The corporate world today is so dynamic that the leaders are expected to take key decision within fraction of time to sustain the fast pace markets. While, quick decision making is vital for success, the hurry in making the decisions without referring to relevant and important data points may prove fatal.
Data revolution is already disrupting the world in every aspect and data is proven to be most important asset of any organisation in present corporate world. Data driven decision making (D3M) is one of the powerful tools used by key decision makers to ensure that the possible impact of the decision-to-be-made is analysed in view of available data and interpretation of the same. D3M involves making decisions that are backed up by hard data rather than making decisions that are intuitive or based on momentary feelings and circumstances.
Business decision making is one of the most important and crucial tasks for any organisation and future path of the business is decided by the results of these key decisions regarding business strategy. If the results are not as expected or not delivered at the right time, the entire efforts made in implementation of that particular decision go waste. This not only costs in terms of money but also demoralise the employees involved in the process. While, there is always an element of risk for the possible outcome of the decisions (positive or negative), this risk can be mitigated to certain extent by utilising D3M techniques, or at least one can take calculated risks as per the appetite of the organisation based on the analysis (referred to as Informed decision making sometimes).
Now the question arises, how is data used in decision making and what kind of data to be used. To answer this, a decision maker must know the following:
Data Driven Decision Making Process
The problem Statement:
What is the problem on the table and what you want to achieve by solving the same is the first thing you must know before you start collecting any data. The possible outcome must be aligned with the organisational objectives.
Now, based on the current situation and possible outcome you want to achieve, start asking the questions the answers to which you must know before devising any road map or strategy. Relevant data points in the process must be collected and processed in order to implement D3M successfully. Collection of irrelevant data without knowing the basic problem and desired outcome may be a waste of resources and time.
Reliable Data Source:
What are the sources wherefrom you can get the relevant data is the next important question. You must put together data from different sources – internal records and database, web intelligence, social media, survey reports, market feedback etc. One thing to ensure is the reliability of the sources to be used.
While you may get data from different reliable sources, you may find it difficult to synchronise the same as finding the common string may not be an easy task. Put all the data fields together to see how different databases can be synched. Keep in mind that the data collected for a particular purpose can be stored for future projects also. It will create a kind of repository for you which can be referred anytime.
Data clean-up:
Data clean-up is one the time consuming yet most important task in the process of D3M. It refers to weed out the irrelevant or incorrect data points and correcting them as per the requirements. The cleaner data you have the more effectively it can be used.
To clean up the data, organise your data in various tables or charts and analyse the outcome in view of your purpose. Any aberration must be removed by cleaning up or correcting the data points.
Data organisation:
Once you clean up the data, organise the same in desired shape and model as per the requirements. This is important because even the most cleaned up data if not organised in proper manner may give misleading interpretations.
Various data points may be organised in different ways but in synch with each other. You may use charting and tabulation techniques to organise the data in a presentable manner.
Data Analysis:
At this point, you need to implement various statistical tools to analyse the organised data. The analysis should be able to answer the questions which you had in order to have the clear understanding of problem statement and desired possible outcome.
Apart from the facts presented by the data collected, you also need to decipher the interpretations of the underlying facts. Also, predictive impact of the possible outcome of various options should be analysed.
Final Decision:
Now you have proper data backed analysis, options available and the possible impact of those options available for your perusal. See what all information you have collected from the data analysis and how it is going to affect the decision-making process. Though, it is okay to make certain assumptions regarding products or market behaviour, these assumptions must be fairly supported by the available data analysis. At the same time, do not fall into the trap of analysis-paralysis and decide what is enough for you to make a decision in a particular situation.
The final decision made from these data driven techniques will help the organisation to take more informed decisions and make the process more transparent and trustworthy for all the stakeholders.
D3M is a skill to present and interpret data in right manner as either wrong data or wrong presentation or wrong interpretation may turn the situation worse. The people involved in the process need to exercise extra caution in choosing the data sources, presentation of data and interpretation of data. There must be a complete trail coming out of every data analysis and the analysts must be able to present the same with right inference. With D3M organisations become more agile and can respond to market changes with more powerful impacts.
By CA Vivek Airen
Copyrights: Finhanceologist
About the Author:
Vivek is a Chartered Accountant by profession and also a certificate holder of Master of Business Finance by ICAI. After spending 18 years in all facets of finance at various large and mid-sized corporates, he is now leading a mission of inculcating financial acumen to business leaders and making brand finance as one of the most sought-after attributes. He writes Hindi poetry too.
About Finhanceologist:
Finhanceologist is a concept of curing Financial ailments of the business. Many Indians businesses (particularly small and medium enterprises and new age entrepreneurs) do not have access to full-fledged quality Financial services and do not give much heed to financial processes, controls and compliances. This lack of structured approach towards financial disciplines affects the business growth and becomes one of the main reasons for their downfall in the long run. We have termed these gaps as Financial ailments which are very much curable with our bouquet of services and expertise. Finhanceologist does not act just as an outsourced service provider but as an active business partner with an aim of providing total financial freedom to the business.