This article looks at the question of a data driven mentality in a business, and asks what does it take to achieve one.
Data Driven Mentality
Such is the value of relevant data to any business, it is referred to by many commentators as “new gold”. A very simple example can illustrate the point. Imagine two businesses selling products using telesales as the method of sale. Now imagine one business has a database of customers all of whom have purchased similar products before, and the other business is just using random data.
Which business will sell more successfully? Of course, it is the business with the database of customers, who have all purchased similar products previously.
This is a very simple example of how data can be used to predict customer interest in a given product. The more interest a customer has, the more likely they are to make a purchase.
Amazon uses a data driven mentality
to drive sales. Their website is optimised to display similar and complimentary products that might be of interest to a customer throughout the process of checkout.
So, a customer buying a liquid makeup foundation might find that a related powder product is displayed for them. This is a very effective way to sell as the customer checking out has already identified themselves as a customer interested in makeup products.
Asda do something very similar in the grocery part of their website. Every customer’s data relating to their past grocery orders is saved, and when a customer checks out future grocery orders, the Asda website is optimised to display items from previous orders to the customer checking out. As such, Asda is selling to a customer who has already made that purchase. Moreover, customers find this very useful, as they may have forgotten to order a product they have purchased in the past.
The same principles can be applied to a whole range of business problems. Banks, for example, collect data and use it to identify possible scams or fraudulent transactions.
Bank accounts that transfer large amounts of cash to foreign countries may be subject to more security checks than those with a continuous series of smaller transactions. This type of analysis is called “reporting”, and “alerting” and the principles can be applied to the business owner who wants to sell more products.
Smaller businesses are starting to understand that data has a similar value for them. As such, they are adopting data strategies that help them make sales. This is what it means to have a data driven mentality in business, and it isn’t just for big businesses. A business can benefit from a data driven mentality, whatever its size.
How To Achieve A Data Driven Mentality?
So, how is a data driven mentality achieved for the average business owner?
Understand The Value Of Data And Be Prepared To Align Business Strategy With Data Acquisition
Every business is different, so the first question that any business looking to achieve a data driven mentality must ask is what that particular business wants to achieve with a data driven strategy?
Some businesses want to boost sales, others want to increase brand recognition. The important thing is to have a clear set of defined goals before you attempt to use data to help you achieve those goals.
A data driven mentality requires data acquisition. Some businesses will acquire data using data that is processed by the business on a daily basis.
Amazon, for example retain data related to previous orders and items that customers have previously expressed interest in by either putting it in their shopping baskets, or just clicking on the item. These records are used to make the best predictions for the items that are displayed to customers during the process of check out.
Other businesses will purchase data from external sources, so an insurance company may purchase phone numbers of customers with particular characteristics, for example based on where they live, and what age or gender they are, in order to devise a telesales strategy for a new insurance product.
Some businesses will acquire a whole business, merely to access to data that has been gathered in the operation of the business concerned – an example being Microsoft’s acquisition of LinkedIn for $26 billion
Data that had been gathered for an entirely different purpose – to develop LinkedIn was now being used so that Microsoft could gain insight into jobs, skills-gaps, interests and skills in different regions. This information is capable of being collated and fed into Microsoft’s overall sales and corporate strategy – with one key goal in mind - to sell Microsoft products more successfully.
Technology And Optimisation
A data driven business will typically need to invest in technology, which can be used to acquire, share and analyse data.
Some businesses will need to optimise their websites for the purposes of data acquisition, whereas others will purchase apps or software that allows for analysis of data that will help the business achieve their goals and objectives.
Data visualisation is a prime example. This allows executives to “see” data in different ways, for example as dashboards or graphs and charts. This allows the executive to quickly understand how the data is relevant to helping them achieve pre-defined goals.
Train Staff To Be Data Literate
Employees need to be given training so they can understand the importance of data in their day to day employment, and how it can be used help them perform better.
If a business invests in technology, which will utilise data to achieve business goals and objectives, the business should also invest in training the executives using it.
Measure Success Using Data
Data can be used to understand how one employee is performing compared to another. A common method of understanding and tracking employee performance is to gather information called Key Performance Indicators, or KPIs. KPIs can be aligned to whatever an individual employee’s tasks are, so a KPI may be to achieve a certain number of sales in a given time period. KPIs can also be linked to efficiency, and productivity.
These can then be used to evaluate the performance of employees, or they can be used to incentivise outcomes that are desirable for both the business and the employee, so for example an increase in sales reflected in KPIs might be rewarded with bonuses, or promotions for the best performing employees.
Make Data Accessible To Employees
Ensuring that data is accessible to employees is very important in a data driven business. The data driven mentality should not be “top down”, where it is just the people in senior positions who understand how data is being used to achieve the goals and objectives of the business. Even the most junior executives need to have access to data that can help them understand what the overall objectives of their employers are.
There are lots of ways to achieve this. Employees can be given access to intranets where personal dashboards are displayed, with relevant data being displayed. This data can be anything from their personal KPIs, to the KPIs of a certain team, or company division.
When employees are informed, they are more likely to be motivated and engaged with the overall objectives of the business.
Using Analytics To Make Fact-based Decisions About Future Business Investments And Strategy
Businesses can use analytics to make decisions about where to make future investments, or what way to develop the business in the future. Frequently businesses can use analytics to help them make decisions about what market segmentations to focus on, or abandon, in order to achieve better sales performance.
The key is using the data to complement informed human decision making. Humans making decisions based on instinct alone can often make bad decisions. Changing this slightly, and making more informed decisions, based on instincts and data will often lead to better decisions and overall results.
To have a true data driven mentality, you need to go further than just doing what most people in your shoes are doing. To get ahead, businesses need to constantly evaluate where they can access data sources that can be valuable to their business. Discovering a novel way to access data can make the difference between mediocre sales and exceeding sales targets.
Data = Gold
In the world of business, data is being compared to gold for a very good reason – the right data, leveraged in the right way, at the right time can catapult a business far beyond what they ever thought they could achieve in terms of sales performance and growth.
This article has explored what steps a business can take to become more data driven. To recap, the most important steps include:
1. Invest in technology which make data analysis easier
2. Invest in training a data literate workforce
3. Evaluation of new possible sources of data – don’t just do what everyone else is doing
4. Use data to measure success and help make decisions about future business investments
5. Invest in data acquisition.