Is Data Really Required in Business?
Have you ever considered how a business takes decisions and make investments running into millions of dollars? How a company spends millions on launching a new product even when there is no guarantee whether it will be successful or not? The answer lies in just one word: Risk.
Risk is often described in business parlance as the probability of loss, negative occurrence or possibility of injury, damage or any other threat that may cause loss to oneself or one’s assets. Still, business organizations take risks as it is a common business practice while taking business decisions. This is because reward is the return for taking risks, it is often said that “The higher the risk, the higher is the reward”.
But do you think that business organizations would be so foolish to take decisions which may cause loss to them and may even threaten their existence? No, this is not the reality because business organizations take risks in business decisions only after evaluating the pros and cons of each factor. What helps the business organizations take such risks is the assessment made by them by evaluating certain factors which is provided by the data. Availability of data helps the business organizations to have confidence in the business decisions taken by them – the more the data is available, the more confidence the business will have about the risks taken by it.
Let us understand this through an example. Suppose we have a glass half filled with water. The entire glass represents our understanding of a business decision. The available water (half filled) represents that data available with us while the empty part of glass represents the risk factor. The half filled glass representing the data gives us the confidence that we have in making decisions as we can evaluate all the factors, taking into consideration all the negative consequences (possibility of loss) and positive consequences (possibility of rewards or profits). Thus we have to assume the factors for the half filled part of glass also (risk) based on our analysis of the part which is filled (data). To cover this risk, it is imperative that we should get as much data as possible to build our confidence.
This is why companies spend millions to collect data from its customers, agents, dealers and others either through its own efforts or purchases the data from specialized companies such as market research organizations. This data is then evaluated and analyzed using specialized tools such as QFD (Quality Function Deployment) and FMEA (Failure Modes and Effects Analysis) to assess the customer requirements and risks associated with the decisions taken by the business organizations for developing products and services for fulfilling these customer requirements. Tools such as QFD and FMEA helps the business organizations have confidence in their business decisions as all the risks associated with these have been carefully evaluated and steps being taken to either eliminate these risks or minimize their occurrence.
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