What does it really mean to be a data-driven business?

Analyst studying results of being a data-driven business
Read an article: 5 ways to become data-driven

If data really is so vital to a firm's present and future, then why do so many firms struggle at managing it?

Are there exceptions here? Of course. I've often written about companies whose management has clearly demonstrated as much (read: that they truly understand the import and value of data). At present, Amazon, Facebook, Google, Microsoft and Netflix are the exceptions that prove the rule – and I'm hardly the only one who feels this way. Gartner VP Doug Laney writes about the relative dearth of progressive data-driven companies in his new and insightful book Infonomics: How to Monetize, Manage, and Measure Information as an Asset for Competitive Advantage.


So what does it really mean to be a data-driven business? Here are a few telltale signs.

  • It means being willing to complement human decision making with data and analytics. Terminators haven't arrived yet. We still make decisions but, as many books and studies have shown, we're not terribly good at it. We frequently make bad decisions based upon cognitive biases. Data and analytics can alleviate our very fallible human tendencies.
  • It means running business experiments and split tests. As powerful as Amazon is, the company isn't sitting on its laurels. To optimize its products, webpages and recommendations, the e-commerce juggernaut constantly runs A/B tests.
  • It means being willing to make large acquisitions largely for data. Case in point: Microsoft's $26B acquisition of LinkedIn. Many analysts viewed Microsoft's purchase as largely a data play.
  • It means stitching together data from disparate sources. Case in point: Even though they are two different apps, Instagram and Facebook share data. Do you think that your ads in Gmail are reflected in your YouTube history by accident? Think again.
  • It means analyzing new data sources even though the rewards are uncertain. Think Netflix knew ahead of time that the colors in movie imagery affected subscriber choice? It does.
  • It means moving beyond Microsoft Excel and using interactive data visualizations. Netflix allows employees to explore data sets. As I write in The Visual Organization, the company makes data available by default, not unavailable. The difference in mindset is huge.
  • Making sense out of unstructured data. Sure, the structured stuff is important, but foolish is the soul who believes that blogs, tweets, photos, videos and the like don't matter.

It's also important to note that being a data-driven business does not entail:

  • Merely installing Hadoop or a NoSQL database in a test environment.
  • Purchasing fancy business intelligence applications but not using them.
  • Inserting the IT department into every reporting or data request.
  • Merely hiring a chief data officer (CDO).

Simon Says

Note that the above traits aren't easy to attain. Change is hard, as is building a culture of analytics. As the lofty market capitalizations of Amazon, Facebook, Google et. al prove, though, there's enormous value in embracing data and analytics. I for one don't see that abating anytime soon.


What say you?

Download – SAS: A Comprehensive Framework for Big Data Governance, Data Management and Analytics


About Author

Phil Simon

Author, Speaker, and Professor

Phil Simon is a keynote speaker and recognized technology expert. He is the award-winning author of eight management books, most recently Analytics: The Agile Way. His ninth will be Slack For Dummies (April, 2020, Wiley) He consults organizations on matters related to strategy, data, analytics, and technology. His contributions have appeared in The Harvard Business Review, CNN, Wired, The New York Times, and many other sites. He teaches information systems and analytics at Arizona State University's W. P. Carey School of Business.

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  1. Thanks for your interesting thoughts, Phil. What do you think of the following aspect? A data-driven company has the ultimate will and ability to utilize data as a key lever to proactively control or even manipulate a customer's, supplier's and competitor's behavior for generating more revenue and profit. Isn't this in fact the pattern which Apple, Google, Facebook and Amazon have in common?

  2. Apple doesn't monetize data; with 40-percent margins, there's no need. The company touts privacy as a service and consistently acts to protects this data.

    As for manipulation, it's all in the eye of the beholder I suppose. One person's manipulations is another's prudent business strategy.

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