Data-Driven, Insights-Driven, and Value-Driven Models With Data as a Strategic Asset

We are surrounded by tons of technology and data has become the “primary resource” for the new economic world order. No wonder we hear the old saying “data is the new oil” from events, advertising to our LinkedIn-Bubbles and up to boardrooms of every company. The rapidly evolving ecosystems built around data – think Amazon, Google, Facebook and even Tesla – have shown that data has emerged as a central asset with the potential to drive unprecedented value creation. For some companies, data has also become a key cornerstone in guiding decision-making, enabling innovative solutions, and catalyzing hyper-scalable growth. But there are differences and different approaches or methodologies to harnessing this data-driven decision-making power to significantly impact the business.

Organizations typically align with one of three approaches: data-driven, insights-driven, and value-driven. Each approach offers unique perspectives and tools for leveraging data, but they differ fundamentally in their execution and emphasis.

All three approaches are different perspectives on how to grow a business today. But these “new” methods will influence decision-making, drive innovation, and shape business strategies for decades to come, so every manager should have at least a basic understanding of how to use them and the differences behind these management principles.

Understanding the Data-Driven Approach

The data-driven approach focuses on collecting as much data as possible, prioritizing the accumulation and analysis of large data sets, often referred to as “big data.” This approach assumes that the data collected will provide actionable insights in the future, even if the immediate application is not clear. Companies that adopt this strategy invest heavily in technologies and systems that can handle large volumes of data from multiple sources.

The data-driven strategic focus, while providing a fundamental foundation of data, is by far the largest strategic investment and a very different management decision. Organizations often evolve to adopt more nuanced and less costly approaches, such as the insights-driven method, which focuses not only on the accumulation but also on the intelligent interpretation of data to drive immediate strategic decisions and innovation.

One example of a data-driven company is Tesla. It collects vast amounts of data from the sensors and cameras on its vehicles, but also from its charger network and from its partners or its own car software ecosystem. This data is not immediately needed for current operations, but is critical for training algorithms for future self-driving capabilities, gaining market insights, customer behavior, and more.

Read further: Data-Driven Decision-Making (DDDM) explained: Making Smarter Business Decisions Using Data

Characteristics of Data-Driven Organizations

• Strategic Priority: Data-driven organizations set the strategy to become a data-first company. This means that the organizations, departments, etc. should be aligned and this is directly reflected in the daily operations, products, etc.
• Extensive data collection: Organizations continuously collect data from a variety of sources, including transactions, sensors, and customer interactions, with the belief that future value will justify current efforts.
• Infrastructure focus: Significant investments are being made to build robust infrastructures capable of managing large volumes of data, using technologies such as data lakes, big data platforms, and cloud storage solutions.
• Focus on data talent: Especially for data-driven organizations, the need for highly skilled people, such as data scientists, big data specialists, mathematicians, and more, is critical. Compared to other models, the investment and team sizes are significantly larger.

Benefits of a data-driven approach

• Future Opportunities: By accumulating rich data sets, organizations are well-positioned to take advantage of future technological advances and data analysis techniques.
• Comprehensive decision making: The broad base of data supports improved decision making by providing a deeper understanding of business operations and customer behavior.
• Strategic Moat: Especially when a company manages to acquire a proprietary and valuable database that can be turned into better products, better customer experiences, or even enable entirely unique business models, such as platforms or digital ecosystems, this data-driven approach becomes a strong strategic moat.

Challenges and Limitations of a Data-Driven Approach

• Resource intensity: Focusing on data accumulation requires significant investments in technology and personnel, which can divert resources from other critical areas.
• Uncertainty: Making data a central goal is also making a bet on the future-and the key word here is “bet.” Because not all data is the same and not every time it can be useful or add value. Simply collecting data can be an expensive and very long-term strategy, but it also involves a great deal of uncertainty, which should be addressed with a clear vision and clear strategies.
• Data overload and management: Managing and governing vast amounts of data becomes increasingly complex, creating the risk of data overload, where the sheer volume of data can hinder rather than help the ability to gain useful insights.
• Potential for stifling innovation: The primary focus on data collection risks overshadowing immediate opportunities for innovation, with organizations potentially missing out on taking advantage of current technologies or market trends that don’t directly contribute to data accumulation.

Understanding the Insights-Driven Approach

The insights-driven approach focuses on the strategic use of specific, targeted insights derived from data, in contrast to the broader data accumulation strategies seen in data-driven models. This approach emphasizes the intelligent interpretation of data to inform and guide immediate strategic decisions and innovation. Rather than simply collecting data, insights-driven organizations seek to understand and act on it efficiently and effectively.

Unlike data-driven organizations, which may not have a clear immediate use for the data they collect, insights-driven organizations (IDO) focus on gaining and using insights that are immediately actionable. This can include leveraging both internal and external data sources, from operational data within the company to studies, surveys, and external data providers. Insights-driven can also be seen as a cultural shift, as it is a strategic shift from making decisions based on “gut feeling” to making decisions based on data-driven insights.

Characteristics of Insights-Driven Organizations

• Focused data collection: Unlike the broad scope of data collection in data-driven approaches, insights-driven organizations collect data with a specific purpose in mind. They target data that is directly relevant to the hypotheses or business questions they need to answer.
• Integrate external insights: These organizations often integrate insights from external sources-market studies, consumer behavior surveys, and industry reports-to complement their internal data and provide a more complete view that enables better decision-making.
• Cultural shift to data-driven decisions: Moving from intuition to insights represents a major cultural shift within the organization. It fosters a mindset that values evidence-based decision making and relies heavily on concrete data insights rather than assumptions.
• Agile and adaptive strategies: Insights-driven organizations are agile, able to quickly adapt their strategies based on new insights. They are able to identify shifts in data trends and adjust their business actions accordingly.

Benefits of an Insights-Driven Approach

• Immediate strategy decisions: Insights-driven organizations can make faster, more informed decisions by focusing on specific insights that provide immediate, actionable results. This ability to respond quickly provides a competitive advantage in fast-paced markets.
• Cost-effectiveness: Compared to the extensive infrastructure and resource requirements of a data-driven approach, the insights-driven method is often less costly. It requires fewer resources for data storage and processing, as well as significantly smaller data teams, as the organization focuses instead on deriving value from targeted data analysis.
• Enhanced growth: By using targeted insights, companies can tailor their strategy, operations, products, and services to meet the exact needs of their customers, improving everything from the bottom line to innovation to customer satisfaction and loyalty.
• Improved risk management: By leveraging specific, actionable insights, insight-driven organizations can better identify and mitigate risk.
• Optimized resource allocation: Insight-driven strategies enable organizations to allocate resources more effectively. Using data insights to understand exactly where and how to invest efforts, organizations can optimize activities and focus resources on areas of greatest expected benefit or strategic value.
• Increase innovation: By focusing on specific insights, companies can more quickly identify opportunities for innovation in their markets.

Challenges and Limitations of an Insights-Driven Approach

• Dependence on data quality: The effectiveness of an insights-driven approach depends on the quality of the data collected. Poor data quality can lead to misleading insights and potentially damaging decisions.
• Balancing depth with breadth: While focusing on specific insights can be beneficial, there is a risk of missing broader trends or data patterns that could be critical to the business. Organizations need to balance depth with breadth to avoid tunnel vision.
• Scalability issues: As organizations grow, scaling an insights-driven approach can become challenging. Expanding the scope of insights without diluting their quality requires a good data management strategy and continuous improvement of analytical capabilities.
• Complex integration of external data sources: While leveraging both internal and external data sources can provide rich insights, it also presents data integration challenges, as well as challenges with varying data quality or missing information. There are off-the-shelf platforms that already provide meaningful data, but tapping into big public data can introduce a lot of uncertainty.
• Risk of short-term focus: There’s a risk that an intense focus on gaining immediate insights could lead organizations to overlook long-term strategies and investments.

Understanding the Value-Driven Approach

The value-driven approach shifts the focus from data and insights alone to all organizational assets that can drive business innovation and create new customer-centric revenue streams. It is a holistic approach that integrates data, insights, and a variety of organizational capabilities to deliver tangible business value. Value-driven organizations align their efforts directly to business objectives that drive profitability and market position, prioritizing strategic outcomes over the mere accumulation of data or insights.

Characteristics of Value-Driven Organizations

• Strategic integration of assets: Value-driven organizations integrate various assets-data, technology, human skills, and business processes-to create a cohesive strategy that maximizes business value.
• Innovation at Scale: These organizations focus on scaling innovations that have proven their value in pilot tests or smaller markets. They rapidly prototype and iterate business models to adapt to market needs and customer feedback.
• Customer-centric initiatives: The core of a value-driven strategy is to increase customer value. This involves creating and delivering products or services that directly address customers’ evolving needs and expectations, often using data and insights to tailor offerings.
• Composable architecture: Value-driven organizations often use a composable business architecture, which means they treat their assets as “nodes” that can be rearranged and reused, allowing them to quickly reconfigure and adapt their technology and business assets.
• Leveraging data and insights: While not solely focused on data, these organizations effectively use data and insights to inform their value creation strategies.

Benefits of a Value-Based Approach

• Dynamic business models: By focusing on value creation, companies can quickly assemble and disassemble business models in response to market changes. This agility allows them to remain competitive and relevant in rapidly evolving industries.
• Improved return on investment (ROI): A value-based approach seeks to optimize the impact of each initiative, ensuring that investments are focused on the most profitable or strategically important areas to maximize ROI.
• Sustainable competitive advantage: By continuously aligning business practices and strategies with the creation of real, measurable value, organizations can develop a sustainable competitive advantage.
• Increased market responsiveness: With a strong focus on delivering value, these organizations can respond more quickly and effectively to market opportunities and threats by adapting their strategies in real time based on customer and market data.

Challenges and Limitations of a Value-Based Approach

• Balancing short-term and long-term objectives: One of the key challenges is balancing the need for immediate returns with investments in long-term strategic initiatives. This balancing act requires careful planning and execution to ensure sustainability and growth.
• Complexity of execution: Implementing a value-based strategy can be complex due to the need to coordinate multiple business units and align various strategic initiatives. Complexity increases as organizations attempt to integrate and leverage diverse assets across business units. The more connected “asset nodes” there are, the more complex the ecosystem becomes.
• Resource allocation: Determining where and how to effectively allocate resources to maximize value can be challenging. Organizations must have a clear understanding of their strategic priorities and the potential impact of different initiatives.
• Measuring and defining value: Defining and measuring value, especially intangible benefits such as customer satisfaction or employee engagement, can be complex and sometimes impossible for most employees and managers.
• Integration of diverse functions: The need to integrate disparate functions and data sources can create significant collaboration and alignment challenges.
• Cultural changes required: Moving to a value-based approach often requires significant cultural changes within the organization. Employees and management must move away from traditional measures of success, such as productivity or efficiency, and embrace value creation as the primary goal.

Compare Data-Driven, Insights-Driven, and Value-Driven

Conclusion and thoughts

All three approaches-whether data-driven, insight-driven, or value-driven-represent the future of management. The choice of approach depends on the industry, strategic ambition, and maturity of the organization. The data-driven approach lays the foundation for future opportunities and may be best suited to digital ecosystems, while the insights-driven approach is the most accessible entry point for most organizations. What makes the insights-driven approach easy is that it leverages external knowledge and off-the-shelf platforms. The mindset shift prepares the organizational culture for data-driven decision making and fosters a fact-based mindset.

From another perspective, the value-driven approach combines data, insights, and various organizational assets to create tangible business value. While it is possible for value-driven organizations to operate without data, in today’s technological landscape, data and insights serve as critical value drivers that improve decision-making and enable innovation.

Ideally, organizations should start with an insights-driven approach and then evolve to either a data-driven or value-driven model based on their strategic goals, industry dynamics, and competitive positioning. The insights-driven approach acts as a stepping stone, cultivating a data-driven culture and enabling organizations to make informed decisions based on facts rather than gut feelings.

Ultimately, the future of management lies in embracing data, insights, and value creation as interrelated drivers of success. Organizations that can seamlessly integrate these approaches will be well positioned to thrive in an increasingly competitive and data-driven business landscape. So start your journey, get insights, and build your Company 2.0 based on facts.

Author: Benjamin Talin, CEO MoreThanDigital

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