The Importance of Data: 5 Top Reasons

In today’s era, an integral part of piloting a successful organization involves gathering data that can be analyzed to gain greater insights into the business and its customers. Many of the largest companies in the world, such as Amazon, Google, and Netflix, have historically leveraged data for business purposes. However, advances in areas such as data processing and data visualization have shown the importance of data and have made reaping the benefits of big data more accessible to everyone. 

“But what if we don’t have enough data?” You do. The total data generated is growing exponentially. Some figures suggest we collectively create roughly 2.5 quintillion bytes of data daily. In other words, data is extremely readily available to business leaders to those willing to extract it. The more concerning issue is distinguishing what data is worth extracting and what is not since so much is being produced. 

Nonetheless, data is a valuable asset for businesses in the 21st century. In 2006, Clive Humby - a British mathematician - coined the phrase “data is the new oil” about the availability of both resources: neither oil nor data is valuable in its raw state; rather, value is derived when it is gathered rapidly, completely, accurately and is connected to other relevant data. 

In this article, we will cover five broad areas that significantly increase data's importance. Those five areas are (in no particular order of importance); 1) decision-making, 2) problem solving, 3) understanding, 4) improving processes, and 5) understanding customers. 

#1 For Informed Decision-Making

With real-time intelligence at their disposal, leaders can make informed decisions on the direction to take their company. This is because data is equivalent to knowledge. Thus, owning good data serves as indisputable evidence or justification for a decision – it allows leaders to say, “we’ve done x because of y.” Essentially, good data is persuasive in and of itself.

The other paths to follow include anecdotal evidence, assumptions, and abstract observation may potentially be easier but may consequently lead down a road of wasted resources. Gone are the days when assumptions and gut feelings steer the ship. Using data enables leaders to make less risky decisions based on facts provided by the data. 

#2 For Problem-Solving

When sales are down or a product fails, how do you discover the cause of the failure? Data enables organizations to track and review the health of various business processes and essential systems. The aid this provides businesses is two-fold: 1) hindsight and 2) foresight. 

In hindsight, businesses can review data to uncover stages where performance breakdowns occur. With a better understanding of where the processes or systems are failing, organizations can implement solutions to improve such stages. In foresight, since data allows organizations to monitor the health of various systems and processes, organizations can effectively enforce quality monitoring, enabling them to respond to challenges before they become a major issue. 

You can use various tools to solve real-world problems, and the importance of data is seen in the flexibility of approaches you can take. 

#3 For Greater Understanding

To make strategic decisions going forward, a good understanding of where you stand is vital. Business leaders must understand how each aspect of the business is performing against key targets and goals. Data is important to get an accurate insight into performance. An industry that serves as an excellent example of this is the sports industry. 

The famous movie, Moneyball, shows how a Bankrupt Oakland Athletics team can beat the odds when the coach, Billy Beane, decides to employ an analyst to make informed decisions on players to acquire that will improve the team's performance. 

This use of data resulted in the team going on a 20-game win streak in 2002. Now, there isn’t a professional sports team that doesn’t leverage data to support and improve their performance on the field.  

You, too, can become a Data Analyst with DataCamp’s Data Analyst Certification, or you can look at an example project of data analysis in basketball to learn more. 

#4 For Improving Processes 

Data helps business leaders better understand and improve processes that reduce the number of wasted resources. By analyzing data and using business process analytics, leaders can have a top-down view that can highlight weaknesses, obstacles, or breakdowns in processes while potentially assisting in streamlining high-functioning processes. 

This knowledge can help businesses get their products into customers’ hands faster and cheaper. 

#5 For Understanding Behaviour

At the center of every successful business is a deep passion for understanding and meeting the customer's needs. If potential and existing customers are to believe a business has their best interest at heart, the business must know, understand, and meet their needs. Customer analytics is big business, and companies spend a lot of time and money trying to understand their audience. 

With access to data (i.e., demographic, geographic, behavioral), businesses can build a better understanding of the customer they are serving and identify the needs of their specific audience. For example, a business may analyze various trends in customer behavior, such as customer churn, and improve certain products or decide a pivot is required.

Wrap-Up

There is no doubt about the importance of data in the modern era of business: it is a vital asset. Organizations must ensure they are data literate to remain competitive and potentially develop an edge over their competition. 

To derive value from data, leaders and employees alike should have foundational data skills that enable them to rapidly gather data completely and accurately while ensuring it is connected to other relevant data. This knowledge may require embracing tools such as Power BI.

Learn more about data literacy and data-driven decision-making with DataCamp's diverse catalog of data literacy resources.