Data-informed vs Data-driven — Which is best for decision-making?

data Feb 12, 2021
As the century progress, data is becoming more vital for businesses, and how their leaders make decisions based on facts, trends, and statistical numbers. But with so much information out there, business leaders must be able to sift through the noise, and get the right information, to make the best decisions about strategy and growth.
 
Data is at the core of nearly every business. The human resources department is gathering data from online resources to find the best recruits and confirm details about them. Moreover, marketing departments are focusing on data relating to market segmentation, finding costumer, and speeding up the sale-closing process whenever possible. On the higher management level, business executives examine bigger trends in the market including changes in the pricing of resources, shipping, or manufacturing.
 
Effective use of data enables a company efficient in their process of developing products and/or services, then delivering them to the customers. However, there are different points to look at data for decision-making — data-inspired, data-informed, and data-driven.
 

What is data-informed decision-making?

Data-Informed Decision Making refers to the ability to transform information into actionable and verified knowledge to ultimately make decisions. Furthermore, it is an approach where decisions are made after considering data as well as user research, experience, and personal insights. Rather than allowing data to control everything, there’s still a human element to decision-making.
 
At an individual level, making data-informed decisions requires systemic thinking, the ability to be aware of your biases, the ability to challenge the data, and the ability to accept failures and learn quickly from them.
 

Pros

  • The ‘bigger picture’ can be considered in making decisions (quality, not just quantity)
  • You can get an accurate idea about what's happening in the market, the business, with consumers, and etc.
  • Helps a business to discover unique solutions because of the human touch (intuition)
  • It can help identify trends in the completion or industry
 

Cons

  • Can be influenced by certain stakeholders.
  • When used incorrectly, decisions can come down to which stakeholders the business wants to keep happy.
  • It often leads to conflicting opinions of team members against what the data suggests.
  • Business goals can be pulled in several different directions and pulled apart at the core.
 

What is data-driven decision-making?

Data-driven means that you have the data that will determine the outcome of an outstanding decision. This approach always relies on data in making decisions. If you’re trying to improve the user experience of a product, you’ll need to run tests to get the data that will find the best approach.
 
Data-driven doesn’t take your unique experience or insight into account. It’s simply about the cold, hard facts. In this approach, data has the final say.
 

Pros

  • Businesses (people) don’t need to make decisions, data makes the decisions for them
  • Gut instincts are ignored and there’s no emotional role.
  • It's possible to overcome the agendas of certain stakeholders.
  • Rather than reacting to a change in the market, you can follow the data and identify something that could be problematic in the future.
 

Cons

  • The bigger picture is largely ignored.
  • It is often difficult to implement when a business isn’t generating enough data.
  • When decisions are based on small amounts of data, there’s a chance that this data isn’t representative of true market conditions.
  • It’s actually very difficult to become a data-driven business.
 

Which is the right approach?

As discussed above, either of the two approaches has benefits and drawbacks. But, we can still look at both for trends and use the data to explore the position of the business in relation to the market. Also, it’s impossible to draw absolute conclusions from the data, this can make it unreliable. So what is the right approach to use in making decisions?
 
Ideally, you’ll use a blend of both data-driven and data-informed for your company. But the choice depends on the circumstance. From the businesses' perspective, the answer is to learn when to use each approach depending on the situation. There’s no reason why any business needs to choose one strategy and stick with this strategy for life; instead, we need to recognize the type of decision we’re making. From there, we can consider the two approaches and choose the best one. Some situations will call for a data-driven approach while others will need a data-informed approach.
 
The Data-Driven Approach — This is best when decisions can be based on an either/or outcome that uses data. If you’re working on conversion rate optimization, A/B testing, pricing, or other data-based projects, data-driven is the way to go. It is recommended to determine first the definition of success for your company, and in the experiment being conducted.
 
The Data-Informed Approach — This approach is the stronger option for more complex decisions/projects that need many inputs (i.e. user feedback, competitive data, personal experience, and stakeholders' opinion). For instance, an example would be product development or a new feature for a product or building a website, where you can understand what the customers like or don't like about it.
 
 

Conclusion

In the battle of data-driven vs. data-informed, there isn’t a clear winner. Both approaches are useful in certain settings. Also, data insights are a disruptive technology that can either make decisions successful or a complete failure. In summary, for decisions that can be based on quantitative input, use a data-driven approach. For decisions that need to include qualitative input, use a data-informed approach.
 
Any form of business should be able to know which approach to apply in finding and taking advantage of new opportunities as quickly as possible, and as a significant competitive advantage.
 
 
 
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