Running a company involves constant risk and operating under conditions of uncertainty. This is particularly important in times of dynamic economic, legal and even social changes, which, as it were, force companies to constantly adapt to changing conditions.

By constantly focusing on effective development, companies are able to succeed largely thanks to properly acquired and utilized knowledge. They build knowledge on data, and it is only as complete and useful as it has been possible to integrate this data into the company’s operations. In other words, today’s agile, innovative organizations are forced to dynamically transform themselves into so-called data-driven organizations, i.e., data-driven at every level of their operations. How to do it right, what to focus on, where to start?

What is data-driven culture?

Today’s world is rapidly rushing forward, there is no time for mistakes, the volume of problems to be solved is constantly growing, and the time for making decisions, even strategic ones, is much shorter. In order to remain competitive, following in the footsteps of the giants, even small and medium-sized companies must ensure innovation, flexibility, as well as possess the ability to acquire and process knowledge about the competitive environment and anticipate trends. As William Deming said: “It’s not enough for you to do something to the best of your ability, you need to know what needs to be done and then execute it to the best of your ability.” Acquiring reliable knowledge and using it skillfully are crucial to the operation of an effective organization, which is why the fastest-growing large corporations are increasingly betting on the development of a culture of data-driven in their organization. Studies conducted by research firms like Gartner increasingly show that having comprehensive data analytics will become as natural and commonplace as using computer software for accounting (it used to be not so obvious). Companies that fail to pay their technology debt in the data area (so-called  data debt) will fall far behind the competition or become increasingly inefficient. 

A data-driven organization can be defined as one in which the foundation for analyzing opportunities and threats, drawing conclusions, and ultimately making financial, strategic or operational decisions is made up of reliable, measurable, data-driven facts. It is not without reason that data is considered a new type of capital whose value is growing and will continue to grow in importance. Every organization generates data; some companies are not even aware of how much data they have. Through their in-depth analysis, this data can be transformed into the practical, action-inspiring knowledge needed to attract new customers, reduce costs, increase operational efficiency, optimize the use of existing resources, identify deviations from norms, budgets, trends, and so on. All of this is necessary to effectively build the company’s value and increase its competitive advantages.

What else is a data-driven organization? The key word is “organization.” Data-driven orientation should not take place at the level of a single process or employee, especially executives. A culture of data-driven management and decision-making should be implemented across the entire organization, all departments and processes. There is increasing talk of democratizing access to data, meaning making it more accessible (to a reasonable extent) for daily activities to as many people in the organization as possible. It’s critical that managers, even at the middle level, be equipped with up-to-date, reliable, hard-data-based knowledge about the functioning of the process they are responsible for, the department they manage or the region they oversee.

So how do we become a data-driven organization, a data-driven organization?

You should start your journey in this process first and foremost with data collection. By delineating standardized for all departments or processes, standards and rules of collection related to their acquisition, storage, flow and further use. Like diamonds, “uncut” data have a much lower value. Therefore, it is worth ensuring that they are of high quality, i.e. reliable, up-to-date, consistent, thus causing them to increase in relevance and value, and in practice – making them business or operationally useful. However, this is obviously not the end of the story. A data-driven organization not only sees the potential in data and is able to collect it, but above all, it is able to work with the data, is constantly attentive to its quality, draws conclusions from it and bases its actions on it.

Why is a data-driven management culture so important?

Transforming into a data-driven organization is a process. Initially, it requires a lot of financial and non-financial resources, and consumes a lot of energy, and can even at times generate frustration among the staff. This is because you have to step out of the speeding train and lay out certain processes and mindsets from scratch. It is also a multi-faceted process, starting from purely human issues – the mentality of employees, working with their habits, through technological issues (implementing more efficient ERP systems or professional analytical tools), arranging cooperation with new business partners supporting the whole process, etc. However, the benefits of the transformation will pay off in the future, and may even turn out to have been necessary. 

A few facts are worth mentioning on this occasion:

• according to PwC, data-driven organizations have seen a 3-fold improvement in the value of their decisions, contributing to better financial performance or improved productivity, 
• a study by Alation found that 90% of companies with the highest data culture met or exceeded their revenue targets in the past 12 months,
• in contrast, according to McKinsey, data-driven organizations are 2.6 times more likely to achieve a higher return on investment and acquire 23 times more new customers
• Kairos Future, on the other hand, showed reduced levels of employee turnover in forms with high data culture (less than 10 percent!). 

Key aspects of building a data-driven organization

An organization has a chance to become data-driven and build on this approach to business success if it views data as an asset and a key building block of the whole organism that is the company. 

In practice, two factors must play first fiddle: technological and human. 

Without proper processes, procedures and analytical tools, a company will not be able to properly collect and use data. Using countless spreadsheets circulating chaotically in the organization for this purpose, aside from the fact that it can be very risky, is inefficient. Often the calculations in them are occupied by the hard, manual work involved in processing the data. Where there is a human factor, there are also unintentional errors that can cost a company a lot. Access to the data is also limited and dependent on more people in the company updating and sharing more files. If we want to be a data-driven organization, we don’t just need to address the next analysis or report, but start with the basics, i.e. where and how they are created. 

Consistency, timeliness, reliability of data and its off-the-shelf availability are key aspects without which it is difficult to build organizations that make rational decisions.

Appropriate, innovative Business Intelligence class tools, such as Microsoft Power BI, allow us to automate the processes of downloading and processing data from various locations, databases and systems, and the functionality of sharing reports within specific access ranges make it easy and, last but not least, secure for any authorized employee to access them. In addition, Power BI gives us the ability to create useful, functional, interactive reports, where “on the click” we can have access to the current information that interests us the most at any given moment – whether it’s information about the deviation of revenue from budget in a given month, the average selling price of a particular commodity to a particular customer, or the gender of people who visited our online store in the past quarter. It is, of course, important to properly design a user interface that will allow you to accessibly navigate the reporting environment, so it is worthwhile to outsource not only the creation of the appropriate ecosystem that retrieves and processes data, but also the so-called reporting front-end to experts. 

An important aspect in terms of the transformation to data-driven organizations is the ability to democratize customized data. The data contained in a dashboard can be customized for each department, as well as the level of initiation of employees. What does this mean in practice? To illustrate with an example: an HR manager can have access to information about employees, their working hours, contract duration, salaries broken down into its various components, to a greater extent than his subordinates. On the other hand, he will not have access to information on whether the planned level of orders has been achieved. This counter-intuitive solution, thanks to the transparency of the data, allows him to focus on analyzing key information.

Fundamental to the transformation of a data-driven organization is, of course, the human aspect, which also involves democratizing access to data. Often in companies that plan to become data-driven organizations, the tendency to limit data access to executives only, ingrained from the old days, persists. This approach inhibits the transformation process. Access and understanding of data by lower-level employees is crucial. This is because it increases employee engagement, and can also initiate the phenomenon of initially internal and later external benchmarking; the process of comparing oneself with other, often better, entities and striving to achieve a similar state. Employees’ understanding of the data, as well as of the company’s purpose, translates directly into increased efficiency, better understanding of HR business decisions, increased innovation and increased value for the company. 

What guarantees the success of a transformation to a data-driven organization?

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Transforming into a data-driven, or data-driven organization is not easy. The biggest obstacles are cultural, organizational and process challenges.

The first and most difficult step is changing the mentality of management and employees. The entire organization needs to understand how crucial data and working with it are to the company’s growth. In the shift in thinking, it is also important to use data to investigate: why are financial results worse, why are certain KPIs not achieved, what do we need to do to achieve our goals? Data-driven organizations don’t just accept information about bad performance, they analyze data to find the problem and put corrective processes in place.  

Directly related to the change in management thinking, and representing the key to success, is also the previously mentioned democratization of information. Why are we talking about her once again? Because it is extremely important to the process. Data, access to it, should be treated as the property of the organization, not just the department or management. It is the people on the “front line” who can sometimes bring beneficial insights to the company. Often these are the people who, through their daily work, have the most ideas for improvement. It is their opinion that should be relied upon, not that of the person who analyzes the data behind the proverbial desk.

To achieve success, it is also important to educate employees. The ability to understand and analyze data should not lie only with data analysts, the controlling department, or executives. Every employee should know the essence and understand the data; this is what makes decisions more accurate and made in a shorter period of time. Engage leaders, managers to make data-driven decisions is also not insignificant. It is worth remembering here the principle that example “comes from the top.” If employees see their superiors arguing for data-driven decision-making, their commitment will also increase. 

It is also extremely important to use the right analytical tool. The new solution should be compatible with accounting systems, ERP, CRM, databases, or other sources used by the organization, and the data it contains should be properly cleaned and consistent with each other. When implementing an analytical tool into an organization, one should keep in mind that it should support data analysis, and therefore should include easy access, the ability for multiple users to access it, be flexible with customizable features, and most importantly, present data in a clear, intuitive, user-friendly manner. You can outsource its implementation to outsourcing companies – they are the ones who know the latest practices and standards, and using their experience, they are sure to implement the best ones and tailored to the needs of your organization.

Summary

As an Enterium team, we have already helped dozens of companies transition to data-driven organizations. Combining our expertise in Business Intelligence and Controlling, we not only implement a state-of-the-art cloud-based analytical tool like Microsoft Power BI, but we also help our clients organize their data, and using our years of experience, we help pinpoint the data that can be crucial. 

Contact us if you want to accelerate your organization’s transformation and focus on building business value. If you have concerns or questions, we’ll be happy to answer them during a free, no-obligation consultation. Make an appointment today.