As Amazon’s founder and CEO, Jeff Bezos has received plenty of press coverage in recent years. Most of this coverage is, of course, thanks to his leading the company to amazing achievements. Amazon has grown from a platform dedicated to online book sales into a retailing giant that’s threatening to revolutionize retail shopping across the world. Bezos’s managerial style, however, has certainly garnered him some additional attention (in the form of praise as well as criticism).
Obviously, all this press has brought many managers to see Bezos as a role model and to look for ways in which to incorporate his techniques in their organization. Let’s focus on one specific aspect of his management of Amazon that managers and senior executives can immediately apply in almost any organization. For the purposes of this article, we’ll call it data-driven management.
Data Over Intuition
Decision making is something that happens in every organization daily. But how are these decisions made? Are they based on empirical facts that can be backed by actual data, or do they rely more on managerial habits and intuitions?
In many modern organizations, decisions are still based on what managers believe (or in worse cases, want) to be true. Many companies have become serious about collecting data but are still using it as what might politely be described as a “decision-support tool.” That is, data is gathered retrospectively and selectively to justify a decision based on the relevant executive’s hunch.
In Jeff Bezos’s Amazon, however, things are done differently. Under his guidance, the company has adopted a policy of near zealous deference to data as the leading concept used for operational and strategic decision making. Amazon constantly and rigorously collects and analyzes data in an ongoing effort to improve the services it provides to customers. Many believe that this effort is the company’s true differentiating factor and one of the main causes of its success so far.
So how does this fact apply to your organization? Let’s look at some of the important principles of data-driven management as practiced by Bezos and see how they can apply to your organization.
KPIs, KPIs, and More KPIs
Key performance indicators (KPIs) are the measurable metrics that define whether your company is achieving its goals and to what extent. Amazon tracks its performance across hundreds of KPIs. A great deal of them are related to customer experience and satisfaction, but the company measures and analyzes all other business processes aggressively, from web development to human resources and financial matters.
The takeaway here is not merely the obvious fact that you should be measuring KPIs (which you probably are doing already), but that you should define the way your company performs in fields that can be measured. If it can’t be measured, you can’t really make more than a somewhat educated guess as to whether you’re seeing improvement.
Of course there are and always will be some unmeasurables. For example, it would be difficult to quantify human relations within each department and whether there is a pleasant and positive atmosphere among team members. But the rule should be to measure and define KPIs for every business process where it is possible and to adhere to their improvement as your foremost goal.
Broad Access to Data
Amazon gives many of its employees the ability to independently examine and analyze data related to their work in the company. The idea is to encourage workers to freely explore the data and discover hidden insights. Since decisions are reached by analysis rather than imposed top down, the input of low-level employees is as valuable as that of senior executives.
Applying this approach to your organization, you should ask yourself whether your data is restricted by some of the traditional “gatekeepers,” either technical or bureaucratic. If data is stored in complex infrastructure that requires turning to the IT department whenever you want to examine new information or perform new analyses, the situation is detrimental to creative data discovery.
If only senior management gets access to the data, it might deter bright and insightful members of the organization from requesting the necessary permissions to use the data independently. In some companies, data is dispersed between many decentralized “data silos”—for example, different spreadsheets or platforms that only certain people have access to. In these cases, many employees feel it is too much of a hassle just to reach the data, and companies miss out on their potentially productive input.
The key is to find a way to store all your organization’s data in one place and enable broad, customizable permissions for different members of the organization to analyze it without getting stuck in one of the above-mentioned bottlenecks. Dashboard software can be a helpful tool in this aspect, as it allows you to join data from different and disparate sources into one central, integrative platform.
Data Wins Any Argument
The third aspect of data-driven management at Amazon is the company-wide adherence to this analytic approach, from team leaders to C-level executives. This universality means that employees are bound to justify their decisions by data, and to change these decisions if analysis dictates a different course of action—regardless of their seniority.
This approach is a matter of corporate culture and education. You’ll need to make it clear to your employees that facts will overcome rank and that optimizing business processes stands above inner-office politics. Management must be educated in the way its members reach and explain their decisions in their respective departments.
Once employees see that data is the real boss, slowly you will start seeing debates being settled not merely by the employee with the highest rank (or paycheck) but by actual facts—and this process will start reflecting on your KPIs soon enough.
Summary: Three Rules for Data-Driven Management
It takes a while to turn your organization into a fully data-driven one. You can’t expect habits and thought patterns to change in a day or even a week. You should take these principles as general guidelines rather than attempt to apply them in full immediately. As we have seen, however, there are three rules you can follow to start using the same kind of data-driven approach used by the fabled Jeff Bezos:
- Focus on constantly measuring and improving a large selection of KPIs
- Give more members of your organization access to data relevant to their field of work
- Promote data-driven decision making regardless of the rank or title of the person making the decision
Following these rules might not make your business as big as Amazon, but it will certainly be a step in the right direction. Data-driven management is a step toward a future where decisions are made on a rational and measurable business and evaluated by the visible value they deliver to your organization.
About the Author
Saar Bitner is VP Marketing at business-analytics and dashboard-software company Sisense, where he executes data-driven strategies as he makes way for the massive growth taking place. He has more than a decade of marketing, sales and product-management experience. You can follow Saar on Twitter or connect on LinkedIn.