In the fast-paced race towards companies with AI-everywhere, there appears to be overlooked value in embracing smarter management and operations of companies. While the allure of AI solutions is undeniable, the foundation for managing organizations often lies in a nowadays less sexy yet powerful concept: being truly data-driven.
But what does “data-driven” really mean? And how does it differ from other related but distinct terms such as data-enabled operations or AI-powered products?
We will shed light on the undeniable necessity and advantage of becoming data-driven, as well as discuss the different areas where data-based solutions such as machine learning and AI can provide you and your company additional superpowers.
Having clarity on these distinctions will allow you to set the right target vision and not be misguided in your efforts. You will have the right expectations set for your investments, avoid going on a hype-tangent, and appreciate the value from smarter decisions when it comes to steering your company.
Fostering Data-Driven Management
Being data-driven is about astute management of your company, where decisions are rooted in robust data foundations. This approach transforms the organization into a well-monitored vessel, steering its course with efficacy based on decisions derived from well crafted indicators.
As a leader, you should foster a culture where informed decisions are valued and rewarded. It involves establishing well-defined Key Performance Indicators (KPIs) and crafting KPI trees or an OKR framework that act as guiding stars, ensuring operational targets align with the strategic goals. People, their motivation and incentives must be thoroughly designed and linked to relevant indicators that they can impact. The topic of smart, data-driven management must be advocated throughout the company, starting from inspiring, and consistent use of informed insights in decision-making from top leadership.
You should also build the conceptual, process-wise and technical foundations to enable managers and other employees steer projects and operations in a strategically desired direction. Accurate, timely and transparent data will establish people’s trust in numbers. For this you must strengthen your data management and data governance practices. Clearly visualized dashboards, in turn, will make it easier to interpret and act upon insights. You will need business savvy cross functional teams of domain experts, analysts, scientists and engineers to turn raw data into actionable insights. And for them to work well together, you will need a solid data infrastructure coupled with a well glued-together operating model that outlines how these teams are able to work together.
That is a lot to ask for becoming data-driven. The benefits from these continuous efforts will be subtle, indirect but large and transformational. You will foster an organizational culture that is able to achieve its full potential, where the energy is converted into moving faster, more efficiently and more strategically, out-navigating your competition with smarter management and data-driven decisions.
Caption: Three ways your company can think about utilizing data, analytics & AI
Driving Data-Enabled Business Operations
While being data-driven propels strategic decision-making, the integration of data-enabled operations takes data solutions into the heartbeat of daily business functions. Here, the emphasis shifts from managerial finesse to the seamless efficiency achieved through data-based solutions like machine learning and AI. From optimizing supply chain logistics, refining HR processes and fortifying financial reporting, the organization evolves into a hub of machine-augmented set of processes.
Any process, in core and support functions alike, can be supercharged by data, analytics and AI solutions. Take advanced analytics models that help a consumer goods manufacturer in their pricing model towards their wholesale partners, or an energy company that uses machine learning as means to achieve end-to-end optimization of their supply to production processes. Generative AI models help you in similar ways: for example, they can supercharge your marketing team, helping them come up with new creative materials, or help the legal team drafting standard contracts based on pre-specified terms and conditions.
There is a vast array of existing tools out there, and ML/AI solutions are getting increasingly integrated into solution suites serving all sorts of industries and functions. Oftentimes it takes effort to integrate these into your company’s IT, data and process landscape, and sometimes you have to build solutions almost from scratch. In any case, the value from them is undeniable. Improvements from such solutions can often create 10-40% efficiency gain.
However, there is at least one more fundamental way your company can benefit from data solutions; and that is to have data-powered products.
Developing Data-Powered Products
When the product or solution that you are selling to your customers directly includes data, analytics or AI solutions, you are what we call “data-powered”. At this point, data & AI is not only your business’ business, but becomes part of something your customers rely on.
Deployed masterfully, data-powered solutions can provide your product a smart edge over competitors, or even offer transformative value to your customers – the same way you may be using certain tools in your data-enabled operations. You can think of these as either supplementary or core features in your products – and as such, mistakes and errors can be costly when it comes to customer value and perception.
Consequently, it is a challenging place to be in: you have to have mastered the technology to a level where you are able to reliably offer data-powered products to your customers, with all its benefits but often daunting list of requirements as well.
So which one could you be? And which one should you be?
Data-driven, data-enabled, data-powered. These categories are not mutually exclusive, and you can choose to be any, or all of them as part of your business strategy.
Every kind of company pursuing impact should desire to be data-driven (managed) and data-enabled (operations). But not every company needs to have AI-powered products. This is a strategic choice and depends on the industry, the customer needs, the positioning and the types of products or solutions that the company is offering. This is often misunderstood in our experience, which results in companies pursuing AI strategies and losing focus on simply becoming data-driven and data-enabled.
Product innovation is powerful and in some sense necessary, but it should be led by solving for the underserved needs or desirability of customers, not by the tool that solves for it in itself. Simply put: not every product needs to incorporate data & AI, but every company must rely on these technologies if they are to remain competitive in today’s market.
As leaders steering the ship of our organizations, the call to action is clear—embrace the transformative power of being data-driven and data-enabled. In an era where the buzz around AI is overtaking, the strategic brilliance of reliable data, well-defined KPIs, and a culture of data-driven decision-making is our guiding light. The journey begins with empowering your teams, instilling a data-driven mindset at every level, and recognizing that the true strength of a company lies not just in its technology but in its data-driven approach to management. This can be your first step on the pathway towards becoming data-driven, data-enabled – and if your customers so need it: data-powered.
Key take-aways:
- The term “data-driven” is loaded and leads to confusing discussions in today’s world where organizations are chasing “AI-everywhere” solutions
- Three ways data can contribute to your business success are (1) fostering data-driven management, (2) driving data-enabled business operations and (3) developing data-powered solutions
- Your role as a leader is to see these as different areas of opportunities, evaluate them objectively, avoid the hype, and set the strategic direction and investment into the most promising ways towards embracing a data-driven advantage