Making the Right Decisions based on Data and Business Knowledge

Posted @ 09/21/2017 07:12 PM By Diego Angarita

“If you know your enemy and you know yourself, you will not be imperiled in a hundred battles”, Sun Tzu

At some point in life, every person in this world has been forced to make a decision whether it’s what they’re having for breakfast or even to decide who they’ll marry, decisions are a daily thing in life for all human beings. Merriam-Webster’s Dictionary defines Decision as “a determination arrived at after consideration”, or more simply put, it’s choosing between 2 or more alternatives. These decisions depend on situation, circumstances, objectives, goals, and the expected results. But decision-making affects not only the lives of human beings, they’re also present in the business world, and this is where we’ll focus.

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The days of the industrial revolution are far behind us, where changes transcendental for mankind took place on the economic, social and technological fields, times when monopolies existed and the environment was smooth and silky. Today, companies around the world are faced with a hostile and changing world, an environment where globalization allows the exchange of information to be faster than ever imagined, and it’s here where data starts being part of the winning equation when supporting decision making.

Trends like BI (Business Intelligence) and Big Data allow managers to make decisions with a very low uncertainty margin. Although Big Data is a more actual concept than BI, it’s giving new life to business intelligence by offering the power of prediction to those in charge of making decisions every day. Predictive analytics was something used exclusively by some data statisticians and scientists dedicated to tasks which had nothing to do with business intelligence and entrepreneurial decision making. But Big Data is about to change that.

The more data flows that connect and integrate in the existing business intelligence systems, CRM, ERP, PPM and other critical mission systems, the closer we are to achieving a single 360° view of the client.

The big majority of companies, whether they are large, medium or small, even if it isn’t visible to the human eye, swim in a sea of data. This is because companies store data in different repositories, whether text files, spreadsheets, databases, emails and now even social media; but the fact that they’re swimming in a sea of data doesn’t mean that the information they have is of the best quality. First, the data must be processed and turned into information, which leads decision makers to have the knowledge that allows companies to reach goals more efficiently. In the following graph, you can see the knowledge pyramid, which represents the structural models between data, information and knowledge showing a relation between the amount of data and the quality they must have.

Data

Data is the base of the pyramid, and as we mentioned previously, here we can find different origins such as spreadsheets, text documents, databases, emails and data stored on social media. But this sea of data doesn’t contribute anything if it can’t be visualized in a proper way, and this is where IT departments begin to suffer with requests for reports from each of the departments or business lines within a company. Some of the queries which must be built to visualize this information can be quite complex and impact on very ample development times, and generally they can disturb the performance of the servers where this data is stored and this entails that sometimes the information won’t be available at the time it’s really needed.

For that reason, it’s at this point where business intelligence methodologies like Inmon and Kimball could be used to help manipulate data to be stored in places like data warehouse’s or data marts, and may be visualized in a correct way without impacting transactional databases that operate on a day to day of the company.

Information

After having the data identified and processed, the next level is that of information, which is constituted by a group of data already supervised and arranged, but what’s really important of keeping this data organized is that it provides the following advantages for information:

Makes necessary information available at the opportune time.
Facilitates communication and coordination between different actors, in the scope of risk management.
Enables cleaner, more effective decision making.
Maximizes use of information resources.
Preserves historical memory.
Contributes to identify and divulge learned lessons.
Potentiates and stimulates the formation of human resources and investigation processes.
Promotes the creation of synergies through networks based on knowledge.

This information can be seen on reports, which can show: patterns, trends, relations, associations, and even predictions, as long as these are well developed and achieve the goal they set out for, which is to visualize the data correctly. Generally, business intelligence models are built to support decision making with historical data, but at this stage, big data tools begin to fit perfectly because they can help process data in real-time and not just historical data. It’s here in this stage where data analysis or data mining gain strength.

Until not so long ago, advanced analytics, big data and unstructured data were reserved for the more specialized nucleus of IT departments. Users in the organization had to conform, at best, with transactional data that was provided with a skewed vision of reality.

The percentage of those who knew of the operations and even of the client who they frequently dealt with was limited to their action scope, and the efficiency suffered. It’s difficult to get it right with decision making when you only know part of the problem.

Big data has meant a change. This transformation begins to broaden the business users’ vision (from middle managers to supervisors, going through other employees in contact with the consumer, for example, through their work in client services. Non-transactional data is put on their hands for them to exploit for strategic decision making in the long run and in the immediate present.

Knowledge

The next level is knowledge, which is the intangible asset that yields the most competitivity for nations and organizations in a global economy. Bill Gates said, “Knowledge management is nothing more than managing information flow, getting the right information to the people who need it so that they can act on it quickly”. With companies, this knowledge makes them more competitive and efficient at the time of making decisions to achieve their goals. On Peter Senge’s book, The Fifth Discipline, he said “The only sustainable competitive advantage is an organization’s ability to learn faster than the competition”. This knowledge may be useful on issues such as:

Client typology.
Shopping baskets.
Contact frequency.
Client potential.
Loyalty degree.
Market share.
Client satisfaction.

Knowledge yields a very ample impact on the organization because it’s very hard to imitate among its competitors, it’s too costly to emulate and gives the company a highly differential point for the clients making them efficient and effective at the time of achieving their goals.

Intelligence

And at the top of the pyramid, corporate intelligence, which is based in the recollection and analysis of information that facilitates decision making, be it to anticipate a future event (like a new investment) or to provide solutions to a particular problem or conflict situation. In this new era, key activities are listening and analyzing, because everyone has information, but extracting practical knowledge from huge amounts of data requires a scientific methodology. Intuition or mental models no longer suffice to be successful, which is why it’s necessary to have more people within an organization with the capacity to analyze, aside from having the right technological tools, because a world rich in data is an open and very competitive world.

For that reason, decision makers in this phase must be able to differentiate very well between tactic and strategy, which, although always together, don’t mean the same thing, and it’s very common for companies to mistake them at the time of execution. Corporate intelligence has the only mission of routing the company towards the path that costs less and provides more input for the fulfillment of its entrepreneurial goals.

In conclusion

Peter Drucker once said, “Whenever you see a successful business, someone once made a courageous decision.” This doesn’t mean that just by making a courageous decision all companies will be successful, but something certain in this phrase is that, someone at some point, in this successful company, left fear behind and was determined to make a courageous decision. Deciding with high uncertainty causes a lot of fear at the time and this is why data is there to reduce said uncertainty.

We live in a globalized world where, thanks to the Internet, we can find abundant information to document ourselves and be able to make a decision. Tools like Google Trends, SimilarWeb, and WooRank, which are freely accessible, help validate market trends, company website traffic behavior, average time a person spends on the website as well as many more benefits.

This type of information may help growing companies to know more about themselves and their competitors, and this knowledge enable business managers to have a high action range to lead their companies.

And this takes us to the specific importance of technology. It’s true that it’s a fundamental variable for the appropriate management of information besides it putting up high barriers to competitor entrance and gives a certain feeling that things are being done well, but we must not forget that technology is not the ends but the means through which companies may reach efficient decision making, and this is where a leader’s intuition also becomes relevant in the process.

As an example, let’s take Waze, the world’s largest community-based traffic and navigation app. If a driver needs to go across the city from one end to the other, the app suggests the most optimal route to reach their destination, but this app doesn’t take into account places that are unsafe for private vehicles to be in, and this is where the driver’s intuition comes in to make a decision. If they take the fastest route regardless of it being unsafe, or if they’d rather follow the route that takes more time but doesn’t expose them to any type of danger. Intuition and experience will always play an important part in decision making because, in a certain way, experience is knowledge and this knowledge can be transformed into intelligence.

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