What is data-driven management essential for DX? Advantages of introducing it and points for success

Table of contents

What is data-driven management?

The literal translation of the English word “Data Driven” is “driven by data,” and “data-driven management” is a management system that makes decisions based on objective and logical data. In the business world, this is sometimes called “data-driven management.” Data-driven management is attracting attention as an essential initiative to realize DX, and advanced companies such as SoftBank Group, JTB, and Fujitsu are promoting data-driven management initiatives.

Data-driven management flow

The essential purpose of data-driven management is to create added value that competitors do not have by analyzing data collected and accumulated through business activities, and to establish a competitive advantage in the market. Therefore, the basic flow of data-driven management is to start with data collection, and then proceed through the process of extraction, processing, visualization, analysis, and decision-making. .

First, all the data collected and accumulated through business activities to date will be centrally aggregated into a repository such as a data lake. The process of extracting and processing this data is called ETL processing. The cleansed data is then typically loaded into a data warehouse that stores structured data and visualized using BI tools.

Next, we move on to the phase where we analyze trends and transitions in the data visualized by the BI tool, as well as correlations and causal relationships between elements. By visualizing data in graphs, flowcharts, etc. using BI tools, you can visually and holistically analyze the regularity and bias of information. The process of making decisions based on the knowledge obtained through analysis is the basic flow of applying data-driven management to the management field.

Advantages of data-driven management

Now let’s take a look at the specific benefits of data-driven management. The three main benefits are “allowing you to make well-founded decisions,” “deepening your understanding of customers,” and “promoting company growth.”

Be able to make well-founded decisions

In modern times, changes in the environment surrounding companies are accelerating in proportion to advances in technology, and market competition is becoming more and more intense. In order for a company to survive in this era, it must build a management foundation that can flexibly respond to changes in the market. To this end, it is essential to minimize the interference of subjective judgments such as intuition and experience, and to make accurate management judgments and decisions based on reliable data.

Managers, especially those involved in corporate management, are constantly forced to make decisions and choices, but the longer the process from decision-making to implementation takes, the slower they will be able to respond to the market. If we can build a data-driven management system through the use of AI, IoT , cloud computing, big data analysis, etc., it will help eliminate ambiguous decision-making based on personal opinions and make sound, grounded management decisions. Probably.

Deeper understanding of customers

Peter Drucker, known as the father of business administration, wrote in his book, “There is only one valid definition of the purpose of a company: the creation of customers.’

By analyzing a huge amount of data such as your company’s customer information, business negotiation information, market trends, and demand trends, you can develop marketing strategies based on latent customer demand and product development that captures consumer insights. By deepening your customer understanding based on solid data analysis, you can differentiate yourself from competitors and maximize the probability of success in marketing strategies and promotions.

(*) Source: Modern Management [Part 1] | Diamond Inc.

Accelerate company growth

One of the benefits of incorporating data-driven management into your management system is the promotion of corporate growth. Data analysis not only supports decision-making and deepens customer understanding, but also has the advantage of being able to analyze your company’s business situation from a bird’s-eye perspective. For example, you can visualize your company’s business status by analyzing business data from core departments such as financial accounting management, human resources management, sales management, and purchasing management stored in ERP.

If you can visualize your company’s business status as objective data, you will be able to understand current issues and problems that need to be solved in concrete terms and numbers. By accurately understanding the issues and problems that you are facing, you can specify the actions that each department and team should take. If the direction each department and team is aiming for becomes more concrete, the role of each employee will become clearer, which will improve the performance of each individual and lead to the growth of the entire organization.

Everything has two sides, and behind the advantages there are also disadvantages. It is true that data-driven management can bring a variety of benefits to companies. However, there are many cases where companies have incorporated data analysis into their management systems but have not been able to achieve DX. Here, we will explain the points you need to keep in mind in order to succeed in data-driven management and realize DX.

Executives learn data-driven management

In order to incorporate data-driven management into the management system and lead to the realization of DX, strong leadership is required for management to learn the importance and process of data utilization and demonstrate its usefulness. Human beings basically tend to dislike change, so it is self-evident that if the existing management system is to be reformed, opposition and resistance will arise within the company. Therefore, management needs to demonstrate the importance and usefulness of data utilization and promote data-driven management with a strong will.

Securing and training human resources

In order to realize DX, we need human resources who can not only introduce digital technology but also use that technology to promote changes in corporate culture and management systems. An important issue is how to secure human resources with advanced knowledge. Furthermore, in addition to focusing on recruiting excellent human resources, it is also important to create an environment that fosters DX human resources, such as creating educational programs and holding seminars.

Create a culture that emphasizes data throughout the company

DX is a concept that refers to total optimization that brings about changes in management systems and business models themselves through the use of digital technology, rather than partial optimization such as so-called digitalization and IT utilization. The problem with companies that do not transform even after incorporating cutting-edge digital solutions and data-driven management into their management systems is not technological, but corporate culture. Therefore, we must incorporate the importance of data utilization into our management vision and foster a corporate culture that is shared throughout the organization.

summary

Data-driven is a concept that refers to a series of processes that make decisions based on data. A management system that makes decisions based on quantitative data analysis is called data-driven management. In today’s rapidly changing market, building a data-driven management system is essential in order to create new market value through the realization of DX.