Data-driven Decision Making (DDD) is the practice of basing decisions on the analysis of data, rather than intuition. It’s like piloting a plane looking at the instruments, instead of looking at the window.
Example: a marketer could select the products to promote purely based on their experience in the field, however, with some supporting data coming from sales or website analytics, that same marketer would be able to recognize patterns and do better-informed decisions, increasing the effectiveness of the product promotions.
The benefits of data-driven decision making have been demonstrated conclusively. A study from MIT and Penn’s Wharton School shows that statistically, the more data-driven a firm is, the more productive it is – even taking into account a possible range of confounding factors. There was a high correlation with return on assets, return on equity, asset utilization, and market value. The relationship seems to be causal, that is, being data-driven cause the improvements, not the other way around. They found companies that adopt Data-driven Decision Making have a 5 to 6% higher productivity than what would be expected given their other investments and information technology usage.