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The Role of Data-Driven Decision Making In Modern Business Leadership

Updated: Aug 21, 2023



How many leaders do you think built their success based on gut decisions? The number is probably much smaller than you think. Many believe that people can be born good leaders and always “know” the right decision to make. In reality, anyone can be a good leader with proper time and training. Data-driven decision-making is one of the best tools to rely on when building and running a modern business.

Decision-making is a large part of leadership. Learning to make the right decisions can feel challenging, if not impossible. Just when you get the hang of how things work, a situation may leave you feeling back at square one. Luckily, many valuable strategies are designed to help you make the best decisions for your business. This process makes you feel more confident and provides helpful criteria based on facts and statistics instead of feelings and intuition. With data-driven decision-making, you don’t have to rely on a “vibe” when making the big calls for your business.

Data-Driven Decision Making Defined Data-driven decision-making, sometimes called DDDM, is making crucial business decisions based on verifiable data and information. This takes the decision-making process away from gut and intuition and relies instead on research and data. Data-driven decisions aim to help a business grow while sidestepping bias and fear that can inhibit making the right move.

Sometimes leaders may feel their experience and time in leadership makes them an expert on all decisions. Data-driven decision-making can ensure that a leader does not overlook facts because of experience or hesitation.

While gathering data to implement this strategy can take longer, many tools today help speed up the process and make it much easier. Some businesses that want to implement this technique must gather data on their company and the market. But once started, it only becomes easier and faster over time.

Utilizing multiple types of data allows for thorough and informed decisions. Qualitative data, such as interviews, focus groups, and general feedback, helps get more observation-based data. Quantitative data, based on numbers, provide clear and specific statistics about progress and the success of past decisions.

Data-Driven Decision-Making Benefits There are many benefits from data-driven decision-making, including gaining new insight into how your company functioned in the past and how it could look in the future. This decision style can offer a lot for leaders and employees alike, allowing everyone to feel more secure in how things are decided and know that bias is being factored out.

Added Confidence When you utilize data-driven decision-making, you rely on facts and intel to inform decisions. This can help you feel more secure and confident in your decisions. You do not have to take a wild guess about what will work best as a next move. You can study past results and look at the current market to make a choice based on previously gathered information.

Leadership can suffer from rushed decisions or making decisions based on feeling. This can hurt a leader’s confidence, as well as the confidence employees have in them. With this technique, you can demonstrate clearly how and why you made certain decisions and more easily explain to others your exact thinking. Once you have the data tools in place, this process can make you feel more assured and secure.

Removing subjectivity from your decisions will prevent bias and other interferences that could influence your decisions. You will know that you are doing what is best for the company, and you can measure the success to help inform later decisions.

Clear Communication When you are more confident in your decisions, you can share them knowing how you made them and show the exact stats that informed your latest move. You will see improved communication and overall better leadership because of this decision-making technique. Employees value clarity and transparency. Often, it can help people better understand the goals they are working toward when leadership is upfront about business decisions. It can provide a collective purpose and help employees feel more connected to the company.

Instead of saying you made a decision based on feeling, you can show the research that informed that decision. You can share the process and engage with employees about where the company has been and where it’s going.

New Leads When you start utilizing data in the decision-making process, you are gathering valuable resources to help you determine the right decision. These resources can lead to insights about your business and where it could go next. You may have more new opportunities available than you realize and are ready to be taken advantage of.

Companies that start the data-driven decision process without an extensive background in data will need to do more work to acquire these resources. But once the data is there, it can be used to help access new revenue streams or a new customer base. This research can point to untapped potential you weren’t aware of and help you find ways to utilize these opportunities. Gathering data can become much more if you remain open to new things and change. And an adaptable leader is one of the best kinds for any company.

Examples Many companies have utilized data-driven decision-making to grow and increase profits. Some companies, like Google, have more data access built into their plan, allowing for ease of use. But others have incorporated it to help them grow.

Amazon is an excellent example of a company using data to help increase sales. A company based on commerce needs to try and stay one step ahead of the consumer, always predicting their needs. Amazon used past purchases and behavioral analytic techniques to generate customer recommendations. This helped increase repeat customers and boost sales in a variety of areas.

Southwest Airlines also utilized data-driven decisions to help expand and retain its customer base. They used customer data to help determine what features are most desirable and appreciated in an airline and used that knowledge to improve customer experience, building loyalty and growing simultaneously.

Plenty of other big and small companies have used data-driven decision-making to help them improve and reach new heights. But how do you incorporate this style into your leadership when new to the idea?

How To Incorporate Data-Driven Decisions You can take many steps to build data-driven decision-making into your everyday business choices. Some of these steps may already be in the works, while others will take some work to get started. Even if it feels like a lot all at once, you can go one at a time to incorporate it slowly. And once you have started, it becomes much easier to utilize frequently. Some of the most important steps include the following:

  • Learn how to read data: You may know some basic analytics, but you must understand what you’re looking at. This might include hiring an analytic or data scientist to help your company get started.

  • Gather data: Not every company has a lot of data on hand. Those that have been around for a while may have a lot to sift through, but starting now will be the best way to gather more and help use it to make smart decisions.

  • Clean and focus your data: Not all of the stats you gather will be useful to your company or the decisions you need to make. Organizing and cleaning up your data will help you better understand your needs. And then, you will want to consider KPIs or key performance indicators. Which pieces of data actually tell you how your company is doing? And how can you use it to influence future decisions?

  • Look for patterns: Knowing patterns is a great way to begin seeing how data can work for you. These trends will help dictate your next move and can show you where to direct your attention as a business.

You can use additional steps to add data-based decisions to your repertoire, but these are the main ones that will help get you started. Once you have data and understand its meaning, you will see how it can help with future business choices.

Data-Driven Success If you as a leader are open to change and want to adapt to more modern business models, utilizing data-driven decision-making is a crucial step. Some people may need help incorporating it due to the added work of gathering and understanding data. Or they will view it as a threat to their ability to decide independently. But leaders need to work with others. They serve a team and work to help the business succeed. And making the best decisions to ensure that happens should be a priority.

If you want to start incorporating data-driven decision-making into your business, start with the steps above and see how you can better understand where your company stands and where it could go with the right choices. You may be surprised at how much a business can change when people are open to new tools and techniques. Your company and leadership skills can improve with this strategy, but you must be open to change. To help grow your leadership adaptability, check out this webinar to help you adjust to the ever-evolving business world.



CHRIS DYER Chris Dyer is a recognized company culture and remote work expert. As a former CEO managing thousands of people, his companies consistently were named a best place to work. They have also been named a fastest growing company by Inc Magazine 5 times. Chris routinely consults and speaks, and Inc Magazine ranked him as the #1 Leadership Speaker on Culture. He has two bestselling books The Power of Company Culture and Remote Work, and has been named #5 on the Leadershum Power List, a Top 40 Change Management Guru, a Top 50 Global Thought Leader, and a Top 50 leadership podcast just this year. As a leadership speaker his goal is to inspire audiences with a straightforward delivery, insightful candor, and engaging humor. His talks leave audiences permanently transformed, offering innovative perspectives on leadership to improve company culture, and empower organizations to discover new successes. Countless companies have unlocked productivity, performance, and profits by implementing his 7 Pillar Strategy.

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