challenges preventing businesses from becoming data driven

Key Challenges That Prevent Businesses From Becoming Data-Driven

Today, businesses produce massive data streams at a drastic rate due to the dramatic acceleration in digitization. This pushes organizations to become more data-driven, making choices based on data rather than hope, gut instincts, personal opinion, or general observation.

Undoubtedly, data is rising as an integral business asset. However, its reliability and value depend on adequately harnessing it to generate practical insights to assist strategic decision-making.

Data Analytics

Analytics and data capabilities have developed at an alarming speed in recent years. It increasingly fuels the adoption of data-driven business strategies. The Statista survey of industry-leading firms shows interesting facts about how businesses adopted big data and analytics in 2020 compared to the previous year. The report reinforced the central role of data in reshaping business decisions, reimagining competition, enhancing innovation, and developing data-driven companies. According to the survey, 37.8% of respondents were able to build data-driven businesses in 2020.

Yet, it seems that, although promising, becoming data-driven is very hard.

According to a Harvard Business survey, only 24% of respondents regarded their organizations as data-driven.

The beneficial promises are amazing, the results even better, but the actual work is quite hard to achieve. Why?

Why Has Data Become Imperative to All Businesses

Data is undoubtedly the most valuable asset in a business. It contains useful insights about business clients, their behavior, and updated industry trends that you can leverage to your advantage.

A data-driven enterprise fosters the culture of using data and business intelligence for all corporate decision-making. These organizations don’t scale in a straight line. Among the reasons why tech giants like Google and Amazon record exponential growth are because their business models are fundamentally based on data.

The goal of a data-driven organization is to design a structure where all members approach each decision by intelligently exploring and analyzing relevant data.

What Does the Research Say?

A PwC research shows that data-driven organizations can outrank their competitors by 6% profitability and 5% productivity.

Another research study found that data-driven businesses are 162% more likely to exceed revenue goals. 58% more likely to hit their revenue goals compared to their competitors who aren’t data-driven.

In addition, this report highlights that 81% of businesses agree that data should be at the center of all corporate decision-making.

While the statistic numbers make it look great, it’s critical to remember that data in its raw form isn’t going to be much helpful or informative. To make the most out of the data you collect, you must collect it appropriately and interpret it into something you can use. For effectiveness, you must create:

  • Organized and Centralized  Data. Data from external and internal sources should be aggregated centrally to serve the entire organization as a single source of truth.
  • Easy Access to Data. Ensure employees across various departments can access relevant data and insights to drive their daily decisions.
  • Standard Policies to Safeguard Data Quality. Having a set of guidelines and policies helps establish governance and ensure superior data quality is maintained for deriving data-based intelligence
  • Integrated Data Analytics. Data analytics tools allow easy adoption and encourage smooth data correlation across business functions to derive valuable insights.

The current unprecedented climate of constant change creates changing market dynamics. Organizations experience the apparent need to start going the data-driven way. Today, companies witness the accelerated urge to change into a more agile and data-first business that understands the value of data reliability and how it can impact business in the new paradigm.

There are a few key drivers of this inevitable corporate transformation:

Benefits of Becoming Data-Driven

1. Enhanced Customer Visibility

A data-driven enterprise knows its customers much better. It’s possible to learn where their customers come from, their needs, what they want to purchase, how they want the buying process to go, and how they want to contact the business.

2. Better Strategic Agility

Businesses often use data such as material cost, sales figures, and marketing projections to formulate business strategies which are largely influenced by the velocity, variety, and volume of data available.

3. Useful Insights for Innovation

A business that uses data and fully understands its customers can use those data insights to improve its functions like applications, offers, and continuous innovations, offering the best experiences to customers.

4. Efficient Operations

The success of a business depends on its customers. Businesses can track and adjust operations and processes by monitoring their data. They can respond to demands and disruptions by gathering and analyzing data on shopping routes, equipment conditions, supply chain efficiency, weather patterns, and inventory.

5. Competitive Edge

If you’ve tried big data exploration and hybrid and multi-cloud data platforms, you need to expand your business growth and success for it to gain a competitive edge.

Challenges That Prevent Businesses From Becoming Data-Driven

businessman presenting business data driven information

Many businesses have been trying to transform into data-first operations for some time now with mixed results. This is because there are numerous challenges to overcome despite many reasons to work toward a data-driven culture.  And according to research, the biggest challenge for a data-driven business strategy doesn’t have anything to do with technology. It has more to do with the fact that organizations and their people are resistant to change.

It doesn’t help that the need to become data-driven keeps getting harder. Corporations now encounter massive new amounts of data as well as new data sources, including texts, sensor data, pictures, signals, and other forms of unstructured data that are not easy to capture or make quantifiable.

Cultural Dynamics

When you consider cultural dynamics such as the rise of self-service and the 2020 global health pandemic, it has become even more challenging for businesses to shift to more data-driven methods. Today’s consumers receive information and data how and when they want it making information more decentralized. This allows consumers to choose the social media platforms they engage with, the news outlets they follow, and the information they rely on.

Then when you factor in the structural aspect considering data is created at an exponential rate, it’s no longer surprising that so many organizations struggle to become data-driven. As time goes on, the task becomes more difficult.

Furthermore, one dramatically emerging concern confronts organizations these days when it comes to management and ownership of data. This is the assurance of ethical and responsible use of data. This topic has been extensively discussed and written about recently and has been the central subject of critics.

In general, without the right datasets, analytics tools, and data specialists to support your business, it can be quite overwhelming.

So the following are some of the key challenges holding businesses back from adopting a data-driven approach:

Low-Quality Data

Not all data is good. Low-quality data is one of the major reasons behind companies’ reluctance to utilize data-driven support for decision-making. Bad data can significantly harm business ambitions and overall corporate decision-making. According to Gartner, poor data quality costs businesses an average of $15 million annually.

Due to the lack of systematic and continuous, collected data becomes too noisy, and insights based on bad, incomplete, or incorrect data become faulty. It’s therefore important to never assume the accuracy of the data used to drive business decision-making.

Inaccessible Data

Employees often face data inaccessibility since data is trapped in functional silos, which are not easily accessible outside the department or application. Unlike the modern automated data management method, most departments in traditional companies maintain data manually rather than use the system. The absence of centralized data prevents others from access, making it difficult for decision-makers to plan and collaborate as one unit.

There should be infrastructure and tools that enable data sharing between departments. Also, organizations can have data governance policies that create a single source of truth for the entire company data.

Lack of System Integration

Businesses don’t lack data. The problem is the vast amount of unstructured data stored across different platforms. The underlying problem for many businesses is the absence of standard data capturing practices and the lack of effective data integrations to unlock the value and achieve a holistic view of this data. The more systems you work with, the more complicated data management becomes. It is daunting to analyze and correlate disparate data from multiple sources lying across functional silos and applications to add value to the business eventually. But done effectively, it should seamlessly bring various functions, interfaces, and technologies together to drive productivity and boost the organization’s capabilities.

It’s, therefore, crucial to map how incumbent and future data systems will integrate while still in the planning phase.

Insufficient Data Interpretation

As sources increase, getting a complete view of various data is critical for effective interpretation. Inadequate visualization makes understanding inventory data, employee performance data, production information, vendor data, or financial transactions data difficult and hinders strategic planning. Furthermore,  the traditional systems’ inability to proactively process real-time data to derive insights into the business processes makes it difficult to identify relevant data points to help make decisions.

Limited Actionable Data Insights to Support Corporate Decision Making

The lack of adequate analytics capabilities makes it impossible to unlock the power of automation tools such as AI and machine learning to gain faster and better insights. AI-powered data systems help organizations automatically streamline data aggregation from various sources, recognize patterns, correlate data points, and present data intuitively to use real-time insights for business actions.

Lack of Skills and Data-Driven Culture

Becoming a data-driven organization takes more than the right technology and strategy. Businesses can only become data-driven if they effectively incorporate a data-first culture. However, most companies still struggle to build a data-driven culture and handle situations where employees make decisions based on gut instincts instead of data-driven facts.  A data-driven culture also needs skills as it should start from the C-suite executives and permeate through each division of the organization.

Become a Data-Driven Business

The shift to a data-driven company is critical for many businesses since it takes staff out of their comfort zones.  Employees and teams not previously deeply exposed to data will have to embrace and adapt to new business approaches. New tools and processes will also likely create skills gaps that must be addressed through new roles or effective training programs.

Even if it feels like you are lost in the process of trying to figure out how to build a strong data strategy and benefit from the use of massive amounts of data at your disposal, you are not the only one. What’s important is that you remain flexible to changing needs, invest in digital tools, and take time to build well-structured processes.

Shifting company culture is hard, but the evolution and innovation will permeate your business from the top down, making it better. ClicData can help you collect and combine data from multiple sources to help you derive actionable business insights. Sign up for a free trial.

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