Data-Driven Culture

The key to data-driven decision-making process lies in the availability of quality data. Many executives have a deep understanding of their business but struggle to elicit the right data needed for informed decision-making. Often, they realize the need for relevant and accurate metrics only once the company has reached a certain size and complexity. At that point, their knowledge of unit economics may no longer be sufficient to understand the full impact of their decisions on the overall business. Whether driven by poor outcomes or the desire to better understand the ramifications of their choices, most CEOs eventually find themselves pushing relentlessly for metrics, on to discover that the company is unable to produce them reliably. 

At that point, seeking a new CFO is almost inevitable, but the new CFO often proves only marginally better than the previous one at generating the necessary data. CEOs who are willing to delve into the details quickly realize that the core issue lies in their systems – they simply do not capture the data required by the company. As a result, the information they need is not truly available, making it difficult to support effective decision-making.

I have experienced this cycle multiple times. The positive aspect is that there is a way to prepare companies for data-driven decision-making when it’s most needed. However, the challenge is that it requires both time and financial resources, particularly when companies should be concentrating on developing their product offering. Here are some steps to help get a head start:

1. Build a team, particularly in Finance, that possesses strong business acumen. To achieve this, focus on recruiting professionals who not only have technical financial expertise but also show a deep understanding of the industry, market dynamics, and the company’s overall business model. 

   
   

2. Understand your company’s customers and vendors, including their business models and key metrics. This insight will help inform the company’s market metrics and dynamics, enabling the company to better forecast and respond to changes in market conditions. Whenever possible, align your core metrics with those of your vendors and customers to ensure your business model closely reflects market realities. 

   
   

3. Implement the company’s ERP, making sure all transactions are registered in accordance with the defined metrics. This approach will enable key metrics to be automatically generated and readily available, supporting real-time insights and more informed decision-making.

   
   

4. Prioritize and simplify your metrics. Less is more.

   
   

5. Implement a metric-driven forecasting process to effectively track execution at the individual metric level.