Data-Driven Decision-Making explained: Making Smarter Business Decisions Using Data

What is Data-Driven Decision-Making (in short DDDM), and why should start making smarter decisions based on data and insights

We explain data-driven decision-making (DDDM) and why it matters for executives. Understand how to start using data for strategic decisions and outperform your competition with the right insights.

Making smart business decisions is essential for the success of any company – I guess we can all agree on this fact. But how do you make strategic and important decisions? Most CEOs and top-level executives make decisions based on their experience and intuition. And while this might sometimes work, relying on these two factors alone is not enough – not by a long shot. No wonder companies using data-driven decision-making (DDDM) are 19x more likely to be profitable than peers who don’t rely on data to make critical decisions. (Source: McKinsey)

This is where data comes in. By analyzing data, you can better understand what’s going on in your business. To make the best decisions, you must have accurate and timely data. This data can come from various sources, including customer surveys, financial reports, and website analytics. This article will discuss how to use data to make smarter business decisions.

Using data for decisions?

Making decisions is hard. It can be tough to know what the right thing to do is. But what if you could use the information to help make your decisions? That’s what data-driven decision-making is. You use data from different sources to help you make better choices. This might include data from science, business analytics, and business intelligence.

There are many benefits to data-driven decision-making. For one, it can help you make decisions faster. This is because you have all the information you need right in front of you. There’s no need to go and gather more data or try to interpret it yourself. This can save a lot of time in the long run.

Another benefit is that it can help you make more accurate decisions. This is because you’re not relying on your gut feeling or intuition. You’re basing your decisions on facts and evidence. This can lead to better outcomes for your business.

What is Data-Driven Decision-Making (DDDM)?

Data-driven Decision-Making (DDDM) is the process of using data and statistics to inform and guide business decisions. DDDM can include everything from understanding what happened in the past, what is happening currently, and what might happen in the future by using machine-learned models to analyze data. Typically, these models are constructed by using a machine learning algorithm on a data set that has been annotated with the desired outputs (decisions). The model can then be used to predict the outputs for new data sets.

Businesses have always used data in some form or another to make decisions, but the term “data-driven decision making” usually refers to the increased use of data analytics and predictive modeling in recent years. Thanks to big data, businesses now have access to more data than ever before, and they are increasingly turning to analytics tools and techniques to make sense of it all.

At the heart of data-driven decision-making is the analytics part. This involves gathering, cleaning, analyzing, and seeing patterns on which management can make decisions. The goal is to use this data to understand what is happening in your business and make better decisions.

Analytics can be used for everything from figuring out what products to sell to understanding customer behavior. By analyzing data, businesses can identify trends and determine actions they need to take to capitalize on them. For example, if a business notices that its sales are increasing during a certain time of year, it might decide to increase its marketing efforts during that time.

The benefits of data-driven decision-making are clear. By using analytics, businesses can improve their decision-making process, become more efficient and make more money. To take advantage of these benefits, businesses must collect and use the right data effectively.

Businesses should be aware of a few limitations to data-driven decision-making. Firstly, data can be misinterpreted. It’s important to remember that data is only part of the picture and can’t be relied on blindly. Furthermore, data can be biased if it’s not collected or analyzed properly. And finally, businesses may not have all the relevant data available, which can hamper their ability to make informed decisions.

Despite these limitations, data-driven decision-making is still a powerful tool that businesses can use to improve their performance. By being aware of these limitations and taking them into account, businesses can make better decisions and see real results.

What are the benefits of Data-Driven Decision Making?

Businesses that use data-driven decision-making can enjoy several advantages over their competitors. It is not just the content of the data but also what it does to managers and decision-makers across the whole organization that lets DDDM be so efficient.

Some of the most important benefits are:

Increased efficiency

Making data-based decisions helps businesses avoid wasting time and resources on ineffective strategies. It also allows businesses to adapt more quickly to market or environment changes.

Faster decisions

Data-driven decision-making can help businesses make decisions more quickly, as they have all the information they need at their fingertips. This is especially useful in fast-paced industries or markets where fast decisions based on pure feelings can be costly.

Improved accuracy

Data provides a factual basis for decision-making, which can improve the accuracy of those decisions. This improves the outcomes and, therefore, also the trust in decisions. This way, companies can speed up the decision process and avoid costly mistakes based on biases, mental traps, or gut feelings.

Better decisions

By having more facts to draw on, businesses can make better decisions that are more likely to succeed. This leads to increased profits and competitiveness. The decision quality will become significantly better and more reliable.

Improved customer service and experience

Data-driven decision-making can help businesses better understand their customers’ needs and preferences, allowing them to provide a higher level of customer service. This way, it is possible to personalize offerings, increase customer retention and even increase the Customer Lifetime Value (CLV) over time by offering better services, communication, and more.

Enhanced strategic planning

Having access to data allows businesses to develop long-term plans more likely to succeed than those developed without data analysis. Data-Driven Strategic Management and Data-Driven Strategic Planning can be an important cornerstone for companies that want to outperform others. But also, here, it needs to be mentioned that managers should understand the possible data bias or challenges in the predictions, not fall for wrong analytics.

More agility

Data-driven decision-making allows businesses to be more agile and quickly adapt to market or industry changes. By getting almost, real-time data, changes in the market dynamics can be observed and proactively tackled. This can help to stay ahead of the market and avoid being only reactive.

Increased confidence in decisions

With data to support your decisions, you and your team can have increased confidence in your choices. This can lead to improved morale and motivation to make faster and bolder decisions which help the organization. Generally, management tends to be more satisfied in making decisions, as they can rely on data instead of needing to justify their decisions based on gut feelings.

More efficient allocation of resources

Data can help you understand where your resources are best spent and where your efforts should focus. This allows you to allocate them more efficiently and effectively, increasing profits. Also, it avoids the best project that has little impact on the company.

7 Steps to Start with Data-Driven Decision-Making (DDDM)

Overall, data-driven decision-making is not that complicated to get started. However, managers should be aware of the pitfalls and ensure that the organization is ready to support DDDM. There are four key steps in the DDDM process: data acquisition, data cleansing and preparation, data analysis, and decision making.

1. Set clear goals and objectives

Without clear goals, it would not be easy to know what type of data to collect and how to analyze it. Managers should work with their teams to set specific goals that DDDM can help achieve.

2. Acquire the right data

Once the goals are set, managers must identify the data needed to support decision-making. This includes internal data (e.g., financial records, website analytics, customer surveys) and external data (e.g., market trends, social media, and market research reports). The data should be accurate and timely; otherwise, it will not be useful for decision-making.

3. Prepare and clean the data

After acquiring the necessary data, it needs to be cleaned and prepared for analysis. This includes formatting the data, missing values, and outlier detection. These steps are important to ensure that the data is ready for further analysis.

4. Perform data analysis

Once the data is cleansed and prepared, it can be analyzed to support decision-making. This includes exploratory data analysis, statistical modeling, and predictive analytics. The goal is to find insights that can help managers make better decisions.

5. Sharing the insights

After analyzing the data, it is important to share the insights with the relevant stakeholders. These stakeholders include managers, employees, and other decision-makers. A great way is to include it in existing tools the stakeholder uses in their everyday work. The insights should be presented clearly and concisely so they can be easily understood and used for decision-making. It also helps to visualize the data and create easy-to-understand reports that will be shared internally.

6. Make decisions

With the right data basis and insights, managers can make informed decisions. This includes strategic decisions (e.g., what new products to develop) and operational decisions (e.g., how to improve customer service).

7. Monitor and adjust

Finally, monitoring the decisions’ results and adjusting accordingly is important. This feedback loop is important to ensure that the decisions are effective and to make further improvements.

Creating a Data-Driven Company Culture

Data-driven company culture is essential for making the most of data-driven decision-making. A company that is not data-driven will be unable to use data to make better decisions effectively. Data-driven decision-making can help a company identify opportunities and problems, but if the culture isn’t supportive of data analysis, these insights will go unused.

To be successful, a data-driven culture must have the following characteristics:

1. Leaders need to be prepared and enabled

Leaders must be given the tools and training necessary to use data in their decision-making process effectively. Without this, they will not be able to take full advantage of data-driven decision-making.

But, leaders also need to be held accountable for making data-based decisions. This accountability can come in the form of Key Performance Indicators (KPIs) and other measures that track whether or not data is being used effectively. If leaders are not prepared or accountable, data-driven decision-making will not be successful.

2. Training of employees

All employees need to be trained to use data in their decision-making. This training should cover everything from basic data literacy to more advanced analytics techniques. Without this training, employees will not be able to make full use of data-driven decision-making. They may not even be aware of the opportunities that data can provide.

3. Find and empower internal data advocates

Data advocates can be difficult to find, but they are essential for driving a data-driven culture. These people will be responsible for evangelizing the use of data and analytics within the company. Data advocates need to be able to communicate the benefits of data-driven decision-making to others effectively and empower them to use data in the right way.

4. Integrate data everywhere – make it “Normal”

To create a data-driven culture, businesses need to integrate data into every aspect of their operation, from meetings to project proposals to strategic planning. By doing so, everyone in the company will understand the importance of data and how it can help them make better decisions.

5. Infrastructure and processes need to be ready

Data-driven decision-making requires a lot of data, infrastructure, and resources. From collecting, cleaning, analyzing, and integrating into everyday tasks, the necessary infrastructure and processes must be in place to support a data-driven culture. If any of these elements are missing, employees can get frustrated and return to “gut feeling decision-making”.


Making decisions based on a solid data-basis is necessary for organizations looking to thrive in the future. With so much change and volatility happening in today’s business landscape, it’s more important than ever to make data-based decisions. Having a data-driven culture ensures that all members of your organization think critically and make informed decisions. Implementing these practices won’t be easy, but careful planning and execution can help your business stay relevant and successful well into the future.

Now is a good time to start with data-driven strategic decisions, build first models, start small and get your feet wet. Many businesses have huge potentials they can unlock by just using some data and some insights to better invest in projects that matter and create the biggest impact for the organization.

Author: Benjamin Talin, CEO MoreThanDigital

MoreThanDigital Insights is a global leading platform for business analytics. We provide the data-driven insights needed to make better strategic decisions, cut through the noise, and future-proof organizations. Our neutral and independent platform analyzes, and benchmarks every aspect of a company, from financial data to several maturity areas. Insights from up to 300 different business dimensions give holistic insights into the organization. This information is essential for a data-driven strategy. It allows companies to invest in projects and topics that will impact their success. With MoreThanDigital Insights, you can be confident that you're making decisions based on facts and data, not guesswork. Our platform is constantly updated with the latest data and insights, so you can be sure that you're always ahead of the curve. Make MoreThanDigital Insights your go-to source for business analytics. Stay ahead of the competition, set the right strategy, make decisions based on data, measure your success and see your progress.

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