In a fiercely competitive business landscape, senior executives are under huge pressure to ensure that any decisions they make are the right ones. Data should, and often does, underpin the decision-making process but many businesses struggle to make the most of the information stored in their systems, not least because of a lack of skilled people. Outsourcing provides a means to solve this problem.
In theory at least, data-led decision-making is firmly embedded in the mindset and practices of the majority of business leaders. Very few entrepreneurs would launch a new company without first analysing all the available market information. A CEO taking a strategic decision about the future direction of his or her company will take into account first and third-party data highlighting the market trends, the costs and the opportunity. An executive managing a complex supply chain will be constantly checking the available information to ensure that the operation is optimised.
And data-led decision-making can benefit organisations at just about any stage of their development. For instance, Deliveroo is one of the most successful companies to emerge from the UK’s tech/startup ecosystem. The decision-making behind the company’s core business operation – the delivery of restaurant and takeaway food to households – is underpinned by the data it collects every day from multiple touchpoints. The information not only ensures that delivery is as fast and cost-effective, it also helps the company identify trends in the market, thus enabling it to evolve the service and ensure it remains competitive.
At the other end of the corporate spectrum, global logistics firm UPS has cut labour and fuel costs by using location data to optimise the routing of its vehicles.
Those are just two examples of data-led decision-making and the difference it can make. But are we talking about the exception rather than the rule? Is decision-making in the majority of businesses as data-led as it could and should be? The truth is that while organisations are generating and storing more data about their operations than ever before, not all of them are taking full advantage of what, in theory, should be a treasure chest of actionable intelligence.
Vision Versus Data
There are a number of reasons why that is the case. Culture plays a part. Business leaders – whether CEOs, C-level colleagues or entrepreneurs – are often visionary people. They see gaps in their chosen markets and act quickly to step in with new products and services. From the outside looking in, that can look a lot like gut instinct. Indeed, the business leaders themselves may take pride in their “superior” intuition. It’s what sets them apart.
Now it’s important to stress that qualities such as intuition or the ability to follow a gut instinct should not be underestimated. But in a very complex business environment, they can only take you so far.
Think of it this way, business leaders have always based their decisions on the available evidence. In simpler times, it was often relatively straightforward to make sound judgements based on just a few numbers. At its simplest, a retailer will decide what to stock and not to stock based on sales figures.
But today’s businesses are gathering data from multiple sources – perhaps thousands – and the story told by the information is not always easy to interpret.
The question is, how do business leaders make sense of all the data – internal and third party – that they’re collecting? How do they ensure that the raw information is turned into useful data that enables them to make decisions about what their customers are doing today – and equally important – what they are likely to be doing tomorrow?
The Data Challenge
There are dangers in misreading the data and again there are human factors to consider. For example, a CEO might choose to focus on a particular subset of information that happens to align with an existing bias. Equally, the data may not be presented in a way that supports decision-making.
This is where access to talent comes into play. In order to have a clear sight of what the data is actually saying, organisations need to draw on the talents of skilled data scientists. Such people are often in short supply.
The alternative – and it’s one that many organisations have opted for – is to use cloud-based decisioning tools provided by data specialists. By using third parties, businesses can leverage the power of their data to support decisions and harness the power of analytics in real time. This clears away one of the major obstacles that stands between organisations and their plans to become data driven.
There are other challenges. As McKinsey points out, businesses that plan to become data-decision-making-ready have to ensure they have embedded data gathering in every process; while being able to process information in real time, store it effectively and make it available across functions and silos. Outsourcing at least some of the processes associated with decisioning allows businesses to press ahead with a key aspect of their digital transformation plans.