How can companies ditch that gut feeling and make decisions based on data?
Cristopher Frank, co-author of Drinking from the fire hose: Making smarter decisions without drowning in information, has an interesting analogy to explain the plight of hi-tech companies struggling with digital transformation. Remember the protagonist from the fairy tale Alice in Wonderland? The story goes that Alice asks the Cheshire cat for directions, who in response asks where she wants to go. Alice says that she really doesn’t know; in which case, the cat pronounces that it doesn’t matter whichever way she goes.
This ‘Alice in Wonderland problem’, as Frank so eloquently calls it, is very common among hi-tech companies who simply do not know what they aim to achieve with the use of big data and analytics. Most enterprises would like to use data to make intelligent business decisions, but have absolutely no idea how to go about it.
Beating the HiPPO effect
According to an interesting study in the Harvard Business Review, while 80 per cent of survey respondents rely on data in their professional roles and 73 per cent rely on data to make work-related decisions, 84 per cent still said managerial judgment is a factor when making key decisions. Avinash Kaushik, the best-selling author of Web Analytics: An Hour a Day, calls it the HiPPO (highest paid person’s opinion) effect. In most organizations, when a HiPPO is in play, decision-making becomes a personal affair, based on someone’s likes, dislikes or gut feeling. And others simply go along with it!
It’s about time we beat the all-pervading HiPPO effect with the latest data arsenal. The idea is to become more objective and data-driven, embracing the power of technology, to change the prevalent expert-based mindset to one that’s more dynamic and agile to the changing realities of today’s world. From the top management’s commitment for adopting digital solutions to encouraging cross-functional teamwork and building a data-driven workplace culture, there’s a lot that goes into digital journey transformations and objective decision-making processes in enterprises.
What customers want
With the incorporation of new technologies, traditional working models are paving the way for new business approaches that look at customer experience as the ultimate goal of any digital transformation. In an age when personalized services are the norm, data analytics can show enterprises how their customers think, what their pain points are and what they really want.
The idea is to cater to every customer demand. It’s proven that across sectors, satisfied customers spend more, exhibit deeper loyalty to companies, and create conditions that allow companies to have lower costs and higher levels of employee engagement. And this is true not just for online service providers like Uber and Amazon, but also for traditional business-to-business players in sectors such as chemicals and steel.
Customers today expect their demands to be met swiftly, making it impossible for enterprises stuck with traditional operating models to survive. The focus can no longer be on optimizing internal capabilities; the customer’s needs have to be at the center of all business decisions. Also, it’s critical to ensure that all departments – whether from the business side, information technology, back-end operations, or other support functions – work collaboratively towards a single vision for a consistent customer experience.
Counting the benefits
When companies make data-driven decisions based on customer demands, experts concur, the results will reflect in the bottom-line. However, it’s not simply about increased revenues and reduced costs. Data also helps to reveal new insights – such as modifications in customer behaviors, to subtle changes in operational outputs. Armed with the right data, companies can build effective strategies to meet business targets, decide on techniques to accelerate delivery of business benefit, and quantify the effect of a proposed investment before signing on the dotted line.
While many of the benefits of embracing a data-driven work culture and decision-making process are tangible, there are innumerable intangible advantages as well. From the impact on strategies and employee engagement to the increase in customer satisfaction and drop in customer pain points, data-based dialogues can be real game-changers. Provided the decisions are not based on unreliable data, or data involved in security or privacy disputes.
The biggest challenge, with ever-increasing data, is deriving meaningful insights from it and converting the knowledge into action. From ensuring the quality of the data gathered and the effectiveness of its analysis and interpretation, to building the infrastructure to capture and store the data, as well as train individuals in data literacy and interpretation, there are processes that need to be in place for data to work its magic!
To stay competitive in today’s market, enterprises need to be ready and willing to adopt a data-driven culture. And that takes more than appointing Chief Data Officers and/or Chief Analytics Officers. Whether it is depersonalizing decision-making or acting on data-based insights in time, enterprises need to realize that technology alone is not enough. Without the right people, working in a culture that values data and knows how to use it effectively, there can’t really be a digital transformation.
Ultimately, data can’t make decisions; it can only support and guide decisions to be made by human beings. The key is to humanize the data and make it less intimidating. When data-based decisions become a way of life, it’ll certainly drive the bottom-line results across the enterprise.