Creating a Data-Driven Culture

By Busse, Scott | Risk Management, April 2012 | Go to article overview

Creating a Data-Driven Culture


Busse, Scott, Risk Management


Empirical evidence shows that a data-driven culture can lead to better, faster decision making, greater customer insights, fewer mistakes and ultimately a competitive advantage.

For example, through his "Moneyball" approach, Billy Beane instilled a data-driven culture as general manager of Major League Baseball's Oakland Athletics. He disregarded old-time scouts' "intuition" and used multivariate analysis to understand what made great hitters and pitchers. Doing this gave Beane an edge in an inefficient market that overvalued a hitter's batting average and undervalued his on-base percentage. With this approach, Beane was able to draft players that the market undervalued and build a team that produced wins at a lower cost than any other team.

However, overcoming organizational inertia to create a data-driven culture isn't always easy. Institutionalizing the following steps and ensuring everybody asks, "Does the data support this decision?" will help make the transition easier.

Know Your Statistics

From the hiring process on, build an organization that understands data. For example, an insurer sent customers a loyalty survey that asked, "Do you use our customer service website?" and the results showed that those who did were 10% more loyal. However, customers aren't more loyal because they use the self-service website. Another factor was probably driving the correlation. For example, loyal insurance buyers are more likely to use online servicing and be less price-sensitive in the first place.

In short, a thorough understanding of statistics, correlation and causality is critical to designing data-collection processes, measuring results, interpreting results and recommending action.

Employ an Expert

At least one person on the team needs to be an expert to prevent mistakes, mentor colleagues and champion analytics.

Not everyone will be analytics and statistics masters, but at least one team member should be able to validate proposed test scenarios and collection techniques, interpret results and lead the creation of a data-driven culture. One-third to one-half of this person's time should go to unstructured data analysis and developing new insights; this person should be evaluated on how effectively the organization's culture changes.

Ensure You Can Measure

Make measurement part of the process, not an afterthought. Creating a data-driven culture starts with being able to accurately measure and present reliable and actionable information. …

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