpful to them.
Many software applications enable you to grant access to certain individuals for certain tasks. Make use of these permissions so that you don't have staff members waiting for middle-men to inform them of vital details that they could use right now.
As your business grows, you need to be able to delegate responsibilities.
Pro tip 💡: On Syft, there are different roles that you can assign to different users, including custom roles.
When it comes to delegating, you need to make sure that you have the right infrastructure in place. This means that you have:
Hired the right people: people who can be trusted to make decisions on their own
Documented processes: this is the best way to communicate how you would like things to be done when you cannot do them yourself
Developed robust metrics: regular reports quantify the performance of your business, including both financial statements and operating metrics
At a certain point, you need to have faith that your employees are competent and capable of making important decisions on their own.
Obstacle Four: A lack of focus
Focus starts at the very top. It's critical for business leaders to establish a strong vision, define what success looks like to them and the company, and get rid of any red tape preventing employees from achieving their objectives. As Thor Ernstsson writes for Forbes:
"To improve your decision making environment, you should articulate an aspirational vision, align success metrics toward that organizational North Star, and develop a culture that empowers all employees to do their best work."
Aligning your success metrics with the overall vision of the organization is key. And when it comes to making crucial decisions for your business, you need to know what metrics to focus on.
Solution 🧪: Figure out which metrics are important to the decisions you need to make and zoom in on those.
Refocusing after the world has been turned upside down by COVID-19 is no mean feat. Perhaps you decide it's time to emphasize short-term, pressing concerns like cash flow, debtors, and creditors. Whatever you decide is most important to review right now, stick to that. Don't try to analyze all the data you have just because you have it. Limit your scope to what's most important.
Obstacle Five: Presentation of the data
For some people, graphs and visualizations make it easier to identify trends and make sense of the numbers. While for others, a numeric or text-based summary provides greater clarity. And then there are those who like a combination of the two. When considering his work with entrepreneurs, Suran Moodley, Managing Director at Ariston Global says:
“All of them need the same thing. They need data to be converted into information, information to be presented in such a way that it empowers them with knowledge, and then that knowledge creates ongoing wisdom for them to make the right decisions in their business.”
For some people, graphs and visualizations make it easier to identify trends and make sense of the numbers.
The key is to present your employees with information in a way that works for them and provides them with knowledge that they can take forward to make the best decisions. Using Syft Analytics enables you to understand your financial data through visualizations and graphs as well as text and numeric-based reports, empowering you to make more informed business decisions.
Making better business decisions
As Dr Christina Orphanidou says in her Ted Talk on decision-making in a future of Big Data and AI, human beings are naturally impulsive decision-makers, but with the help of data and data analysis, we can make decisions that are better informed and more beneficial. While impulsivity has its historic roots and uses, data-driven decisions are the path to the future.
Human beings are naturally impulsive decision-makers.
When it comes to delegating responsibility to other members of your team, you can rest assured that better, data-driven decisions are being made so long as you empower your team with:
Access to the data they need
The tools that will help them understand it
The skills they need to analyze and interpret it
And with digital tools like Syft Analytics, it's never been easier to make data-based decisions than it is today. So, if you're feeling data in your fingers and in your toes, and you see it all around you, you may as well let better decisions grow. (Too many Christmas movies, yes, but there you have it.)
If you found this article helpful, you may be interested in our business owner's guide to leveraging your financial data.