This just feels like the right thing to do. Studies have revealed that more than half of us routinely use our intuition to make significant personal and professional decisions. There are situations when there isn't the time or reliable data available. However, relying on only a feeling of right or wrong would be a big mistake in today's complex and chaotic marketplace. A recent 2021 Fortune 1000 executive leaders survey revealed that 99% are investing in data initiatives to transform their companies. These investments in technology are producing a deluge of available data within companies. But are these investments leading to better decisions?
Leading companies are looking for data to transform their businesses, and 96% of executives report that they are achieving measurable business outcomes. However, these same leaders identify culture as the single most significant deterrent to becoming a data-driven organization. Only 30% of respondents indicated their organization had developed a well-articulated data-driven decision-making strategy and culture.
What is Data-Driven Decision-Making?
Data-driven decision-making (DDDM) has become somewhat of a buzzword as many leaders and organizations aim to be data-driven. A good working definition for what it means to embrace data-driven decision-making is:
Using facts extracted from data and metrics to guide business decisions that support business goals rather than relying on experience, intuition, and stories alone.
The following video provides a real-world example from Google of how businesses can use people analytics to make better decisions.
Why Competing with Data Analytics is Important?
Making data-driven decisions is not the only way leaders can succeed. However, many examples prove the power of analytics.
Understanding what is not working. Testing and data collection enables leaders to fail fast and learn from making decisions.
Leverage technology investments. Technology is influencing every aspect of life and creating new opportunities. Data-driven decisions move beyond insights to action.
Reduce costs and increase revenue. Using data enables organizations to optimize operations leading to reduced costs and increased revenue. Predictive analytics goes one step further, allowing organizations to transform during market change quickly.
Reduce risk. Data analytics enable leaders to reduce risk in decision-making by making data-driven decisions based on facts rather than feelings.
Strategic foresight. Data analytics can help organizations see around corners and plan for mixed realities. It's not about predicting but anticipating potential futures.
Continuous improvement. Data enables leaders to learn and improve decision-making continuously. Measures cut through the haze that comes from relying on intuition.
The Importance of Data-Driven Organizational Culture
"Culture is more powerful than anything else in the organization," and often why good management ideas fail. Upadhyay & Kumar (2020)
Only focusing on building analytics capability is ineffective until an organizational culture supports data-driven decision-making. A firm's capacity and performance with data-driven decision-making are significantly moderated by culture.
Organizational culture is the shared assumptions that influence employees' perceptions, thoughts, feelings, and behavior within a business. A simplified definition of corporate culture is how things get done within the company when no one is watching.
Getting Started by Assessing Your Organizational Culture
Company culture must support business strategies for organizations to be successful. Leaders looking to architect a data-driven decision-making culture should start by clarifying their current business strategies and the characteristics of the existing culture.
The Competing Values Framework identifies four fundamentally different cultures:
Clan Culture creates a collaborative atmosphere similar to a family. The role of leadership is as a facilitator, mentor, and team builder. This culture emphasizes the value of teamwork, participation, and a consensus decision-making style, which may lead to more intuitive decisions. This culture creates value through individual commitment, communication effectiveness, and development.
Adhocracy Culture creates an energetic and entrepreneurial atmosphere. The role of leadership is as an innovator, entrepreneur, and visionary. This culture stresses the importance of research and continuous improvement. This culture creates value through innovative ideas, transformation over transactional, and nimbleness.
Market Culture creates a competitive, fast-paced, results-oriented environment. The role of leadership is challenger, competitor, and achiever. This culture highlights coming in first, which may lead to a more data-driven decision-making orientation as external data analysis can create a competitive advantage. This culture creates value through capturing market share, meeting or exceeding goals, and profitability.
Hierarchy Culture is a top-down formal rule-based atmosphere. The role of leadership is management, supervision, and organization. This culture emphasizes efficient, reliable, and cost-effective performance, which could lead to a more data-driven decision-making orientation as internal data analysis can create improved efficiency and reliability. This culture creates value through promptness, consistency, control, and certainty.
The Competing Values Framework and the Organizational Culture Assessment Instrument (OCAI) provide organizations with a simple validated method to describe a company's existing culture. For more information regarding the OCAI, please go to ww.ocai-online.com.
Leadership creates difficult choices. If you want to build a data-driven decision-making culture or need an executive coach, we're ready to partner with you to craft a solution specific to your organization's context and challenges. Getting started is as easy as visiting www.organizationaltalent.com or contacting us via email firstname.lastname@example.org. Organizational Talent Consulting utilizes proven, simple, and transformational personal and organizational development solutions to help our clients learn, change, and apply tools in ways that benefit their unique needs and corporate culture.
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Davenport, T. H., Harris, J. G., & Morison, R. (2010). Analytics at work: Smarter decisions, better results. Harvard Business Press. MA.
NewVantage Partners, LLC. (2021). The journey to becoming data-driven: A progress report on the state of corporate data initiatives.
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Stobierski, T. (2019). The advantages of data-driven decision-making. Harvard Business School.
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Upadhyay, P., & Kumar, A. (2020). The intermediating role of organizational culture and internal analytical knowledge between the capability of big data analytics and a firm's performance. International Journal of Information Management, 52, 102100