How to Build a Data-Driven Decision-Making Culture

Many organizations believe they have a data-driven culture because they generate lots of reports, or have dashboards throughout their organization.

Unfortunately, it's not that simple.

A data-driven culture is when an organization's progress is measured using data rather than intuition (gut feel) or past examples (personal experience). In the scientific world, this is usually referred to as evidence-based decision making.

A data-driven culture is where transparency and accountability are nurtured around data, and team members are driven by decisions through hypotheses testing where the data results ultimately drive the decisions.

Having lots of operational data is a great start, but to be a truly data-driven organization requires the ability to develop strategic insights into what is influencing your key performance indicators (KPIs).

A deep understanding of the metrics that influence those KPIs, and the capability to do analytical reporting, will help process all your data and create a data-driven team that investigates trends, predicts outcomes, and discovers new insights.

Below is specific advice for how to incorporate data-driven decision making into your workforce.

The trend toward data-driven decision making

As data becomes more important, organizations are responding to this changing business environment by adding new senior roles such as chief data officer or chief analytics officer to the highest level of their leadership teams.

Shopify has a senior leadership position called senior vice president of data and analytics headed by David Lennie who previously was the senior vice president of analytics at LearnVest and director of data science and engineering at Netflix. These three fast-growing businesses make it clear that having a senior leadership role in data is important.

How to build a data-savvy workforce

For the many organizations that do not have a central focal point or team where a data function exists, here are six key things you can do to establish a data-driven team:

1. Start from the top with data-driven leadership

Start with the obvious: leaders must lead by example. Today's top managers are sharing insights with their teams and using data to help tell their story.

In the absence of a data-driven leadership team, decisions are often based on the HiPPO—“highest paid person's opinion." This is absolutely the antithesis of data-driven culture. We all recognize them when they start talking about their X number of years/decades of experience and start sharing how they used to do things at company Y. While that experience is valuable, it must be combined with current data in order to make good decisions.

This really hit home in a Financial Times article:

Great leaders foster an environment for hypothesis making and testing. This type of culture is the foundation for growth. The use of a simple A/B test or an experiment to share insights will start to drive the right behaviors throughout the organization.

Also, as a leader, don't forget to celebrate both failures and successes. According to the Harvard Business Review, over 80 to 90% of experiments fail. These failed experiments should be considered learning opportunities that will help shape future key hypotheses.

2. Hire data-driven team members

Encourage and empower your HR team to screen every candidate for any role in the organization with a data-driven mindset lens.

Although your end goal may be to have a full data analytics team, start driving a culture adoption across the entire organization with each new hire.

For example, if your are hiring a new marketing program manager, does the resume include performance metrics and real examples of how that individual impacted the organization from a big picture down to the program level? If not, then pass.

3. Look within your existing ranks

Hiring for data analytics and data science roles is getting harder. Since this role has become recognized by many organizations, it has become a highly in-demand skill set with a shortage of talent.

According to MIT Sloan Management Review, 40% of the companies they surveyed struggled to find and retain data analytics talent. The good news is that many of your other technical resources may be great candidates to get things started.

Find out who on your IT, finance, and marketing teams are data obsessed. These teams often harbor individuals who have advanced their careers and impact within the organization using data.

Some teams already have data specialists. Someone on your IT team has created ways to push, pull, and aggregate data for various corporate reasons to answer common executive questions. Your finance team will have great insights and data on past results. Your marketing team should be data-driven when trying to figure out new ways to optimize, target and segment their marketing programs to drive growth.

How marketers are augmenting data-driven marketing (Source)

The above chart highlights how most marketing teams' data journey is shifting from data capture (CRM) and reporting (analytics and visualizations) to more action-oriented benefits, including adding personalization into marketing efforts, using machine learning and AI for predictive outcomes based upon past trends.

So if you can't hire them, start nurturing the talent you have and help them discover new capabilities and opportunities to learn and build out their skill sets.

4. Use data everywhere and embed it into your culture

A data-driven culture is usually easy to spot, especially in team meetings and quarterly town halls.

For example, at Klipfolio, many of our monthly team meetings are centered around a dashboard specifically focused on the topic at hand. Whether it is a weekly sales huddle, a monthly customer retention meeting, or a user experience onboarding review led by the UX team, each discussion starts with a review of the data shared on a large TV screen in the room.

Each team member is encouraged to ask questions and drill down on what is being shown. People are expected to question the data—what it means, what we can extract from it, and what we are missing to complete the picture. These meetings are valuable as a forum to continually challenge ourselves on how we think, what new data we should collect, and what attributions vs. correlations can we draw from the data.

You can quickly realize how data-driven a culture is because there is no end point. Ideally, you should have very few static dashboards. The top KPIs dashboard may change a bit from year to year, but everything else is constantly being challenged, refined, and retooled to help us better understand what is changing.

5. Create your own data dictionary and tools strategy

Data tends to be centralized with a few individuals within a company who are data experts.

However, transformational organizations are those that enable data to be available to anyone across the entire organization. As the data becomes more freely accessible, having a central spot to share those insights, a data dictionary to define the key metrics, and an inventory of the tools available is key to your data-driven cultural success.

The number and variety of tools available for organizations to leverage is exploding, and the data those tools are creating is growing exponentially.

Most small businesses have a CRM software solution, an email platform, a website, and digital ads. In the marketing technology segment there were only 150 marketing tools in 2011—today there are almost 5,000! That's an increase of more than 3,200% in just six years. And it's not just marketing—the marketplace for HR software and platforms is valued at over $14 billion.

Thus, the challenge for today's leading organizations is how to strategically take advantage of all this data from all these amazing tools.

6. Remember that data is not everything

A data-driven culture can only take an organization so far. Sometimes you see organizations get so deep into reporting, analysis, and testing that they become paralyzed. Also, if you focus on the wrong thing you may miss the big wave that is happening around you.

Jeff Bezos, CEO of Amazon, cautions in his annual letter to shareholders that:

Creating a data-driven culture takes time

Changing the culture of an organization never happens overnight, so be patient, take your time and start small.

Build on successes, encourage others to follow, and invest in some tools to help you along the way. Most data-driven organizations tend to leverage multiple tools since data sources will be spread out within most organizations.

Helping break down data silos is usually a large barrier in changing the data-driven culture. So help foster an environment where metrics are internally well-defined and communicated clearly to the teams on a regular basis. And lastly, ensure there is one person who is the go-to resource and owns the project internally.

I've been in business intelligence for over 15 years and it's become second nature to leverage data in everything I do. It actually becomes addictive after you discover your first "aha" moment that generates a new insight. Everything I do is measured, whether it's testing a hypothesis, launching a new partner program, or experimenting with blog posts to see what generates the best results.