Business Strategy

3 Types of Decisions Made from Data

3 Types of Decisions Made from Data

Data drives decision-making across every industry. Should we hire another salesperson? You check the data. Should we change global freight carriers? You check the data. Should we acquire another software company? You sure as h*ll better check the data.

Understanding data is no longer novel in organizations, it’s expected. A range of decisions from tactical to strategic ones are made by querying data.

Three Levels of Decisions Made From Data

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Discrete decisions often require only one single data point to come to a conclusion. You might be stuck, but one glance at some hard facts may help determine what to do. These more tactical and low-risk decisions don’t require vast analysis, you simply ping a dataset for a yes or no answer.

Typically, one simple table or chart may give you the information you need. One data point could confirm you should stop an activity, start something new, or continue with what you’re doing because what you’re doing is working. You may decide to renew an ad campaign, check how much sales dropped from a price increase, or understand why a project is over budget.

One data point could confirm you should stop an activity, start something new, or continue with what you’re doing because what you’re doing is working. You may decide to renew an ad campaign, check how much sales dropped from a price increase, or understand why a project is over budget.

Operational decisions require continuous analysis to gauge performance, often in real time. Whether viewed daily, weekly, monthly, quarterly, or annually, performance-data allows you to make informed decisions by evaluating how data changes over time. Were these numbers expected? Or is there an unexpected irregularity that requires we change?

You might notice a sudden drop in sales for a certain product line, or a trend of increased freight costs in a certain geographical area. These insights are often uncovered through dashboards and reports you see on a regular basis.

Strategic decisions determine the future path of an organization, industry, and beyond. You use current data to project where you should go in the future. These data points might not come from one place. You’d synthesize information from a variety of internal and external sources. The stakes involved in strategic decisions can be intimidating because if you make the right bet you could gain market share, but the wrong decision can have you meeting with teams about layoffs.

Also, data can help you predict a future direction, but it also takes intuition and guts to choose what to do. Merging with a competitor, opening a new market, or even transforming the type of business you’re in are very big changes data can inform you, but data rarely explicitly states what to do.

The more strategic a decision is, the more leaders need you to explain your reasoning clearly—with words and visuals. While a chart alone might be clear to you, your leaders may have a different depth of understanding about the data.

Decisions that seem obvious to you, may not be obvious to others without clear communication.

Getting others to buy in to executing on a decision made from data requires communication skills that are part art and part science. Shaping a crisp narrative to an executive could launch your career from individual contributor to trusted advisor.

Although the numbers themselves are important, what leaders need from you is not just data, but an explanation as to what the action you’re proposing will mean for business outcomes.

Data alone can’t communicate a strategic vision for the future of your team, your organization, your industry. Only you can do that.

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Illustrated by Anna Ralston