April 26, 2016
Data Driven Decision Making
The tech industry is surrounded by data. Your team is constantly told to pay attention to analytics. Then, you’re encouraged to make decisions based on your newfound insights. But what does that really mean? A good start is to understand why data-driven decision making matters. “Without data we have no way of knowing whether we are improving or getting worse. It has also been said that ‘what gets measured gets improved’,” writes Chris Rees, director of operations at SigmaPro. Recognize that data helps reduce your company’s liabilities. However, inaccurate data can sometimes make situations worse. Let’s explore what data-driven decision making looks like in practice. Check out the four examples below.
1. Google - data answers your questions
At Google, data isn’t an afterthought. It’s actually part of their culture. The technology company makes it their mission to use information in the decision-making process. Google starts by evaluating the questions they need answered. Because if the questions aren’t correct, the answers will lead their team in the wrong direction. Here’s what former Google CEO Eric Schmidt had to say about this approach: “We run the company by questions, not by answers. So in the strategy process we’ve so far formulated 30 questions that we have to answer […] You ask it as a question, rather than a pithy answer, and that stimulates conversation. Out of the conversation comes innovation.” Within their human resources department, Google created “people analytics.” It’s their way of creating impactful decisions around people management. Human capital is expensive. Research shows that employee costs often approach 60 percent of corporate variable expenses. That’s why it makes sense for Google to take a data-driven approach. To understand whether managers mattered, their team initiated Project Oxygen. Google analyzed internal data, like performance reviews and employee surveys. It revealed that most managers were perceived as good. Taking it a step further, they questioned what actually made a good manager. The data identified eight characteristics of an effective leader, including empowerment and communication. Now, those traits help evaluate team members and guide training sessions. Asking the right questions along with data can inform business decisions.
2. Southwest Airlines - data opens up new possibilities
The airline industry is no stranger to technology. Their use of data affects how we travel from one country to another. It involves not only better transportation systems, but also heightened safety measures. For instance, airline companies use real-time data to analyze aircraft performance. Sensors on the aircraft notify ground control of any engine or hardware system issues. This information keeps personnel aware of ongoing problems. And it also provides an analysis of when routine maintenance is required. The benefits include reduced costs and increased safety. In addition, airlines are using data to personalize the customer journey. They customize promotional offers and track passengers’ luggage – all in the name of customer loyalty. Southwest observes and analyzes the data behind their customers’ online behaviors. “Southwest uses aggregated, anonymous customer data to promote products, services, and featured offers to customers on multiple channels, devices, and websites including Southwest.com,” states Dan Landson, a Southwest spokesman. As a result, the company offers tailored services to specific loyalty segments. This ensures the right customer is receiving the best product. Moreover, it keeps their brand profitable. Internally, airline companies are taking advantage of predictive analytics to assist with revenue accounting. Financial data helps “reduce loss, prevent fraud, reconcile transactions, and reduce remittance cycles.” Data provides the traveling industry with new possibilities for both the customers and the companies.
3. Amazon - data increases efficiency
Obsessed with customer satisfaction, Amazon’s CEO and founder Jeff Bezos is the driving force behind the business’s analytics. Entrepreneur.com contributor David Selinger says listening to data starts at the top: “A data-driven culture is meaningless without the support of the CEO and executive team – and their own willingness to challenge assumptions that they hold dear.” The e-commerce retailer continues to learn about their customers. Their team uses data to analyze customers’ tastes and buying habits. It’s not a coincidence when the e-retailer makes spot on product recommendations. Through item-to-item collaborative filtering, customers receive personalized suggestions fitting their interests, generating 29% of Amazon’s sales. Plus, Amazon possesses 500 KPIs to measure performance. For instance, it found that “a 0.1 delay in website loading times means a one percent drop in visitor activity which led the engineers at Amazon to focus on optimizing its website in order to reduce page load times.” Data elevates the efficiency of business functions.
4. Domino’s Pizza - data unlocks customization
What toppings would you like? When it comes to Domino’s Pizza, they’re serving up a hefty amount of data into their business strategy. And revenue growth is only one of the positive gains. Domino’s Anyware is a multi-channel approach that simplifies the ordering process for their consumers. Customers can place orders via a text, a tweet, and even a smart watch. This platform enables the pizza delivery franchise to generate and capture lots of data. Combined with third-party sources, like geocode and competitor information, Domino’s is able to uncover in-depth customer segments. Their Vice President of Enterprise Information Services Dan Djuric explains the significance of the data: “We have the ability to not only look at a consumer as an individual and assess their buying patterns, but also look at the multiple consumers residing within a household, understand who is the dominant buyer, who reacts to our coupons, and, foremost, understand how they react to the channel that they’re coming to us on.” With that knowledge, Domino’s can offer different coupons and products offers based on the customer’s profile. It also helps the chain assess performance within their stores. For example, if a particular store needs a revenue boost, the data helps tailor discounts and upsells in the area to improve future sales. Data is the key to unlocking customization.
Data in action
Data isn’t some mythical creature. Coupled with decision-making, data offers a powerful tool for your business to become an industry leader. Before diving into analytics, determine what questions you want answered. Let data change the way you enhance the customer experience. And discover new forms of company-wide efficiencies. Resolve to use data-driven decision making.