Council Post: Six Steps To Becoming A Data-Driven Organization

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CFO of Sandline Global & author of Deep Finance, Glenn has spent the past two decades helping startups prepare for funding or acquisition.

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The world lives in a time of technological ubiquity. From smartphones to smart homes, the internet seemingly envelops every transaction, communication and interaction. This includes your life at home and work.

What does this mean for your organization? Is it possible to keep running an analog enterprise in a digital world? Possible, yes. But why? Business education 101 will tell you that ready access to accurate data is a hallmark of a successful modern enterprise. Better information leads to better decisions and optimal results.

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Today, leaders have more information at our fingertips than at any time in human history, but this does not simply mean you can just Google your way to business success. Companies must put in the hard work to establish a solid digital foundation and then follow that up with increasingly important steps to become data-driven organizations.

I’ve put together six steps to help you digitally transform your organization based on my experience as a CFO and leader helping startups prepare for their next move.

Step One: Hire or upskill workers and implement systems to collect and handle data.

Whatever your business’s focus, it is important to ensure that you have people and processes in place to collect data and present it in the right way. This means investment in systems and human resources. It does not necessarily mean that you have to go out and hire an entirely new team (although you may need to perform targeted personnel searches for specific skill sets). Often it’s mainly just a matter of upskilling your existing talent base. From the beginning, identify the right people and equip them with the tools and training they need.

Step Two: Make sure you are collecting and aggregating all available data you have in and around your business.

From sales figures to market research, economic indicators to internal metrics, it’s important to “know what you know.” Make it a priority early on to take stock of your existing data and what it says about your business at a fundamental level. This might involve a restructuring of your workforce to give higher priority to those in charge of building such a knowledge base. Again, effective human resource management is just as important as buying the right software.

Step Three: Take stock of your descriptive statistics.

Make a catalog of all data you have for existing customers and products, and note what it all means in a descriptive, nonjudgmental way. Look for correlation across statistical categories and identify trends in your data that yield insights about, say, a particular market segment. Build software and intranet tools and dashboards where people across the organization can quickly see data that is relevant to them. This is the first level of “knowing what you know”; next, you’ll start to grapple with what that knowledge “means,

Step Four: Move on to prescriptive analytics.

Once you’ve gotten your arms around your data, use it to make predictions and recommendations for the future. Make inferences from your existing datasets and use them to plan the way forward. That is when you are truly data-driven: when you draw connections between the volumes of data in order to reach useful conclusions and implement them in innovative and forward-thinking ways.

Important caveat: A robust collection of data should not replace human decisions. Rather, it is a crucial tool to make better decisions. As they say, knowledge is power, but the real source of that power comes from knowing how to deploy that knowledge. It can take you from hunch to hypothesis, where stakeholders and enterprise leaders bolster their intuition with real-world information that leads to practical solutions,

Step Five: Democratize your data and crowdsource your leadership.

You don’t want to be a top-down gatekeeper of your company’s data. Canned reports sent out from informational silos are not good enough. Different team members may see the same data in a different way because of how it pertains to their department’s role within the organization. You want to build systems and processes that rely on readily accessible data across your firm. Comprehensive access to data empowers departments and leaders to make important decisions without having to wait for you. This transparent approach discourages unhealthy competition and encourages collaboration and greater accountability. It will drive better decisions for finance, sales and marketing, IT, human resources, etc. By “crowdsourcing” your decision-making power, you’ll be harnessing the many strengths of your team members in a way that far outpaces any one person’s talents.

Step Six: We’re all in the same boat.

This is the last step, the point where it all comes together. It’s the “trust point” where everyone in the company has bought into the data-driven approach, where each team member trusts that data is accurate and is giving them a full picture of the company’s situation. Only then are effective analytics possible. Mark Twain famously bemoaned the danger of “lies, damn lies, and statistics.” It’s understandable and proper to be skeptical of mountains of raw, unvetted data. It’s, therefore, crucial to have vetting mechanisms in place to continually ensure that the information you are collecting is “real.” In a world of misinformation, disinformation and “fake news,” it’s paramount to create an environment where your team members take for granted that “the truth is the truth.” Only then can everyone bring their own perspective and relevant experience to bear on the same set of trusted numbers and information.

Today’s world moves fast, and many leaders and companies are drowning in data. The smart business leader knows the difference between information and knowledge. It’s crucial to build processes and teams that can aggregate relevant data, make it readily available to all stakeholders, and empower your team to draw conclusions about that data that lead to productive and fruitful decisions. As the Mandalorians might say: “This is The Way.”

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

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