Ever heard the expression “data is the new oil”? The phrase draws a connection between two seemingly unrelated types of resources. Just like the black stuff, data can be thought of as abundant but finite, and waiting to be claimed. Data is also effectively worthless in its raw form and takes expertise and investment to refine and process it into something more valuable.
This is where the idea of data-driven culture comes from. Companies with a data-driven culture are guided by the information they’ve gathered and processed. They use carefully managed data to inform their decisions and to make changes to how the business operates, rather than acting on assumptions or tradition.
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What is data-driven culture?
A data-driven culture is one that’s built on a strong foundation of numbers and analytics.
A company with a data-driven culture can be said to place facts before instincts. They responsibly collect as much data as they can, and then take advantage of that data to derive valuable insights and guide their next steps. The numbers can help inform which new products to develop, how to focus investment, where to launch new stores, or which direction to take the business in.
The role of data in decision-making
Whether personal or professional, every meaningful decision we make in life is based on the information we have. Without any information to work with, we’re effectively tossing a coin, choosing an option at random. The more information we have, the more we can tip the odds in our favor.
Having a data-driven culture in business is all about maximizing the information we have, ensuring it’s of good-enough quality to be useful, and allowing it to fully guide our decision-making process.
The role of technology in a data-driven culture
A data-driven culture can’t exist without specialized technology to support it. To start, you need the right tools to organize potentially vast amounts of data and present it in an easily digestible format. Otherwise, the information won’t be accessible by people at all levels of the organization and ultimately won’t get used.
But technology plays another, equally important role in a data-first environment. As well as making information more accessible and understandable, the right tech can help us to gather data more efficiently in the first place. Automated data collection tools, such as those found in most good CRM systems, can take the manual labor out of data-gathering and free up employees to focus on more value-added activities.
Data-driven culture for clients and employees
When people talk about data in business, they’re almost always talking about customer data. But other kinds of data exist: client data, employee data, financial data, and operational data, to name a few. All of these data types can be useful, but customer data is often seen as the most valuable because it can be used to generate an understanding of customer behavior and preferences.
But having a huge pile of customer data to work with doesn’t automatically mean that a company has a data-driven culture, just as discovering vast oil reserves beneath your house doesn’t make you a prospector. There are other factors at play too. Data quality, data governance, and data literacy are all important aspects of fostering and maintaining a data-driven culture that works.
Building a data-driven culture, step by step
Transitioning to a data-driven culture isn’t something that happens overnight. It takes time, effort, and careful planning to ensure that the data you’re collecting is clean and of good quality; that it can be accessed and interpreted by everyone who needs it; and that it can be used effectively to grow the business. Here are a few steps to help you get started:
1. Encourage a data-first mindset
Change starts at the top, so one of the most important things you can do to foster a data-driven culture is encourage a data-first mindset at the highest levels of the business. Data should be front and center in all decision-making, from strategic planning to day-to-day operations.
2. Collect high-quality data
Bad, stale, or incomplete datasets lead to poor decision-making. If you want your data-driven culture to be successful, you need to make sure that the data you’re collecting is of the highest quality. This means having systems and processes in place to ensure that data is accurate, current, relevant, and collected responsibly.
3. Make data-driven decisions
Once you have high-quality data, you can start making data-driven decisions. This means using data to inform your choices rather than relying on personal feelings or looking at whatever your competitors are doing. These decisions can require a degree of bravery and leadership to follow through on, as insights derived from data can sometimes contradict your natural business instinct.
4. Communicate data-driven decisions
Data-driven decisions won’t mean anything if nobody knows about them. Make sure that everyone in the company understands why these decisions are being made and how data is being used to inform them. Emphasize the role of data when it results in success: Did a customer-data-driven rebrand lead to a bump in sales? Make a big deal about it in meetings, and let every part of the business see the benefit of a data-first mindset.
5. Iterate and improve
A data-driven culture is never finished. As your data changes—and the tools used to gather, store, and process it evolve—so should your decisions. Be prepared to iterate and improve as you learn more about your data and what it can do for your business.
The importance of leadership for a data-driven culture
Leaders play a crucial role in guiding any change within a company, and moving to a more data-centric way of doing business is no different. Leaders set the tone. They lead by example, communicate goals to their teams, and decide on the indicators and metrics that will be used to measure results.
But on top of that, they also need to be able to sell employees on exactly why a data-driven approach is important in the first place. Most of us are hardwired to approach problems using the knowledge and expertise we’ve gained through past experiences, even when data tells us otherwise. A good leader provides employees with the training and tools needed to look past what our instincts might be telling us to do in the moment, and instead to trust the analytics.
For many employees, the first step can feel like a leap of faith, which is why it’s important to have effective leaders to support, guide, and shape the data-driven culture as it grows.
Steve Hogarty is a writer and journalist based in London. He is the travel editor of City AM newspaper and the deputy editor of City AM Magazine, where his work focuses on technology, travel, and entertainment.