We’re living in the age of Big Data, where every click, like, and page view is captured and analyzed and businesses are increasingly relying on data to make decisions. However, data-driven decisions can often be wrong, leading to costly mistakes. There are several reasons for this, including:

• Focusing on the wrong data: Companies often focus on vanity metrics, such as website traffic or social media followers, rather than metrics that are actually relevant to their business goals. For example, a company might focus on increasing website traffic without considering whether those visitors are actually converting into customers.
• Not asking the right questions: Before collecting data, it is important to ask the right questions. What are you trying to learn? What problem are you trying to solve? Once you know the questions you need to answer, you can collect the data that is most relevant.
• Poor Data Quality: Data can be inaccurate, incomplete or biased. A database usually includes 10-30% duplicates (Hubspot research). This can lead to misleading results and poor decision-making.
• Ignoring human judgment: Data is a valuable tool, but it should not be the only factor in decision-making. Human judgment and common sense is also essential, as it can help to interpret data and make sense of complex situations.

The Risks of Bad Data-Driven Decisions

Bad data-driven decisions can have a number of negative consequences for businesses, including:

• Wasted resources: Companies may waste time and money on initiatives that are not effective because they are based on bad data.
• Lost opportunities: Companies may miss out on opportunities to improve their business because they are focused on the wrong metrics.
• Damaged reputation: If a company makes a bad decision that is based on bad data, it can damage its reputation with customers and investors. It applies to both: implementing Data Ethics practices and avoiding GDPR risk (penalties up to 20mln EUR or 4% of global turnover).

Why Companies Often Select Vanity Metrics Instead of Real Metrics

There are several reasons why companies often select vanity metrics instead of real metrics:

• Vanity metrics are easy to measure: Vanity metrics, such as website traffic or social media followers, are easy to track and measure. This can make them seem more appealing than real metrics, which can be more difficult to measure.
• Vanity metrics can make a company look good: Vanity metrics can make a company look successful, even if it is not. This can be attractive to executives and investor. And most often:
• Companies don’t know what to measure: Many companies simply don’t know what metrics they should be tracking. They may default to vanity metrics because they are familiar with them.

How to Make Better Data-Driven Decisions

Here are few tips to start with:

• Identify the right questions to ask: Before collecting data, it is important to identify the key questions you need to answer. What are you trying to learn? What problem are you trying to solve?
• Collect the right data: Once you know the questions you need to answer, you can collect the data that is most relevant. This may include both quantitative data (e.g., sales figures) and qualitative data (e.g., customer feedback). Remember, 94% of companies suspect their customer data to be inaccurate (Experian research)
• Use data to support, but not dictate, decisions: Data is a valuable tool, but it should not be the only factor in decision-making. Human judgment is also essential, as it can help to interpret data and make sense of complex situations.
• Focus on real metrics, not vanity metrics: Vanity metrics can be misleading and can lead to poor decision-making. Instead, focus on metrics that are actually relevant to your business goals. Check some examples from Forbes.

By following these tips, businesses can make better use of data to make informed decisions that will help them achieve their goals.

Additional tips:

• Start small: Don’t try to boil the ocean. Start by focusing on a few key metrics that are important to your business.
• Get buy-in from all levels of the organization: Data-driven decision-making requires buy-in from all levels of the organization, from executives to front-line employees.
• Be transparent about your data: Be transparent about how you collect and use data. This will help to build trust with your employees and customers. Check out our article on Data Governance.

These tips should help get you started. For the next steps – connect with us.
Good luck!