Challenges and Benefits of Data Driven Decision Making - A complete guide

by Ramesh Panuganty, Founder & CEO

Challenges and Benefits of Data Driven Decision Making - A complete guide

by Ramesh Panuganty, Founder & CEO

Data has proven its value by being a helpful companion in our decision making in our daily life – be it choosing a restaurant, buying insurance, or deciding the best investment option. It has also become an essential success enabler in the world of business decision making. Every business decision, whether routine or critical, has an impact on how an organization performs. Oversight, misinformation, guesswork, and lack of research in decision making can cost millions of dollars and bring a bad reputation. That’s why organizations are realizing the importance of data-driven decision making and investing heavily in data analytics and decision intelligence platforms.

What is Data-Driven Decision Making?

Data-driven decision making is the process of using data and insights to enhance the quality and improve the accuracy of decisions, instead of relying on guesswork, intuition, or hearsay. Using this process, decisions are made based on supporting data and facts, thus ensuring better outcomes and minimizing the chances of failure.

According to PwC research,

Highly data-driven organizations are three times more likely to report significant improvement in decision-making.

For example, a bank or a financial institution gathers data about a borrower’s financial standing such as credit ratings, past transactions, references, and background verification, to decide whether they can extend loan or credit limits to the borrower and to what extent. Such data-driven decision making helps them protect themselves from defaulters and losses.

Challenges in Data-Driven Decision Making

Decisions informed by data can guide organizations in achieving their goals. However, organizations should also be aware of the challenges that can reduce the effectiveness of data-driven decision making.

Scattered data

Many times, different departments in an organization generate, collect, and store data in different systems such as CRM solutions, accounting systems, sales and marketing portals, project management solutions, or plain spreadsheets. Decision makers do not have the visibility of these data silos. This leads to incomplete information for decision making. Integrating data from various sources is essential to provide decision makers with a unified view and comprehensive information.

Solution: To overcome this challenge, select a modern data analytics platform that integrates data from multiple on-premise databases and cloud data sources instantly, with smooth onboarding and quick deployments.

Low quality data

The quality of insights obtained from data directly depends on its quality. If data itself is incorrect, has duplicate and missing values, and is not consistent in nature, it loses its credibility to provide accurate insights. Dirty data can lead to risky decisions and disastrous outcomes. Decision makers need reliable and relevant data to make accurate business decisions.

Solution: To overcome this challenge, select a modern data analytics platform that measures the quality of data and highlights problem areas where quality can be improved to increase the quality of insights.

Restrictive analysis

Legacy data analytics tools have limited capabilities for analyzing data. Such tools may provide only half of the insights and restrict a user’s ability to find insights, even if the data exists for it. For example, if the legacy tools only support analysis of historical data, users may miss out on what’s happening in the business today. In this fast-changing business environment, decision intelligence offers real-time insights for making crucial decisions. Any delays can lead to missed opportunities.

Solution: To overcome this challenge, select a modern data analytics platform that connects to data directly to ensure that the latest information is always available, without the hassles and delays of data duplication.

Lack of recommendations

When there is too much data and too many insights, it can get confusing to select the right course of action. This inability to pick the right option often results in analysis paralysis among decision makers, leading to hasty and faulty decisions. Decision makers need actionable insights and personalized recommendations to make quick and confident decisions.

Solution: To overcome this challenge, select a modern data analytics platform that goes beyond the answers to explain “what” happened, uncover “why” it happened, and recommend “how” to proceed in the best possible manner.

Poor data literacy

It may happen that the data is good, the insights are available in real-time, but the decision makers are not able to interpret them properly. Flawed interpretations can lead to wrong decisions and faulty execution. Gartner, in their 2022 trends, predicted that leaders should prioritize data literacy and put in place strategies to address the scarcity of data and analytics talent. Organizations need to focus on training and building data literacy and interpretation skills, so that decision makers can explore data themselves and understand the insights easily, without any dependency.

Solution: To overcome this challenge, select a modern data analytics platform that offers self-service analytics capabilities, natural language search, and interactive visualizations to explore data and receive insights.

Benefits of Data-Driven Decision Making

Once organizations prepare to overcome the above challenges and embrace data-driven decision making across team hierarchies and functions, they can accelerate their progress by reaping the following benefits.

Better clarity

Data can reveal a lot of insights about customer preferences, market trends, operational costs, campaign outcomes, and so on. With easy access to real-time insights, decision makers gain clear visibility and better clarity of what’s happening in their business, where to focus their efforts, and how to take action.

Increased agility

As businesses grow and responsibilities widen, decision makers find it challenging to track all business drivers simultaneously, identify all variables, and monitor industry trends. With data-driven decision making, they can receive new insights instantly, adapt their strategies to changing scenarios, and make quick decisions to ensure that no opportunity is missed.

Protection against risks

Data-driven decision making eliminates the guesswork, errors, and biases that can creep in human decisions, especially in high-pressure situations. It enhances our ability to process huge volumes of data in a short time to find the right insight. It provides the much required support for improving our decision-making abilities and reducing possibilities of human errors.

Empowered and proactive workforce

With data-driven decision making, decision makers feel confident about their decisions and work. They become self-reliant in exploring data and finding insights themselves, which reduces dependency and improves speed of decisions. Such empowerment makes them proactive, and increases their productivity and drive for innovation.

Competitive advantage

Organizations implementing data-driven decision making gain the benefits of better operational efficiencies, better resource allocation, reduced wastage and costs, and quicker time-to-market. As more and more decision makers adopt data-driven decision making and use self-service analytics, organizations are able to increase their ROI on analytics platforms and plan better for the future.

How to get started with Data-Driven Decision Making?

Decisions can vary from routine to unconventional, low impact to high impact, and regular to business-critical. Identify the decisions that require support from data. Then, begin taking an inventory of data sources that will offer value for such decisions. Select a modern analytics platform that aligns with the business's needs and those of its decision-makers. A modern data analytics copilot, enriched with LLM analytics, and offering self-service analytics, an intuitive search interface, and personalized insights, can assist every decision-maker across organizations in making fast and confident decisions.

MachEye is one such modern data analytics platform that accelerates the decision-making process with deep insights and intuitive user interface. By offering intelligent search, actionable insights, and interactive audio-visuals, MachEye makes the insight discovery process not only faster but also engaging and interactive. It acts as a trusted personal business companion who performs root cause analysis, identifies key drivers, and explains the what-why-how of business events in just a single search. With actionable recommendations and upfront business headlines, MachEye guides decision makers in every step of decision making.