Making better decisions as the essence of being data-driven

For Van Helden, ‘data’ and ‘digital’ encompass the vast array of opportunities and possibilities created by the ongoing digitization of processes and the resulting data traces. There are two sides to using data:

1. Data as a tool to support decision-making;
2. The role that data and digitization can play in a company’s primary process

In that process, data can be used in myriad ways, including as a delivery channel, to reinforce the production process or commercial process, or to accelerate R&D. On the one hand, this means that boards that do not use data to test their decisions are doing themselves a disservice. On the other hand, failing to recognize how data affect the organization’s primary process would be equally harmful to the organization. “However, there is no guarantee that a board will have that knowledge”, says Van Helden, “which makes appointing a board member who does have a grasp of data much more important. As a board member, you simply need to have some level of understanding of data or digital possibilities.”

Convincing ambition

Van Helden believes that boards have a very significant role to play: “They should have the courage to speak of minimum expectations from their own organization at this time. A board capable of setting the bar at the appropriate height - not too high and not too low - is very valuable and can make a huge contribution by formulating a convincing ambition.” Van Helden continues: “I think that a board should be able to convey the same level of conviction and decisiveness about the role of digital processes in the future as about how it wants to organize its commercial or business operations. Still, I have noticed that boards often stay at an arm’s length from digital, probably due to a lack of hands-on experience in the field. If you are lacking that knowledge and experience, it is important to go on an active quest to acquire it through training or by seeking out those capabilities when recruiting a new board member.

It’s not that board members are unaware of digitization or fail to grasp its importance: everyone knows it’s key.” Nevertheless, there are too few directors who really know digitization backwards and forwards. Consequently, overly lax attitudes are sometimes taken for granted, whereas other boards set sky-high and, frankly, unrealistic ambitions that create a stark divide between the organization’s digital agenda and real-world agenda. “Organizations should approach digital as a part of the real world - not as the sole reality, admittedly, but definitely not as a separate entity requiring an isolated digital strategy either. An organization should ask itself: “How can I pursue my current objectives whilst doing justice to data and digital assets?” The same question can be asked of the board: how can you harness the vast arsenal of digital possibilities to achieve your purpose. Understanding your core value to customers will help you hone in on the right option in an ocean of digital possibilities.

“I don’t know of any operation that has thought through what a digital data component could add from start to finish.”

‘Digital’ as a real building block

Digitization is picking up steam in the B2B market, but nowhere near as quick as on the consumer side, Van Helden notes. “Which digital services can be used to make operations smarter?” Digitization and digitized logging are most common, but this is seldom done to improve decision-making within processes and even more rarely to shift to other processes. I don’t know any operation that has thought through what a digital data component could add from start to finish. Digitization can be difficult and drastic for incumbents, which can make it hard to justify. Yet that’s exactly why traditional retailers are struggling to compete with digital natives such as Coolblue or Picnic, whose business models are inextricably linked to the online world. Such a rigorous approach takes time and guts, and companies can also choose to bide their time and learn from the mistakes made by digital natives, but I often find that they inspire me. Digital natives show that there is still a lot to be gained in B2B, especially when it comes to processes.

Machine data, for instance, is a hot topic at the moment, and as I see it, asset-side data exchange is currently underdeveloped. Let’s say you purchase a machine that generates data. Who do those data belong to? And who will make sure to leverage the data to generate maximum value? These questions are often believed to be of secondary importance: people are more interested in the consequences of a potential break down of the machine, even if that happens only once. At the same time, Predictive Maintenance technology is expected to accurately predict the exact minute the machine will break down, and when these unrealistic expectations are not met, frustration boils over, Proofs of Concept fail and development grinds to a halt. More realistic insight into technology is better. You have to know the impact of the fact that your data-generating machine is down, for instance, as you will have to be able to assess whether it will have to be repaired as quickly as possible or whether you can afford to wait a day, depending on the supply chains that rely on the machine. Usually, these kinds of insights are lacking.

If you think digitally straight from the beginning - not as the one key element, but as a building similar to capital and labor, these thoughts will come much sooner. It is not about shoehorning a ‘digital’ category into the business model, rather it is about carefully examining how data and digitization can impact and play a role in each and every box of your business model. You can invest in all those boxes, and although this was traditionally done with capital, you can also choose to invest in digital capability now.

Technology and decision-making processes

Van Helden does not believe in fully automating all decision-making. For starters, organizations will have to decide whether to use technology for all decision-making processes, what type of technology to invest in, and how adding data to the mix will change the process. In some organizations, these discussions are met with considerable resistance. “It boils down to a certain stubbornness, with directors resorting to old favorites like: ‘I’ve never needed data before’ and ‘who knows my company better than me?’ Then there are organizations that are aware of data not being the be-all and end-all yet, but that are still willing to learn. It never hurts to try, after all, and they don’t want to be left behind. There is a grain of truth in both views. Sometimes, decisions based on intuition and experience will do and insisting on using data will amount to nothing more than a waste of time. However, simply ignoring available data and potentially missing an insight you had right at your fingertips is hardly a good approach either.

“At some point, you’ll have captured all useful insights in data, which will make supporting long-term decision-making a whole lot easier.”

From operations and tactics to strategy

Van Helden predicts that the use of data to make minor decisions is set to take off, playing an increasingly important role in processes at the operational and tactical level. “Once data are embraced at those levels, companies will automatically start creating datasets that can be used as input for more strategic decisions”, Van Helden suggests. “When the use of data is ingrained in operational and tactical decision-making processes, data quality will gradually improve and datasets will stretch back far enough to support long-term decision-making. However, Van Helden is eager to warn companies of some of the inherent limitations of data. "Data always describe the past. In order to use them to say something about the future, you will have to extrapolate or rely on forecasting techniques & methods. The more secure the extrapolation, the more usable your data will be.”

As a result, data reliability is often sub-optimal for long-term decisions, Van Helden points out. "There are exceptions, of course, as using large amounts of data is common practice when determining an ideal supply chain network. However, the same does not apply to many other strategic considerations. At the moment, using data to predict the future of a market is far less common, and existing datasets are generally sub-par. As the quality of the data supply increases, data become more useful. The best way to make this happen is to encourage grassroots adoption of data: the broader your base, the greater your options. At some point, you’ll have captured all useful insights in data, which will make supporting long-term decision-making a whole lot easier.”

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About the author

As Managing Director at ORTEC Consulting, Frans van Helden is responsible for a team of 170 consultants, data scientists and data engineers. His mission is to translate the inherent potential of mathematics into impact. He is at his best when he gets to work with clients and ponder how data, mathematics and AI will change their businesses, and turning that vision into a workable plan with his team.