What are the benefits of being a data-driven organization?

Becoming data-driven is not just some buzz-phrase or passing fad. There are significant benefits, both tangible and intangible, awaiting organizations willing to make necessary changes. If your organization has a goal of becoming more data-driven, here are some of the benefits you can expect. 

Most advantages of being a data-driven organization can be said to fall into two main categories: Whatever the organization does today, it can do better through increased value creation. Secondly, it can seize new opportunities faster and with a more accurate understanding of risk and rewards. Let us give you a little more granularity.

Increased value creation

Being data-driven gives you better control over the profitability of existing business areas. Essentially, you get to squeeze more value out of the resources you already have. One example is monitoring the organization’s performance through having relevant data on profitability KPIs, such as

• Average revenue per user/customer (ARPU)
• Cost of goods and services sold (COGS)
• Gross revenue
• Client contribution (CC)
• Earnings before interest, taxes, depreciation and amortization (EBITDA)

This drives substantiated business development, course-correcting towards those ventures that create the most value. Similarly, being data-driven allows for rational product or service development, with relevant data on

• Which products and services sell the best – and to what groups
• The value chain for each product and service end to end
• Resources available and resources spent 
• Customer demands and customer expectations
• Changes to the competitive environment covering competitor rivalry, supplier power, buyer power, threat of substitution and threat of new entry

Additionally, there is an important element of branding at play. By being and appearing innovative and cutting-edge, this not only increases shareholder value, but helps retain existing talent and customers, attract new talent and customers – further driving revenue growth.

Discover new opportunities

In a market where disruption is becoming the norm, organizations need to either specialize or be large enough to control entire value chains. This is why smaller companies are now, more than ever, incentivized to become part of business ecosystems. And being data-driven makes the organization more attractive to potential ecosystem partners, as these share synergistic data to strengthen their competitive advantages. 

Moreover, data is not only an internal asset for decision making and supporting R&D initiatives. Data can also be a sellable asset, i.e. more and more companies build new business cases gathering data – which again can be sold to either partners or other organizations in the value-chain..

While ceasing new opportunities always carries some risk, a proper data foundation – a single, shared truth – lets you make a qualified decision that people trust. Also, should the initiative turn out less successful than estimated, it is easier to learn from the decisions made – and thus improve for next time. 

Conversely, the organization does not run the risk of having a «Kodak moment» simply because they did not have the necessary market insight to see what was coming at them. It may, despite the data, choose not to act on it, but at least they will not be caught off-guard.

Reduced costs and increased quality

A data-driven approach can also reduce costs in several ways – while simultaneously increasing the quality of both products, services and organizational processes. First of all, it allows for the organization to scale with fewer resources. Without the need to continuously hire new employees as you scale up, you run less of a risk to lose the competition to more digital companies.

Secondly, with relevant data at your fingertips, you can make day-to-day operations more efficient through cost monitoring: What are the primary operational cost drivers? What costs can and should we reduce? It should be reiterated that relevancy is a key data quality for answering these questions – more is not necessarily better.

Additionally, with higher data quality, your organization also strengthens the foundation on which it bases its decisions. This can in turn lead to improved reputation. Being data-driven also enables your organization to more painlessly meet regulatory requirements such as GDPR, or industry-specific regulations such as Solvency or Basel.

Your organization can also automate optimize its CRM processes – cutting costs and increasing quality at the same time. Enough data allows you to generalize customers that are similar enough to automate their parts of their CRM procedures. This, coupled with data on what customers ask for – and what their needs are – can lead to

• fewer support tickets
• more streamlined customer dialogue
• lower processing times
• better customer experience

Similarly, your organization can now more keenly monitor its production line, leading to higher efficiency and fewer errors – strengthening both the top and bottom line.

To sum it all up

The benefits of being data-driven are manyfold. Your organization stands to increase its value creation, improve quality – of products, services and organizational processes – and reputation. At the same time you equip yourself with the agility to adapt to the market changes of tomorrow. And frankly, what other option is there? The future leaves little room for «gut feeling-driven organizations». 

In the end, it is all about making better decisions. The source of good decisions is experience – and that is exactly what data really is.