Why is Data important for any business?
The concept of data and data analysis can sound scary to many: it sounds like math, algorithms, and complicated and cold things. Because of this misconception, many companies underestimate the importance of data and what a huge improvement proper data use could bring to their activities.
In this article, we’re going to explore the reasons why data is important and what is the use any company can — and should — do of it.
What is data?
Many people see data as numbers, and this is where the misconception is born. You shouldn’t think of data as numbers, or strings of zeros and ones; think of data as information, because it’s exactly what they are.
Data is information. They can be qualitative or quantitative information, but they are always measurable, comparable, and repeatable.
Data encompasses knowledge, history, and forecasting.
Dealing with data may also mean that you need to deal with numbers sometimes, but “80% of clients landing on your website from your YouTube channel” shouldn’t be a number to hate or be scared of. It is a number to be used!
With data analysis, you don’t need to manipulate numbers as you used to in math class at school: data is collected through automatic systems that provide statistics, percentages, and information. Becoming aware of that information and using it well is your only job.
Why is data important?
This article isn’t just going to tell you that data is important. In this section, you will learn why it is so important. Once you are aware of them, you’ll have the tools to understand their importance without anyone needing to convince you about it.
Make informed decisions
Data is information and knowledge. Any decision you need to take within your company or business, it should be taken based on information. And the quality of this information will affect the quality of your decisions.
One thing is deciding to invest more in your social media marketing campaigns because you have the feeling that they might be working; one thing is taking budget decisions based on precise data about which channel is being more profitable.
One of the most effective strategies you may have heard of — in business and also in real life — is that preventing risks is better than fixing problems after they’ve already shown up.
Monitoring data makes organizations able to respond to challenges before they become an actual problem or — even worse — crisis. With data monitoring and analysis, your company becomes proactive instead of reactive.
Effective risk prevention can, in turn, improve the workflow, create a consistent income and improve your business performance overall.
Improve the workflow
Data can improve the quality of your work and workflow. If you reflect on how many times you had to overcome divergence in opinions with your colleagues, convince your partners of the quality of an idea or move, and demonstrate the success of a strategy… this all becomes straight and easy when you can count on objective data.
Not only do decisions and evaluations become more objective, but the efficiency and speed with which they are taken would improve: as a consequence, the everyday work and collaboration become easier and, once again, more effective.
With data, the success of the strategy can be measured more deeply. It’s no more a matter of evaluating whether a strategy has been successful or not; with data, you can measure that success (or failure).
The easier way to understand this aspect is with a simple example. Without data in your hand, you can say that a strategy has or has not been successful. For example, you can say that the discount on a given service has increased or not increased its sales.
With data, you can measure that, during the period when the promotion was active, the sales for that service have increased by a certain percentage. During the period immediately after, it has risen by another percentage, and so on…
When you need to decide to activate another promotion, if you can base your decision on data, you can have a better understanding of what kind of discount you can offer, for how long should it be active, and you can also forecast how long sales and profit would benefit of that promotion, even after it has expired.
Forecasting is not about divination. If you run a business, you already know how many decisions you make based on possible future outcomes. With data, future outcomes can be predicted based on measurable and objective elements.
Furthermore, having data at your disposal also means that you can use algorithms to forecast possible outcomes. Based on a trend measured in the past six months, an algorithm can provide information on how that same trend will behave in the next weeks, for example.
Identify and solve problems
Data allows companies to be more effective when they need to identify the causes of a problem. For example, data can highlight relationships between what is happening in different locations or departments of the same companies.
For example, data can allow you to notice quite quickly if the number of mistakes made during the expedition process for your article is growing. Data can also help you identify whether there are issues such as staff turnover that may suggest the cause.
Last but not least, when you are more efficient in identifying the causes of a problem, you are also more efficient in solving it.
Investors and stakeholders
Data will help you explain your decisions to investors and stakeholders. Data can also help you find investors: when you have data at your disposal, that are objective and that you can show in a report or presentation, it’ll become far easier to find people interested in your project and willing to invest in it.
The same goes for any stakeholders. Stakeholders are people that are involved in your projects at different levels: with data that can be shared with them, they are never excluded from any process.
At the end of the day, data also helps you improve your relationship with your stakeholders and investors: you no longer have to gain their trust, you have data to show; they no longer need to feel reassurance, they have data to check.
With data, you stop guessing, at any level and any aspect of your business management. Decisions, forecasting, new strategies, the success of old ones… it all becomes based on data and therefore objective.
Keep pushing where it’s worth it
Data also helps you understand what you’re doing well. We too often focus on identifying problems and improving what we are doing wrong, and we underestimate that the path to success is also made of improvement and strengthening of what we are doing well.
If a strategy has worked well last year, with data at your hand, not only you can choose to repeat that strategy but also double the budget dedicated to it.
Your business’ history is important beyond measure: by looking at how things went in the past you can take decisions in the present, and forecast the outcomes. But can you keep track of strategies, accomplishments, and failures if not with data?
Data allows you to measure, therefore they allow you to establish baselines, find benchmarks, and set performance goals.
How do you collect and use data?
Once you’ve understood the importance of data, your next question might be: how do I collect data? How can I analyze it?
Technological and software development is what allows you to collect data without even realizing it. Data collection can be implemented in your systems and it can work without being seen.
The same software tools are usually also meant to analyze data. Once they’ve collected data, you can search for those data, percentages, and statistics. Nobody asks you to keep endless excel sheets updated, or record any move you make within your business management: software should do this for you.
How data collection and analysis work might be a topic for another article. For the moment, it’s important that you understand how data can make any aspect of business more grounded. Data is to be considered the foundation for your business growth: all successful stories, whether it is business or life, are based on a solid foundation and, in this historical period, the foundation for business success is made of data.