Small business owners often have to rely on their intuition and knowledge when making critical decisions about who they trade with both from a supply chain and a sales transaction basis. All too often this can go tragically wrong and for some businesses this can lead to costly mistakes and even business closure.
The good news is that a business’s chances of success when they incorporate facts and data into the decision-making process can lead to growth and prosperity
Why is fact-based decision making so important for a business?
Clearly instincts will always play a huge part with expedient decisions but they aren’t always good decisions and business owners become better decision makers when they take advantage of data and the facts that are derived from it.
Although intuitive decision making is both simplistic and quick, a lack of accurate data does make it hard for business owners to diagnose, recognise and rectify problems and issues when something does go wrong. Being able to drill down and access data stops the compound effect of making further poor decisions.
When a company reacts to problems instead of using facts to make prudent business decisions they are putting themselves at a competitive disadvantage within their sector and market place if their competitors are using relevant data.
What types of decisions are best solved by the use of big data?
Generally data-driven decision making works better at an operational level since there are relatively fewer risks involved. In fact, when aided by technology, data makes it easy to automate rudimentary tasks and decisions.
For example, it’s hard to imagine how a credit controller would fare if they relied on instincts to decide the health rating of a new customer and how much credit to award them, equally injecting big data analytics into a sales team can significantly reduce time and resource if quality leads were able to be sourced every day by sector, region, postcode and health rating.
Strategic decisions still require intuition and judgment, but injecting data analysis into the process can significantly improve the odds of success and the end result is that they complement each other.
Another great benefit is that cross-functional teams often use data in different ways but with the same assurance of fact based outcomes.
What’s the best way to incorporate data into the decision-making process?
Firstly, managers need to lead the way in supporting cultural change by acknowledging the importance of data in the decision-making process. Start with something simple like a data product that helps support your marketing program or reduce your risks of doing business as buying a licenced product like Red Flag Alert will automatically give you a better feel about customers, markets and risks.
Finally, encourage your team to analyse data by asking questions during the evaluation process so they learn how to marry facts with their instincts.