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Curriculum-oriented, born- digital transformation strategy requires that senior m
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digital books for advanced make trade-off decisions to reinvent a business. Equally ­important

Data-Based
business students, written all decision makers must learn to ask the right ­questions, use
by academic thought data and computer support in decision making, and increase
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Decision
rewarding data-based decision making leads to successful digital
into course readings and transformation. Join the digital journey.
reference materials for This book is targeted at managers, especially ­middle-level
students expecting to tackle

Making
managers who are trying to come to grips with using ­data-based
management and leadership
decision making in a transforming organization. The a
­uthors
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explore a number of broad questions including: How can
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professional careers.

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­managers become data-based decision makers? How can d
­ igital
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and Digital
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Transformation
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Data-Based Decision
Making and Digital
Transformation
Data-Based Decision
Making and Digital
Transformation

Daniel J. Power and Ciara Heavin

Data-Based Decision Making and Digital Transformation

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 Abstract
Many organizations must adapt to survive digital disruption. One
approach is digital transformation. The quest for transformation is
a ­ journey and the destination is not fixed. Rather senior managers
must envision a data-centric organization and encourage data-based
­decision-making processes.
Data-based decision making is an ongoing process of collecting and
analyzing different types of data from diverse sources. Building better
­decision support and using analytics is an enabler of more effective ­decision
making and digital transformation. Digital transformation changes
­people’s behavior, organizational processes, and technologies to enhance
performance and better meet customer needs. Using data becomes part
of an organization’s culture and managers learn to use data and analytics
appropriately for each decision situation. Analytics and decision support
become pervasive and enhance data-based decision making.
Digital disruption is like a tidal wave. Managers must learn to act
quickly using data. To succeed in the long-run, managers must ensure
that data is used ethically. Both data visualization and data story telling
can assist managers in directing the digital journey. Algorithms, ­Artificial
Intelligence, and Machine Learning are tools to make processes faster
and smarter.
Middle managers using data-based decision-making are the key to
successfully implementing a digital vision.

Keywords
analytics, artificial intelligence, big data, business intelligence, com-
petitive advantage, data, data ­storytelling, data-based decision making,
decision making, decision support, decision support systems, digital
­transformation, IoT, machine learning, managers, visualization
 Contents
Preface��������������������������������������������������������������������������������������������������ix
Acknowledgments�����������������������������������������������������������������������������������xi

Chapter 1 Introduction and Overview����������������������������������������������1

Chapter 2 Decision Making and Digital Transformation�������������������5
Chapter 3 Data-Based Decision Making�����������������������������������������21
Chapter 4 Analytics and High-Velocity Decision Making����������������35
Chapter 5 Implementing Digital Transformation����������������������������57
Chapter 6 Finding a Way Forward���������������������������������������������������71

Glossary�����������������������������������������������������������������������������������������������77
Bibliography�����������������������������������������������������������������������������������������81
Index���������������������������������������������������������������������������������������������������91
 Preface
For many years, both of us have been working with digital technolo-
gies and computerized decision support and analytics. Over the years,
we have observed both successes and failures, shattered expectations for
new decision support systems, ongoing technology obsolescence, and
­magnificent technology innovations. We have experienced digital trans-
formation in many industries, including retailing at Amazon, streaming
video at ­Netflix, transportation at Uber, and accommodations at Airbnb.
­Computing and information technologies have changed the world and
will continue to do so.
This book is wide ranging in its coverage of digital transforma-
tion, but it is primarily focused upon how expanding data sources can
improve data-based decision making and help realize successful changes
in organizations. The goal of the book is to help managers anticipate and
thrive in the disruptive, data intensive digital environment facing many
­organizations.
Writing this book has been a transformative journey for us and we
acknowledge it builds on the prior ideas of many researchers, experts,
and bloggers. For more than a year, we have explored the riddle of how
managers can cope with digital disruption. We found consensus that the
competitive problem of digitalization was real. We found ­examples of
entrepreneurs and managers implementing new business models and tak-
ing strategic actions intended to use digital technologies for competitive
advantage. In some cases, actions seemed short term and mere repairs
to outdated processes, rather than significant changes to processes and
­business models. In other cases, the transformation was innovative and
extraordinarily successful.
This book is targeted for managers, especially middle-level managers
who are trying to come to grips with using data-based decision mak-
ing in a transforming organization. We encourage managers to practice
thoughtful, ethical, data-based decision making.
 Acknowledgments
Many people over the years have contributed to the ideas and advice
developed in this book—our students, readers of Decision Support News,
faculty colleagues, friends in various software companies, and friends
associated with the BeyeNETWORK, a TechTarget company. Also, DSS-
Resources.com and Decision Support News have been effective ways to
communicate ideas and to get feedback.
Actual production of this book is the result of the efforts of many
people. Thanks to everyone at Business Expert Press (BEP) and affiliated
organizations.
Lastly, and most importantly, we want to acknowledge the invaluable
help and support of our families. Dan thanks his wife Carol and sons
Alex, Ben, and Greg. Ciara sends thanks to her husband Finian, sons
Oisin and Ronan, and to her Mum and Dad.
Our families motivated us to make this contribution toward improv-
ing data-based decision making in organizations and helping managers
and their organizations survive well in a disrupted, digital world.
 CHAPTER 1

Introduction and Overview

The year 1951 marks the beginning of the first wave of economic and
social digital disruption and transformation. The first commercially
­available digital computer was the Ferranti Mark I, an English digital
computer released in February 1951. A much more famous and com-
mercially successful digital computer, the Universal Automatic Computer
(UNIVAC) was released in March 1951.
The vacuum tube computers of 1951 have become solid state, minia-
turized devices. Digital computers and specialized software replaced many
thousands of bookkeepers and their ledger books. The Sears, ­Roebuck,
and Montgomery Ward merchandise catalogs are defunct, replaced by
online shopping at sites like Amazon.com. Rotary dial phones were
replaced by various digital technologies over the years; communication is
now dominated by the ubiquitous smart phone. Black and White over the
air television displayed using cathode ray tubes (CRT) has been replaced
by streaming media provided over the Internet on digital displays. Hand-
written, personal letters have been largely replaced by E-mail and social
media. These, and many other large-scale changes, have resulted from
the initial waves of digital transformation. We have seen incredible data-­
enabled changes. Digital disruption is continuing, and the possibilities
for change have expanded.
Many organizations must change to survive digital disruption, and
managers in those organizations must create and pursue what can be
called a digital transformation strategy. Some sources estimate that 90
percent of all the data in the world today has been created in the last few
years. According to a number of estimates, 2.5 exabytes, equivalent to 2.5
quintillion bytes,1 of data are generated every day. Research group IDC

1
http://iflscience.com/technology/how-much-data-does-the-world-generate-
every-minute/
2 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

estimates that 163 zettabytes of data will be created each year by 2025.2
Global society is in the midst of a profound and irreversible change. Data
are everywhere, we are dependent on digital devices, and data provide an
opportunity for innovative business models, increased efficiencies, and
greater effectiveness in meeting customer needs.
Managers must at a fundamental level make better use of data and
facts in decision making. Facts should guide digital transformation and
digital transformation initiatives should increase the use of data and facts
in every activity and process of an organization including decision m
­ aking.
Analyzing data is now a core decision support task in many b­ usinesses as
managers try to derive value from the large volume of diverse data sources.
Digitization of business activities and processes has led to an explosive
growth in data. The “Big Data” tsunami has hence increased the need
for business and data analytics. This major change has heightened the
need for managers to understand the possibilities of these technologies
and their application in a variety of areas including consumer financial
services, insurance, manufacturing, media, retail, pharmaceuticals, health
care, and government.3
As senior managers formulate information technology (IT) strate-
gies, formulate a digital transformation vision, and assess investments,
it is essential to use data-based decision making and data analytics to
investigate and evaluate choices. Managers should ask if the investments
will improve organizational decision making, knowledge management,
yield valued digital transformation, and ultimately enhance organiza-
tional ­success? According to Grossman (2016), “Organizations that foster
a culture of making data-based decisions will be in a stronger position to
weather the changes ahead.” We agree.
Digital transformation strategy involves making decisions about
technology trade-offs and ideally choices are data-informed and fact-
based. Data-based decision making is both a process and a culture. Some

2
IDC, Data Age at https://seagate.com/files/www-content/our-story/trends/
files/Seagate-WP-DataAge2025-March-2017.pdf
3
Grossman, R. 2016. “The Industries that are Being Disrupted the Most by
Digital.” Harvard Business Review. https://hbr.org/2016/03/the-industries-that-
are-being-disrupted-the-most-by-digital. March 21, 2016.
 Introduction and Overview 3

managers and organizations already value using data and facts to make
decisions. Part of successful digital transformation is making systematic
use of data in decision making. Data-based decision making, using data
and facts to make decisions, is both a prerequisite to digital transfor-
mation and the result of a data-informed culture. Improved data-based
decision making is and should be a necessary consequence of a digital
transformation vision and strategy.
Global business activity is accelerating and decision-making activ-
ities and processes must be responsive to changing business needs and
a high velocity decision environment. Understanding what is occurring
can increase the adaptive response of managers. Awareness is a major
goal of the following chapters. In general, it is not sufficient to only
understand the need for new technology-supported processes, for ­better
use of data in decision making and the possibilities for revised and
innovative business models to achieve positive change. Managers must
understand how to successfully implement digital transformation com-
petitive ­opportunities. Managers must think digital and be committed
to ­building data capture and data use into core activities and processes.
A transformation strategy without an implementation plan and action
taking is wishful thinking.
Improved data-based decision making skills of middle-level managers
and use of analytical tools and innovative computerized decision sup-
port can reduce the negative consequences and chaos some organizations
are experiencing due to digital technologies and vast, ever-increasing,
amounts of data. Data-based decision making can help channel informa-
tion technology changes in positive directions that are essential to success-
ful digital transformation and improved organization viability. Relying
solely on programmed data-driven decision making using algorithms
and reducing the number of decision makers in an organization is only a
­partial solution for digital transformation and then only in some indus-
tries. Replacing decision makers with decision automation, p ­ rogrammed
data-driven decision making, and decision management has a serious
downside for society and may actually increase digital disruption and
make positive digital transformation in an organization less likely.
To cope with digital disruption, many managers should learn new
knowledge and new skills, including the basics of analytics, data-based
4 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

decision making, and digital transformation technologies. This short

book is a starting point, a primer. The following chapters discuss decision
making and digital transformation, data-based decision making, high
velocity decision making and analytics, and implementing digital trans-
formation. These chapters help managers become data-based decision
makers who can assess, choose, and successfully implement digital trans-
formation competitive opportunities. The remaining chapters emphasize
the how and what questions of data-based decision making and digital
transformation.
Each of the following chapters serves as a guide to help managers
actively confront the challenge of implementing and using data-based
decision making in a digitally transforming global business ecosystem.
Our objectives are both ambitious and modest. We explore a number
of broad questions: (1) How can managers become data-based decision
makers? (2) How can digital transformation become part of an organi-
zational strategy? (3) What new skills do managers need to implement
digital transformation? and (4) How will we know an organization has
been successfully transformed?
 CHAPTER 2

Decision Making and Digital

Transformation
Digital transformation is changing our lives, our jobs, our organizations,
and our world. Each of us makes choices that impact how we use digital
data and digital technology. Managers and organizations that do not keep
up with digital transformation trends and successfully implement key
transformation projects will likely suffer negative consequences, includ-
ing loss of jobs, going out of business, or being acquired by a digital
upstart or a more traditional competitor.1
Innovating with data, digital technologies, and data-based ­decision
making is a major business opportunity that can change business
­models, improve customer experiences, reduce costs and increase agil-
ity. Such innovation is necessary to prosper in our changing global eco-
nomic ­markets. Sadly, there is no simple formula or training program
that can help managers become data-based decision makers. Indeed,
most managers are trying to learn “on the job” to understand what dig-
ital transformation means for them, their team, and their organization
while trying to tackle the great challenge presented by rapidly expand-
ing organizational data. Successful digital organizational transformation
requires that managers have ­mastered data-based decision-making skills
that can help formulate, implement and manage an appropriate digital
transformation strategy.
Effective data-based decision making using accurate and timely data is
integral to successful digital transformation. Opportunities and obstacles
created by digitalization2 and leveraging digital technologies require that

1
“Couchbase Research Reveals a Majority of Organizations Expect to Fail in
Four Years if Digital Transformation Approach is Unsuccessful.” http://dssre-
sources.com/news/4798.php
2
https://i-scoop.eu/digitization-digitalization-digital-transformation-disruption/
6 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

managers develop sophisticated data analysis, data interpretation, and

decision-making skills. The velocity at which large datasets are processed
and reported requires that managers adapt to an increasingly fast paced
business environment. A digital world requires decision making and lead-
ership skills that leverage diverse data sources, data analytics know-what
and know-how, and decision support capabilities that enable and support
the strategic direction of an organization.
Data-based decision making is not a new idea. Decision support research
began at the dawn of the digital age and the concepts of decision support
and decision support systems (DSS) remain understandable and intuitively
descriptive. Related terms such as high velocity decision making, data ana-
lytics, business intelligence, and big data analytics are of more recent ori-
gin and are interpreted in different ways by managers, software vendors,
and consultants. Also, artificial intelligence (AI), data-based applications,
and real-time analytics are accelerating the velocity of digital organizational
transformation.3
Data-based decision making is a broad concept that prescribes an
ongoing process of collecting and analyzing different types of data to aid
in making fact-based, routine and nonroutine decisions. The use of new
digital information the use of new digital information technologies to
change and improve business processes, alter business models, enhance
products, and change customer experience.
Many new technology developments, like the Internet of Things
(IoT) are expanding the range of computing devices and expanding data
collection. AI and data analytics are helping managers use the new data
sources in real-time. Managers choose how to exploit and adopt these
technology developments. Actions of managers disrupt existing business
models and create new opportunities for businesses across industry sec-
tors. These intertwined changes are causing significant digital disruptions.
The following five sections in this chapter discuss related ­topics, includ-
ing: (1) data, information, and knowledge, paying particular ­attention
to the opportunities to use new data sources as part of a d ­ igital trans-
formation strategy, (2) understanding data-based decisions and d ­ ecision

3
Dimension Data, “Artificial Intelligence and Analytics Accelerate the Pace of
Digital Workplace Transformation.” http://dssresources.com/news/4789.php
 Decision Making and Digital Transformation 7

s­upport, (3) digital transformation impacts, especially upon ­ people,

processes, and strategy, (4) asking the right questions, and (5) ­creating
data-centric organizations. Our perspective emphasizes the centrality of
decision support and data-based decision making in organizations.

Understanding Data, Information, and Knowledge

To adapt and cope, organization decision makers need better, faster, more
accurate data and information to make decisions. The volume, availability,
and speed of real-time data continue to be a special challenge in organizations.
Managers are increasingly focused on finding opportunities arising from valu-
able data insights. An organization’s capability to capture, store and manage,
analyze and visualize large volumes of semistructured, and unstructured data
is generally referred to as using “Big Data” (Chen et al. 2012). Big data refers
to very large data volumes that are complex and varied, and often collected
and must be analyzed in real-time. Venture Capitalist Bryce Roberts4 reminds
us “Data, big, medium or small, has no value in and of itself. The value of
data is unlocked through context and presentation.” How data are presented
or visualized can change behavior. Managers continue to struggle with issues
like managing large volumes of data and information, anticipating external
environmental uncertainty, and monitoring advances in technology.
Focusing on greater use of knowledge as an organizational strategy
found widespread recognition and approval after Drucker (1992) con-
cluded that “the basic economic resource—the means of production—is
no longer capital, nor natural resources, nor labor. It is and will be knowl-
edge.” While knowledge remains a core organizational and societal resource,
the notion of big data and developing and understanding an organization’s
ability to extract relevant knowledge and associated insights using sophisti-
cated technology has of necessity become a priority for managers.
A vast amount of industry, company, product, and customer data can
be gathered from a wide variety of external and Internet sources including
online social media forums, web blogs, social networking sites, logs of
website visits, and retail transactions. Most of this data is significant in

4
Roberts, B. February 2012. “Data Data Everywhere and Not a Drop of Value,”
http://bryce.vc blog, at URL http://bryce.vc/post/15300645787/data-data-­
everywhere-and-not-a-drop-of-value
8 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

Digital data

Digital
content

Information
Qualitative
Big data
Actionable
knowledge Structured data

Unstructured data
Knowledge
Quantitative

Figure 2.1 Data concept map: Big data, data, information, and
knowledge

volume and it is often unstructured in nature—it is considered big data.

It is difficult to prescribe a “one size fits all” approach to big data because
big data for one organization may be “small data” for another. However,
the key to successful big data use is a manager’s ability to identify the
value in the data collected and devise ways to explore and extract value
from large volumes of data for the right people at the right time.
There is overlap and yet differences among the concepts of digital
data, information, knowledge, and big data (see Figure 2.1). It is difficult
to identify where one concept begins and another ends, this challenge is
reflected in the distinct lack of a common language used by stakehold-
ers when it comes to defining and discussing these phenomena. Rather
than over emphasizing the boundaries of data, knowledge, and informa-
tion and when data becomes big data, managers must focus on decision
support and analytics needs required to help them in achieving business
objectives. Managers need relevant data, information, knowledge and
decision support capabilities to meet decision making needs.

Understanding Decisions and Decision Support

Managers make many decisions and the characteristics of each decision
determine if analytics and decision support are appropriate and if so
what support is most useful. Decisions are made as part of processes and
 Decision Making and Digital Transformation 9

decisions result in outcomes. A decision may involve assessing and eval-

uating alternatives using data sets, variables, and algorithms. The quality
of a decision is often impacted by the type of process or path that is pur-
sued in making and implementing a decision. Organizational decision
environments are typically characterized by a rational decision making
approach. Rationality is the quality of being consistent with or based on
logic and reason. One hopes managers and responsible decision m ­ akers
attempt to be rational and thoughtful in their decision making.
Decisions vary widely in structure and complexity. Some decisions
are characterized by a concise decision question, with a clear, well defined
and structured choice. These are typically known as operating or func-
tion-specific decisions. This type of decision is usually routine, occurring
regularly and frequently, that is, daily or weekly. Tactical decisions are
typically addressing a broader decision question, and are semistructured
in nature, this means that some but not all of the information necessary
to make the decision is available. These decisions are mostly internally
focused and may even be specific to an individual business unit. Other
nonroutine decisions are more complex. In these situations, some ­variables
may not be well understood, often information required to make the
decision is unavailable, incomplete and in some situations information
may be known to be inaccurate. Classified as strategic decisions, these
are ­usually complex, unstructured decisions involving many different and
connected parts. These decisions usually involve a high degree of uncer-
tainty about outcomes. If implemented, strategic decisions often result
in major changes in an organization. Pursuing digital transformation is a
strategic decision.
Modern decision support is evolving rapidly in step with computing
hardware and software progress. A modern decision support system is
up-to-date technologically. The modern era in decision support devel-
opment started in many ways in 1995 with the specification of HTML
2.0 and the introduction of handheld computing and cell phones. Since
2007, Web 2.0 technologies, mobile integrated devices, and improved
software ­development tools have revolutionized decision support user
interfaces, while the decision support data store back-end has gotten
extremely ­powerful supporting large, real-time and complex data sets.
Modern ­decision support is varied and increasingly widespread in use.
10 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

A DSS is a computer-based information system that supports individ-

ual or team decision making. There are five major categories or types of
DSS, but some DSS do not fit neatly into one of the categories, instead
they have multiple decision support functionalities and a hybrid architec-
ture. Hybrid or complex DSS have components to provide more than one
category of decision support. The five primary DSS categories include:
(1) Communication-driven DSS that enable cooperation, supporting
more than one person working on a shared task, (2) ­Data-driven DSS
that emphasize access to and manipulation of internal company data
integrated with external data, (3) Document-driven DSS that manage,
retrieve, and manipulate semistructured or w ­ ell-structured documents,
(4) Knowledge-driven DSS that provide specialized p ­roblem-solving
expertise stored as rules, procedures, or in s­imilar structures, and
­
(5) ­Model-driven DSS that emphasize access to and manipulation of sta-
tistical, financial, optimization, simulation, or other quantitative models.
The general, defining characteristics of DSS have not changed over
the years. These systems remain characterized by facilitation, interaction,
an ancillary role, repeated use, task oriented, identifiable and having a
decision impact (cf. Power 2002). Some characteristics are more closely
associated with one category of DSS than another, but complex DSS often
have multiple subsystems that fit in different categories. For example, a
complex, modern decision support capability may have a well-defined
data-driven subsystem and a model-driven subsystem. Major specific
characteristics of modern DSS include: (1) Broad domain of applica-
tions with diverse functionality, (2) Faster access to data stored in very
large data sets, (3) Faster deployment, (4) Faster response, (5) ­Integrated
DSS with transaction processing systems (TPS), multiple decision sup-
port subsystems, (6) Lower cost per user, (7) Multiuser and collaborative
interaction, (8) Real-time data and real-time DSS use, (9) Ubiquitous,
(10) User friendly and a better user experience, and (11) Visualization.
Table 2.1 describes these 11 characteristics of modern decision support
capabilities. These modern ­decision support applications enhance both
data-based and data-­informed decision making.
This list of attributes and characteristics of a modern DSS is likely
incomplete. Decision support is usually ahead of current practices, but
the list may represent current “best practices.” Those of us interested in
modern computerized decision support are promoting new ideas and
 Decision Making and Digital Transformation 11

Table 2.1 Characteristics of modern decision support applications

Characteristic Description
1. Broad domain of Decision support user base and the rationale for
­applications with diverse DSS use has expanded. There are many use cases for
functionality ­decision support and we are capturing use case models.
2. Faster access to data stored Data access refers to software and activities related
in very large data sets to retrieving or acting upon data in a database or
other repository. Data-driven DSS can use very large
data stores.
3. Faster deployment Software deployment is all of the activities that make
a new DSS available for use. Faster deployment is
partly due to the use of Web technologies, also better
prototyping and templates.
4. Faster response How quickly an interactive system responds to user
input has improved significantly. In a distributed
computing environment, the lag for video, voice, data
retrieval or transmitting results is now negligible.
5. Integrated DSS with TPS Enterprisewide decision support applications are
increasingly common. A standardized interface and
single sign-on security helps create an integrated
and unified decision support/transaction processing
environment (TPS).
6. Lower cost per user Total annual cost for licensing development software
on a per user basis is declining. This trend will
continue given the increased open source decision
support applications.
7. Multiuser and collaborative DSS are increasingly collaborative with shared
interaction ­decision making environments.
8. Real-time data and real-time The classical decision support idea is an immediate
DSS use real-time system that is used while action is occurring.
That vision is increasingly possible and useful.
9. Ubiquitous DSS are available and seem to be usable everywhere.
DSS for a particular function can be used on mobile
devices.
10. User friendly and a better Usability is the ease of using a particular tool. All DSS
user experience are much easier to use, but we can do more to improve
usability and reduce information load.
11. Visualization Creating images, diagrams, or animations to commu-
nicate a message is important. Modern DSS include
capabilities to create and manipulate visualizations.

approaches, and encouraging progress in supporting decision making.

Building better decision support provides one of the “keys” to competing
in this increasingly digital global business environment. Better decision
support is a major enabler of digital transformation.
12 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

Digital Transformation Impacts

Digital transformation is a complex concept and challenging goal that
holds a variety of meanings for a diverse set of stakeholders. In a recent
Forbes article, Kerschberg (2017) contends that technology is central to
organizational digital transformation, in particular adopting analytics, big
data, mobile, cloud, IoT, and application development. While technol-
ogy may be at the core of digital transformation, successful digital trans-
formation requires excellent leadership, a supportive culture, and new
business processes. Leadership should promote and cultivate a data-based
­decision-making culture. Digital transformation remains a complex task.
It begins with strategic leadership and a commitment to a digital transfor-
mation organization strategy.
Barriers to entry for many industries have been lowered and some
industries have been consolidated or forced to contract. Nontraditional
competitors are entering industries and changing markets and goods and
services. Few managers in traditional industries led prior transformations
and some have been caught off-guard. Managers should have known dig-
ital technologies would be an enabler of change, so why were so many
surprised by the suddenness and magnitude of the disruption? Lack of
vision and understanding? Complacency? An inward looking attitude?
Lack of knowledge? Perhaps a combination of these reasons.
A related discussion on digital transformation, cf. Power (2017),
stated that a strategic vision for digital transformation is useful; however
vision must be grounded in customer needs and technology possibilities.
Indeed, business transformation cannot happen without people making
decisions about technology. Figure 2.2 is a conceptual decision support
guide for managers.
The conceptual model in Figure 2.2 highlights three levels of orga-
nizational tasks for implementing digital transformation including:
(1) strategic tasks, (2) tactical tasks, and (3) operational tasks. M
­ anagers
at each level choose from a set of tasks that should be completed as part
of an organization’s approach to digital transformation. Through the
completion of some or all of these tasks, organizations can move from
an ad-hoc approach to a more systematic, mature approach to digital
 Decision Making and Digital Transformation 13

Operational tasks
Focus on specific technologies
Explore cloud and distributed
databases
Identify key skilled staff
Identify opportunities for data
integration
Implement digital governance
Tactical tasks
Build internal digital management
capabalities
Digitization of existing and new
business processes
Establish data governance
processes
Integrate business function with IT

Strategic tasks
Define a digital vision
Establish digital leadership
Reinvent business model(s)
Rethink business processes
Redefine and improve stakeholder
engagement
Digital transformation Define a digital governance strategy
Value
maturity Choosing and completing transformation tasks

Figure 2.2 Conceptual digital transformation support guide

transformation. Achieving a digital transformation vision that is stable

and “mature” comes from successfully completing transformation tasks.
Digital transformation tasks may be broadly characterized in terms
of changing people, processes, and technology. For any business strategy
to be successful activities across these dimensions need to be aligned. In
a Harvard Business Review article, Trevor and Varcoe (2017) promote
the notion of strategies, capabilities, and resources to achieve digital
transformation including systems that “should be arranged to support
the enterprise’s purpose.” Identifying appropriate transformation tasks to
undertake is important.
Strategic tasks represent a high level collection of activities that imple-
ment a digital transformation vision and strategy. Some of these tasks
include developing the vision, developing digital leadership capability
(Westerman et al. 2014), reinventing business models, rethinking business
processes, redefining stakeholder engagement (Kerschberg 2017), and
developing a digital governance strategy (Ernst and Young 2017). While
this list is not exhaustive, it is moving toward a more balanced and holistic
approach for managers to tackle digital transformation of an organization.
14 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

As illustrated by the “middle out” notation and arrows used in

­Figure 2.2, tactical tasks (the middle) are integral to the success of a digital
transformation strategy. Trevor and Varcoe (2017) refer to this mediating
managerial level in terms of building organizational capabilities. At this
level, it is important for managers to consider and select tasks that provide
them with the means (capability) to deliver the digital transformation
strategy. These tactical tasks will drive the digital transformation agenda
in an organization with managers asking questions about how transforma-
tion can be achieved based on the capabilities available. Tactical tasks are
concerned with designing new business processes, establishing d ­ isruptive
new business models, and defining data governance processes. It is also
useful to consider new mechanisms for evaluating performance in terms
of achieving digital transformation. Completing tactical tasks may be an
opportunity for managers to define new measures of organizational suc-
cess including understanding customer engagement and customer experi-
ence. Data-based decision making should guide and help prioritize tasks.
Operational tasks are focused around the questions managers need
to answer for (1) selecting and developing technologies, (2) establishing
viable data integration platforms, (3) choosing necessary security controls
that will balance data access with data protection, and (4) identifying and
developing the right people capabilities to achieve the digital vision for
the organization. Managers need to select and complete tasks that develop
“assets that will be useful in a digitally transformed world” (cf. ­Capgemini
Consulting 2011).
Completing the appropriate mix of tasks should increase the chances
of a successful digital transformation. Technological maturity is at the
heart of achieving real digital transformation. To begin a digital trans-
formation journey, managers need to move beyond focusing on new
individual technologies to develop a comprehensive digital technology
capability that is closely aligned to a well-defined digital transformation
vision and strategy.
Digital transformation can both solve problems and create new prob-
lems. Successful digital transformation creates a positive, long-term, net
benefit for an organization. Applying digital technologies can create a
data-based virtuous feedback cycle that leads to adopting and choosing
more innovative and transformative digital solutions.
 Decision Making and Digital Transformation 15

Finding Success: Asking the Right Questions

Making decisions often involves answering questions like “What should
be done?” or “What alternative is best?” Asking the right questions can
help people make better decisions. Kipling (1902) wrote a poem manag-
ers should remember when thinking about defining decision questions.
The poem begins “I keep six honest serving-men (They taught me all
I knew); Their names are What and Why and When and How and Where
and Who.” These six are the primary question words. There are other
question words and phrases like How many? and How much?, even the
word “Is” can start a question, but Kipling’s six words (see Figure 2.3)
are a good starting place for examining how decision questions differ in
intent and how they are similar.
A decision question asks about what action(s) to take among vari-
ous options or alternatives. A decision process helps create alternatives/
options, find them, and sometimes eliminate options. Answering or
resolving a decision question should be a thoughtful and comprehen-
sive process. Assessing and understanding the decision question provides
guidance and direction for customizing an appropriate decision process.
So let’s examine Kipling’s “serving men” and evaluate what they mean for
decision making processes.
What ... ? is a complex word to begin a question. A “What” question
may seek an approximation, a forecast or an estimate, that is, “What will
sales be in the next quarter?” Alternatively a “What” question may seek
specific facts or information, that is, “What is the current profitability of
XYZ?” In this second case, the “What” question does not or should not
require a decision, rather a fact is sought.

What? Why?

Who? When?

Where? How?

Figure 2.3 Six honest serving men (adapted from Kipling)

16 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

Why ... ? questions are the most perplexing and most troublesome.
By asking why, a person is expecting a reason for an action or event or an
explanation of something that has occurred. Asking and answering why
questions are important in problem solving. Understanding causes and
motivations helps us understand a decision situation. In general, a “why”
question supports reasoning or informs a decision question. For example,
examine this question, “Why did sales decline in the last quarter?” This
diagnostic question seeks to know the cause of a problem so that perhaps
a decision can be made about how to remove the cause and reduce the
negative consequences. A person may ask multiple “Why” questions in a
decision situation prior to or after asking a key decision question, that is,
“How can the decline in sales be stopped or reversed?”
When ... ? refers to time. One wants information about the time or
timing of events or actions. The Cambridge English Dictionary notes
“We can use when to ask for information about what time something
happens.” So a decision maker may want to know about past, present or
future time, that is, “When did sales start to decline?” “When should the
new sales and marketing plan be implemented?” Some When ­questions
imply a decision is needed while others are informational. Helper words
like will and should can indicate whether information or a decision
is sought.
How ... ? much or how many or how can. How is sometimes the indi-
cator of a decision question. For example, similar to the prior discussion
we might ask “How can we stop the sales decline?” or “How many people
will attend the event?” or “How do we contact customers?” Some how
questions are requesting an estimate or conclusion. For example, “How
much will a new production facility cost?” Many questions that begin
with the how keyword request information rather than a decision, that is,
“How do I find XXX?”
Where ... ? refers to location and place. The where question word
seems to be primarily an indicator of a need for information about
­location, that is, “Where will the event be held?” or “Where is the sales-
person?” The first location question may involve a decision if phrased
with the should helper word, that is, “Where should the event be held?”
Finally, there comes Who ... ? the who keyword may indicate a request
for information or a need to make a decision. For example, “Who is the
 Decision Making and Digital Transformation 17

sales manager?” is an information request. While the question “Who

should be the sales manager?” implies the need for a decision among a
set of people who have applied for a job. A Who question may refer to
choosing one person or a group or team of people. Consider the question
“Who will implement the new strategy?” The answer might be a single
individual or a group or team.
Some decision questions are highly structured, routine and repetitive,
others are semistructured or unstructured and even novel and nonrou-
tine. The amount of structure depends to some extent upon the decision
situation. For example, for a salesperson the following are usually routine
and repetitive questions: “Who will buy the product or service from you
and your company?” “What and how much will they buy from you?”
“Why do they need the product or service?” and “How should you engage
them in a meaningful conversation about the product/service?” In the
context of assessing the introduction of a new product, the same ques-
tions are more unstructured and often nonroutine.
Although decision questions often begin with one of the six q­ uestions
words, that is, what, why, when, how, where, and who, these question
words get altered by helper words like will and should, much and many.
In English, one finds decision questions are alternatively framed as
“Should we” or “Should I do XX or go to XX.” Colloquial or informal
language also interferes with recognizing decision questions. Knowing
what the word phrase implies helps us provide decision support when
that is appropriate. Asking the “right” decision questions in a solution ori-
ented manner is an important skill for data-based decision makers. Spend
some time early in a decision process to specify an appropriate decision
question or questions that can be answered.

Creating a Data-Centric Organization

A supportive organizational culture is important to successful digital
transformation. A data-centric organization has policies and a culture
that encourage and reward the use of data in products, processes, and
decision making. Using data to make decisions in organizations has long
been a goal of most managers. Using “gut instincts” and limited facts
has serious risks. Basing a decision on self-interest is poor practice, and
18 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

even if that is the choice criterion the decision maker still requires facts.
Consulting mystics/fortune-tellers fell into disfavor long ago. Today most
decision makers have increased access to more and better data in near
real time almost anywhere in the world. This new reality has changed
the decision support possibilities. Managers can make better fact-based
decisions if they choose to develop the decision support capabilities
and infrastructure.
Becoming a data-informed, or data-centric organization has become
a priority for many managers. Analytics and decision support must be
aligned with business strategy to realize benefits from digital transfor-
mation. Pushing for more data and more analytics without a strategic
fit is folly. Organizations and managers need to understand what they
are trying to achieve. Decision support initiatives fail when there is poor
alignment with the business strategy.
Organizations can empower employees with access to relevant data
and analytics. The key is to provide relevant data when it is needed to
make a decision. The decision maker remains central to decision tak-
ing, but technology and analytics support are enhanced for data-based
­decision making. Providing data does not mean however it will be used
properly or even used. Training and reward systems are key to making the
new decision support capabilities a factor in improving organizational
performance.
The term digital data refers to facts, figures, and digital content cap-
tured in information systems. Raw data are the bits and bytes stored elec-
tronically. Data may be streaming to a decision maker or retrieved from
a static data store. Figuring out what data is relevant and what that data
means in a decision situation can be challenging. Data can overwhelm a
decision maker and can mislead. Data-based decision making requires
anticipating data and analysis needs and providing the opportunity to
request and analyze additional data. Analytics involves processes for iden-
tifying and communicating patterns, derived conclusions and facts. Deci-
sion support and analytics must provide timely and useful information
for benefits of digital transformation to be realized.
Using data in decision making must become part of an organiza-
tion’s culture. The quest for understanding, formalizing, and prioritizing
important decision questions, and then capturing and making available
 Decision Making and Digital Transformation 19

appropriate data, and relevant analysis must become an urgent require-

ment and ongoing priority. A data-centric organization survives and
hopefully prospers based on the quality, provision, and availability of
data to decision-makers. Data should be captured where it is generated
and then it must be appropriately stored and managed for use in deci-
sion-making. Analytics, decision support, and data become the basis for
decision making in a digitally transformed organization.

Summary
Creating a data-centric organization where managers make data-based
decisions has both technology and human resource challenges. Technol-
ogy challenges continue to evolve as more data and better, easier to use
analytic tools become available. The human resource challenge involves
retraining and motivating current employees to use analytics, model-­
driven, and data-driven decision support.
Digital transformation does not occur quickly, rather it is a journey.
We know that factors other than data availability influence choices. With-
out data and facts, then luck and chance dominate outcomes in situations.
Chapter 3 examines how using data and information underpin data-based
decision making which is also the key to more effective ­decision making.
 CHAPTER 3

Data-Based Decision Making

Some managers seem preoccupied with making better use of current
data—internal operations data, customer/client/patient data, supplier data,
and market data to name a few data sources. Major data challenges are
many including the increasing volumes of varied data, mixed data qual-
ity, data security, changing data regulations, generating insights from data,
using analytics better, and identifying new opportunities to derive value
from data. At the heart of implementing a successful digital transformation
strategy is solving two key challenges: (1) managers must understand the
value of current data and existing data sources, and (2) managers must have
appropriate technology tools, skills, and techniques to support the digital
vision. Successful transformation is about more than using current data.
Now let’s begin to tackle these challenges to effective data-based d
­ ecision
making and implementing a digital transformation strategy. The following
five sections of this chapter discuss: (1) different approaches to managerial
decision making including data-based, data-driven, and data-informed,
(2) the need for computerized decision support, (3) key skills required for
data-based decision making, (4) steps for making data-based decisions,
and (5) the importance of data-based decision making for gaining an orga-
nizational competitive advantage. To overcome data c­ hallenges, one must
determine how data can be used to help improve managerial and organi-
zational decision making processes and hence b­ usiness outcomes. Some
people advocate for data-driven decision m ­ aking, others for data-based or
data-informed decision making. The next section explores these differing
approaches to using data in decision making.

Data-Based, Data-Driven, and Data-Informed

Decision Making
Decision makers are confronted with evolving and expanding data
resources and there is a pressing need to ask better questions to help solve
22 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

real business problems. One can read a variety of case studies about how
using data can improve decisions in many domains including education,
retail sales, health care, and financial services. Using more data and ana-
lytics is often identified as the key to success in these situations.
A number of phrases have been used by authors and consultants
to describe the increasing use of data to improve decision making in
organizations. The word data is modified as data-based, data-driven, or
sometimes data-informed decision making. These phrases are often used
interchangeably to refer to an improved organizational decision support
capability. While the terms are related, there are important differences.
After reviewing prior usage, we find it most useful to focus on data-based
decision making. We consider each of these concepts as mutually exclu-
sive, but in some situations complementary. For managers to meaningfully
engage with data opportunities and challenges they need to understand
how these decision making approaches can be formulated, managed and
exploited as part of an organizational digital transformation strategy. Let’s
examine these three approaches to using data in decision making.
Data-based decision making refers to an ongoing process of collecting
and analyzing different types of data to aid in decision making (Power
2017). Decisions are based on data facts, values and vision, intuition,
and ethical guidelines. Data-based decision making usually incorporates
many diverse data types from a variety of sources including quantitative
data balanced with “softer” data that is more descriptive in nature. Data-
based decisions are primarily based on data, but analysis and judgment
are also very important. Ethical decision making should be incorporated
in data-based decision making. Decision makers should apply moral
rules, codes, or principles to guide choices for right and truthful behavior.
Data-driven decision making or data-driven management is widely
used in articles, consultant reports, white papers and more recently in
academic research papers to characterize a particular type of decision
making. Data-driven decision making refers to the collection and anal-
ysis of data to make decisions, but the data determines the action. Data
“drive” the decision making and decisions are made using verifiable data.
Some consider data-driven as synonymous with business intelligence,
while other authors link the phrase to decision automation. Provost and
Fawcett (2013) define data-driven decision making very broadly as “the
 Data-Based Decision Making 23

practice of basing decisions on the analysis of data rather than purely on

intuition.” According to a number of sources (McAfee and Brynjolfsson
2012; Frick 2014), organizations that use “data-driven decision making”
are more productive and more profitable than their competitors. In these
research studies respondents likely had various understanding of data-
driven decision making.
Data-driven, data-informed or fact-based decision making means
managers use and evaluate data to make decisions, but providing more
data is not necessarily the way to improve decision making effectiveness. As
a concept, data-driven decision making is often used in conjunction with
big data and data analytics, particularly quantitative/statistical analytics.
Data-informed decision making is a term used when data and facts
are an influential factor in decision making, but not the only factor.
According to Maycotte (2015), decisions are complex phenomena that
require significant human input in terms of experience and instinct.
Maycotte believes, he believes that decisions should not be purely “driven”
by data but data may be used to support experienced decision makers
to be faster and more flexible in their decision making. He advocates
that decision ­makers need to “strike the balance between expertise and
understanding information.” The U.S. Department of Education prefers
the terms data-based or data-informed decision making over data-driven
decision making asserting that decisions should not be based solely on
quantitative data.
Using data in decision making should be contingent on the decision
situation. Figure 3.1 suggests a continuum of decision situations r­ anging
from highly structured and routine to highly unstructured and nonroutine
and recommends different decision making depending on the situation.
Data-driven decision making can be used effectively in highly struc-
tured situations when appropriate data and analytics are available. As a

Decision Data–driven Data–based Data–informed Decision

characteristics decision making decision making decision making characteristics
Highly structured Highly unstructured
Operational Nonroutine
Routine Novel
Recurring High Medium Low Not time constrained
Real–time Consequential
Reversible Amount of data used Strategic
Data use continuum Irreversible

Figure 3.1 Using data in decision making

24 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

decision situation becomes more unstructured, the best one can do is

data-based decision making because more qualitative content and sub-
jective assessment is needed. It is appropriate and recommended to base
a decision upon quantitative and qualitative data in these semistructured
decision situations, but other factors like data quality, data relevance, and
data timeliness must be resolved. Finally, in highly unstructured d ­ ecision
situations the best one can expect is data-informed decision making. In
this process, one examines available data and tries to see how it informs
ones understanding of a situation. In a highly unstructured decision
situation, an effective decision maker needs both knowledge and facts.
A ­
­ subjective assessment and assumption analysis becomes especially
important. Decisions related to implementing digital transformation
involve semistructured and unstructured decision situations.
Managers need to develop and embed processes for collecting, stor-
ing, maintaining, and analyzing data that can help answer important,
recurring decision questions. Creating and managing an approach to
quantitative and qualitative data use requires a sophisticated information
system. A mix of people skills, technologies, and managerial ­procedures
are needed to create information and support its timely flow to deci-
sion makers for data-driven, data-based, and data-informed decision
­making. Using data appropriately in decision making is key to successful
digital transformation.

Need for Computerized Decision Support

In this digital era, managers realize the growing need for computerized
decision support. Today decision making is challenging and the ­challenge
to make “good” decisions is increasing. The need to make faster d
­ ecisions
has also increased. Too much information is common in decision situ-
ations and much of that information is often only marginally relevant.
Finally, there is often more distortion of information in society. For
these reasons specifically, there is an emphasis on improving data-based
­decision making in organizations. These reasons also create a need for
more analytics and decision support.
Overall, a complex decision-making environment creates a need
for computerized decision support. Decision support remains a broad
 Data-Based Decision Making 25

concept that prescribes using computerized systems and other analytical

tools to assist individuals and groups in making decisions.
Research and case studies provide evidence that a well-designed and
appropriate computerized DSS can encourage data-based decisions,
improve decision quality, and improve the efficiency and effectiveness of
decision processes.
Most managers want more analysis and they want specific decision
relevant reports quickly. Certainly, managers have many and increasing
information needs. Effective decision support provides managers more
independence to retrieve and analyze data and documents to obtain facts
and results when they need them.
From a different perspective, cognitive decision making biases exist
and create a need for decision support. Information presentation and
information availability influence decision makers both positively and
negatively. Reducing bias has been a secondary motivation for providing
analytics and decision support. Most managers accept that some people
are biased decision makers, but likely wonder if proposed analytics and
decision support would reduce bias. Decision makers do “anchor” on the
initial information they receive and that behavior influences how they
interpret subsequent information. In addition, decision makers tend to
place the greatest attention on more recent information and either ignore
or forget historical information. The evidence is convincing that these
and other biases can alter decisions.
Changing decision making environments, managerial requests, and
decision maker limitations create a need for more and better decision
­support. We should consider building a computerized decision support
when two conditions exist: (1) Good data/information is likely to improve
the quality of decisions, (2) potential decision support users recognize a
need for and want to use technology to support their data-based decision
making needs.

Key Skills of Data-Based Decision Makers

Decision making habits are often learned by trial and error. Decision mak-
ing skills should be learned through more deliberate, systematic effort.
Culture can promote the use of data to make decisions or be neutral on
26 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

this topic. More data and easier to use analytical tools provide an oppor-
tunity for improving operational decision making, but many managers
must learn new behaviors and skills to actually use data and analyses effec-
tively. Generally, managers must expand their skill sets to use data and
analysis effectively. Data-based decision making requires a specialized skill
set in addition to other decision making skills.
Organizations that embrace measurement have a data-centric culture.
This encourages and rewards managers for making decisions based on
meaningful data, rather than solely based on intuition, cf., Kanter (2013).
Managers must enhance and refine their understanding of the possibili-
ties of data analysis. Managers must strive to understand the meaning of
frequently used analyses. Also, managers must be rewarded for incorpo-
rating results of data and analysis into their thinking about a situation.
Shea, Santos, and Byrnes (2012) differentiate between data-driven
and data supported decisions. They note both processes use quantitative
and qualitative data to inform and make decisions. Supposedly data-­
supported decisions “use the same data but they also take into account
people, issues, ethics, and broader system effects.” They caution that an
excessive “data driven” emphasis can contribute to ethical blind spots
poor decisions. Data-based decision making can and should incorporate
ethics and ethical decision making.
Using data and analyses is sometimes challenging. Rob Enderle
(2013; 2014), a technology analyst, provides examples of what he consid-
ered poor use of data and analyses at IBM, Microsoft, and Siemens. For
example, he reports Microsoft’s internal market research organization was
providing executives with “results that made decisions they had already
made look smarter.” Hindsight can suggest data distortion and misuse,
but based on his personal experience he observed “a surprisingly small
number of the companies that sell analytics tools actually rely on those
tools for major decisions.”
Blogger Kalie Moore (2014) at Business Intelligence software vendor
datapine.com raises a similar issue. She writes “insights we provide are
completely useless if, at the end of the day, these reports are ignored by
the actual decision makers.” Moore felt business leaders were not using
data in decision making for three reasons: (1) overreliance on past expe-
rience, (2) going with their gut and cooking the data, and (3) cognitive
 Data-Based Decision Making 27

biases. These are serious concerns. There are ways to overcome biased
behavior, but managers must become aware of their own biases and the
problem resulting from specific biases. Managers must develop reflective
skills, especially regarding biases in data use, to become effective data-
based decision makers. Reflective skills means thinking about or reflecting
on what you do.
Data analyses can be used to bolster and provide biased confirmation
of previously made decisions. Also, analyses can be requested that support
biased rationalizing of decisions. Skilled data-based decision makers must
learn to reserve judgment and postpone a final choice until the available facts
are presented and evaluated. A decision should then be made that incorpo-
rates and reconciles the facts.
So what are the specialized data analytics decision skills managers and
decision makers need? The primary skills seem to broadly encompass:
(1) collecting and identifying relevant data, (2) using software to per-
form statistical analysis including charting of data, (3) interpreting data
and analyses in the context of an actual decision situation, and (4) using
analyses of data, including sensitivity analyses, to inform decisions. Let’s
review these skills briefly.

1. Collecting and identifying relevant data. Organizations collect large

amounts of data and external data can also be purchased. Often
new data can also be captured. Managers need to understand data
resources and data capture and how to work with stored data, to
use metadata, to identify what data is available and what new data
should be captured.
2. Using software to perform statistical analysis including charting
of data. Often desktop tools like Excel and Tableau are adequate.
Learning a statistical analysis package helps decision makers interpret
­analytical results and understand limitations of statistical analysis.
3. Interpreting data and analyses in the context of an actual deci-
sion situation. Decision makers need to match data and analyses
to ­questions of interest. Many decisions can be framed either in
terms of gains or losses. How a decision is framed can also impact
choices. Decision maker ask: What do I need to know about this
situation? Is there data that will help me understand my choices in
28 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

the ­situation? What does the data mean? Do I have a pre-conceived

solution or biases?
4. Using analyses of data, including sensitivity analyses, to inform deci-
sions. Data can inform decisions, but data does not always provide
conclusive evidence. In some situations data analysis shows a strong
correlation, but the causal evidence is much more circumstantial.
Rather than ignoring data, managers should show caution when they
use available data. Correlation is not causation, but in many cases
correlation is the strongest conclusion about a relationship.

Many observers agree quantitative skills are important to data-based

decision making.
Until recently, data analysis skills were primarily taught to statisti-
cians, market researchers, actuaries and other specialists more than to
people planning careers as managers. Times have changed and teach-
ing applied data analysis skills is increasingly popular. Top International
­Business Schools are addressing this managerial skills gap. There is broad
recognition that managers and decision makers need to be skilled data
users and data interpreters. Managers need to be skilled at data-based
decision making.
Using data and analyzing data is every manager’s job. If that goal is
to be realized, then current and future decision makers must develop
and enhance skills needed to use data effectively. Rationalizing before a
decision is made or afterward is equally inappropriate. A skilled, data-
based decision maker follows a process that begins with asking the right
questions, and then answering the question using facts, relevant data and
analyses prior to making a decision.

Steps to Develop Data-Based Decision Support

Encouraging and developing data-based decision support is an organiza-
tionwide effort and requires many resources, including people, money,
and technologies. Building an effective enterprisewide decision support
capability can help improve decision making, but meeting that goal is a
challenging task. Providing companywide decision support requires cre-
ating a sophisticated information technology architecture of computing
assets. That architecture provides the foundation for data-based decision
 Data-Based Decision Making 29

making and digital transformation. Data-based decision making b­ enefits

from computer-based support for collecting, analyzing, and sharing
different types of data. Often relevant decision support information is
derived from real-time and historical quantitative and qualitative data.
Creating and managing a modern computing architecture requires
a mix of people skills, technologies, and managerial procedures that are
often difficult to assemble and implement. For example, storing a large
quantity of decision support data is likely to require purchasing the l­atest
hardware and software. Most companies need to purchase high-end
­servers with multiple processors and advanced database systems trans-
lytical databases NoSQL databases such as MongoDB, Cassandra, and
CouchDB, and translytical databases to support real-time transaction
processing and data analytics. To implement a decision support architec-
ture an organization also needs people with advanced database design and
data management skills.
How can managers increase the chances of a successful data-based
decision support implementation? After evaluating some alternate sug-
gestions, we have concluded that once an appropriate need has been
­identified, then the following steps can help create, implement, and
­promote use of data-based decision support in decision-making ­processes,
see Figure 3.2.

Select project champion with a decision

support need

Identify technology challenges

Communicate about capabilities and cost

Provide appropriate training and support

to staff

Market and promote capability among

managers

Figure 3.2 Steps to create a data-based decision support capability

30 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

In Figure 3.2, the first step is to identify an influential project

­champion with a decision support need. The project champion must be
a respected, senior manager. A ­project champion can deal with political
issues and help insure that everyone realizes they are part of an analytics
and decision support team. Managers need to stay focused on a ­company’s
decision support development goals.
Second, managers should be prepared for technology shortfalls.
­Technology problems are inevitable with data-oriented decision support
projects. Often the technology to accomplish a desired decision support
task is not currently available or is not easily implemented. Unforeseen
problems and frustrations will occur.
The third step is to tell everyone as much as you can about the costs
of creating and using the proposed decision support capability. Managers
need to know how much it costs to develop, access, and analyze decision
support data.
Fourth, be sure to invest in training. Set aside adequate resources,
both time and money, so users can learn to access and leverage the new
decision support capability.
Finally, market and promote the new capability to the managers you
want to use the system. Provide incentive and motivation for appropriate
use of the system. Provide incentive and motivation for appropriate use
of the system.
Effective decision support requires ongoing innovation and refine-
ment. As decisions become more complex and as data increases in
quantity and variety, systems must be refined and enhanced. Decision
support requires an iterative development process, executing the steps in
­Figure 3.2 repetitively.

Find an Opportunity to Create

Competitive Advantage
Managers want to create capabilities that provide a competitive advan-
tage. Decision support, analytics, and business intelligence can provide
advantage, but the mere existence of a capability does not create sus-
tainable advantage. According to Setia et al. (2013, p. 583) “the relative
ubiquity of digital technologies implies that merely investing in digital
 Data-Based Decision Making 31

technologies or enhancing their usage may not be sufficient for a firm

to gain competitive advantage.” The real value comes from understand-
ing how a proposed capability may provide advantage. This knowledge is
crucial for evaluating opportunities. Also, it is important to assess how
likely it is that a successful implementation will provide advantage. At
an abstract level based on Barney (1991), technologists need to ask if the
novel capability is valuable, rare, inimitable, and nonsubstitutable. Then
establish whether the organization is ready to implement the capability.
A competitive advantage is a resource, capability, skill, or character-
istic of an organization that significantly enhances success in a market,
rivalry situation, or competitive encounter. Competitive advantage results
from doing something better than competitors that create value and supe-
rior performance in a timely manner.
A proposed capability must have the potential to create real value in
a realistic time frame. For example, a novel decision support capability
must demonstrably improve decision-making efficiency or effectiveness
or both. In general, a novel decision support capability should be hidden
from competitors and it should be difficult for competitors to identify
and emulate. An internal facing system used by managers is more likely
to remain rare and unknown to competitors than an externally facing
­capability used by customers or other external stakeholders. A proposed
capability must also be difficult to duplicate or imitate. Systems devel-
oped by company information technology staff are more likely to ­create
sustainable advantage than off-the-shelf solutions purchased from a
­vendor. Finally, the functionality of any new capability must be difficult
to duplicate if it becomes known. One hopes any substitutes for the capa-
bility have serious limitations.
Decision support and analytics may and can create competitive
advantage. A decision support capability is a competitive advantage when
it is (1) a major strength, (2) unique and proprietary, and (3) sustainable
long enough to realize a payback. Digital transformation and improved
decision support may not create a competitive advantage—it depends on
the vision, competitor actions, timing, and implementation.
Barney’s resource-based view of a firm suggests questions that should
be asked when vendors or internal advocates are promoting any capability
as a potential competitive advantage.
32 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

• Will the proposed capability create significant value?

• Is the proposed capability novel and rare?
• Is the proposed capability difficult to copy, duplicate,
or ­imitate?
• Do substitutes for the capability have limitations that will
discourage using them?
• Is the organization ready to implement and exploit the
­proposed capability?

Decision support can create competitive advantage by significantly

improving data-based decision making efficiency and effectiveness, by
supporting cost and/or differentiation strategies, and by increasing orga-
nizational control, innovation, or adaptability. High risk decision support
projects such as key digital transformation decision-related projects are
the most likely to result in a competitive advantage or fail spectacularly.
Gaining any advantage may require large financial investments and be
temporary. Some decision support development opportunities are better
than others. Many very useful decision support capabilities will not pro-
vide a significant competitive advantage, but the capabilities are needed to
remain competitive in the industry. Evidence about the need and poten-
tial value of a proposed capability can help choose among opportunities.
Some software vendors claim a specific “new” application will pro-
vide a competitive advantage. Supposedly organizations that implement
a vendor’s solution will gain a competitive advantage. This broad promise
sounds too good to be true, so don’t believe the promise. Ask questions,
get answers and facts, tailor and customize off-the-shelf applications.

Summary
More efficient and effective managerial decision making is difficult
to achieve in an increasingly complex, data intensive, digital business
ecosystem. Stakeholders, including shareholders, senior management,
­customers, and partners, have high expectations for better results and
continue to want more value.
Increasing and improving data-based decision making is key to
­successfully implementing a digital transformation vision. Some people
 Data-Based Decision Making 33

advocate for data-driven decision ­making, ­others for data-based or data-in-

formed decision making. These approaches differ and each can provide
value in the right situation. Data are important and d ­ ecision making
should incorporate facts, but often assumptions and opinions should also
influence choices. Managers need to learn new ­analytical skills and an
organization’s culture should reward data-based d ­ ecision m
­ aking. Overall,
complex decision-making environments ­create a need for computerized
decision support and for more sophisticated ­decision making.
Using data-based decision making provides a generalized opportu-
nity to create an advantage as part of a digital transformation strategy.
In ­general, managers should use data-based decision making for semi-
structured decision situations. Managers should use all relevant data in
semistructured situations, and should consider ethical issues, values,
­situational factors, assumptions, and other less tangible f­actors. This
­factual, data-based approach is especially important in assessing digital
transformation opportunities.
 CHAPTER 4

Analytics and High-Velocity

Decision Making
Managers must match the velocity of streaming data with high-velocity,
data-based decision making and agile execution to successfully compete.1
Digital transformation is ongoing and evolving. Managers engaged in
­finding ways to make greater use of digital data must understand the impor-
tance of analyzing and using digital data in decision making to a­ ctually
improve the overall functioning and success of an organization. Digital
transformation maturity refers to the progress of managers in ­implementing
various actions to re-imagine or re-invent the ­business, typically leverag-
ing technology. Managers implementing a digital ­transformation s­ trategy
should focus on adopting and using innovative technology that can
enhance organizational decision-making capabilities.
In a collaborative research study conducted by MIT Sloan Man-
agement Review and Deloitte professional services network, Kane et
al. (2015) found that among digitally maturing organizations, nearly
90 percent of strategies focus on improving decisions and innovation.
The following six sections emphasize improving decision making and
include: (1) the basics of analytics, (2) current trends in advanced ana-
lytics and applications, (3) a guide to identify and select data analytics
tools, (4) analytics as an enabler for data-based decision making, (5) high-­
velocity decision making, and (6) the ethical challenges encountered with
data analytics and data-based decision making.

1
Dykes, B. 2017. “Big Data: Forget Volume and Variety, Focus On Velocity.”
Forbes, June 28. https://forbes.com/sites/brentdykes/2017/06/28/big-data-forget-
volume-and-variety-focus-on-velocity/#5de2336f7d67
36 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

Basics of Analytics
Analytics is often described as the science of analysis and discovery. The
term refers to quantitative analysis of data. People who conduct analyses
and develop analytic applications are decision or data scientists. Analytics
refers to a broad set of tools and capabilities that provide decision ­support.
Analytic capabilities are important in data-driven and model-driven DSS
and analysis with quantitative and statistical tools is the focus of special
studies such as knowledge discovery or data mining.
Davenport and Harris (2007) define analytics as “extensive use of
data, statistical and quantitative analysis, exploratory and predictive
models, and fact-based management to drive decisions and actions. The
analytics may be input for human decisions or drive fully automated
­decisions” (p. 7).
Analytics is a broad umbrella term that includes business analytics
and data analytics. Business analytics (BA) use data and analytics to
improve business operations and decision making. BA includes optimi-
zation techniques and Key Performance Indicators (KPIs). Data analyt-
ics applies quantitative and statistical methods to analyze large, complex
organizational data sets. Managers need to understand the value of using
data analytics and the decision support capabilities made possible by
leveraging data.
Analytic applications have three main technology features: (1) data
management and retrieval, (2) mathematical and statistical analysis and
models, and (3) techniques for data visualization and display. Analytic
applications are used to process large amounts of structured and unstruc-
tured data to find patterns and provide information. Analyzing data can
be challenging and more data can increase the complexity of an analysis.
More data does not mean better analytics. Like all computerized systems,
for analytics to be useful the data must be accurate, complete, and repre-
sentative of the real world.
Some sources consider analytics as a subset of business intelligence
(BI), while some use the terms analytics and BI interchangeably, other
commentators are more specific and consider only reporting analyt-
ics as another name for BI. In this discussion, data-driven DSS and BI
are considered as reporting analytic applications. There are three major
 Analytics and High-Velocity Decision Making 37

types of analytics: (1) reporting analytics, (2) prescriptive analytics, and

(3) ­predictive analytics.
Information Systems vendors and analysts tend to use BI as a cat-
egory of software tools that can be used to extract and analyze data
from corporate databases. The most common BI software is query and
reporting tools. This software extracts data from a database and creates
formatted reports.
Prescriptive analytics manipulate large data sets to make recommen-
dations. This type of decision support prescribes or recommends an
action, rather than a forecast or a summary report. Prescriptive analysis
relies on sophisticated analytics including graph analysis, simulations
and machine learning. Through evaluating decision options, managers
can use prescriptive analytics to take advantage of an opportunity in
the future. Using What… questions such as “What should be done to
achieve xxx in the future?” Predictive analytics is based on quantitative
and statistical models and this category of analytics includes model-
driven DSS.
Predictive analytics is a general term for using simple and complex
models to support anticipatory decision making. Analysis of historical
data is used to build a predictive model to support a specific decision
task. The decision task may be determining who to target in a marketing
campaign, what products to stock, possibility of fraud, or who the “best”
customers are for a firm. Using historical data, predictor variables are
identified for building quantitative or business rule models. The model
makes a prediction for a decision task.
Managers in consumer-packaged goods, banking, gambling, energy,
and health care industries are the most active users of predictive analyt-
ics. Predictive analytics is increasingly incorporated in day-to-day opera-
tions management tasks. New projects can be implemented faster because
software has improved for analysis and development, but the number of
IT professionals skilled in using the many varied analytical techniques is
inadequate to meet the demand.
Developing analytics should involve both business and IT managers.
This joint development process should help in understanding and in some
cases automating business operations decisions. Creating a meaningful
analytics development partnership can facilitate improved and enhanced
38 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

routine decision making. Working together on analytics development can

serve as a bridge between IT and business managers.
Development and use of analytics should be a core technology
competency of many companies and managers should be reluctant to
outsource or offshore the capability. Managers must realize the cost of
each analytics project is an investment in building competency and it can
also reduce operations costs and enhance operations. Certainly there is a
learning curve associated with analytics but consultants can reduce the
curve. Managers should not however assume that programmers outside
their firm can easily understand the peculiarities and needs of their busi-
ness. As organizations capture more and more data, it will be important
to analyze and use the data to enhance business results. Implement-
ing analytics is NOT just another routine Information Technology
(IT) project.
Based on a number of sources including the IBM Analytics Quotient
(AQ) quiz, the following questions and responses identify best practices
for using IT to implement analytics.
Answering the questions presented in Table 4.1 can provide man-
agers with a baseline guide to assess current development of analytics
capabilities.
A joint MIT Sloan Management Review and IBM report identified
three core competencies organizations must master to achieve a com-
petitive advantage with analytics. The first is information management,
which rely on standardized data practices. The second is analytics skills,
which revolve on core discipline expertise, built on robust tools. Finally,
there must exist a data-centric culture that sees analytics as a key asset to
support evidence-based management.
Analytics is continuing and perhaps accelerating. Analytics are
important decision support tools that lead to data-based decision making.

Current Trends in Advanced Analytics

and Its Applications
Analytics and business intelligence (BI) technologies continue to be key
enablers of most organizational data and decision support strategies. The
opportunities for mobile BI are many, and the trends toward self-service
 Analytics and High-Velocity Decision Making 39

Table 4.1 Decision guide for implementing analytics

Ask questions Guideline
1. What types of data sources In general, standard enterprise data sources across
should managers analyze? functions should be combined with data from external
sources, point of sale, RFID, and social media
2. How important is the quality Very important. An organization should have an
of data used in analyses? enterprise data model. Common master data and
metadata must exist and strong data governance
practices must be in place
3. Should managers docu- Yes. Managers should initiate a documentation
ment outcomes of analytics ­process to capture how the use of business analytics
initiatives? has changed business operations. Successful projects
will lead to more projects
4. How important is using Very important. Integrated planning and predictive
predictive models? modeling can enable an organization to adjust policy
and execution in response to shifting dynamics in the
organization and business environment
5. How should managers assess Risk metrics should be industry specific. Managers
and manage risk? should share risk management assessment and miti-
gation processes across the organization, identify the
most significant cross-departmental risks in an effort
to reduce loss, and link risk reduction and specific
risks to business objectives and improved performance

6. Should managers centralize Yes, but analytics knowledge should be widespread

resources for performing and throughout an organization. Using analytics should
developing analytics? become part of the organizational culture. Managers
should establish an analytics center of excellence and
cross functional analytics team

7. What general analytics solu- Solutions are in four categories: (1) Reporting and
tions should be implemented analytics, (2) Planning, budgeting and ­forecasting,
in organizations? (3) Predictive and advanced analytics, and
(4) ­Governance, risk and compliance analytics

8. How should managers It is important to use both qualitative and quantita-

anticipate future events tive methods, including: (1) experience and intuition,
and results? (2) predictive analytics for priority needs, (3) “what
if” scenarios, and (4) integrated planning and
­predictive models

analytics and visualization are both exciting and promising for data-­
centric organizations.
BI and related technology initiatives attract a lot of attention from
technology experts, managers, consultants, and vendors. A recent survey
of BI professionals identified data discovery/visualization, self-service BI,
40 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

and data quality/master data management as the most important trends.

In her Datapine blog, Mona Lebied (2016) identified key areas for BI
and analytics ranging from security and digitization to cloud analytics,
embedded BI, and data storytelling.
AI and ML are areas attracting considerable attention. Managers in
organizations large and small are trying to understand the prospect of
AI in general and the possibilities for their business. Gartner has flagged
advanced AI and ML as important trends for organizations by 2018. AI
is a broad concept that has been around for many years. AI refers to the
simulation of “smart” behaviors in computers. ML is a subset of AI that
uses algorithms to learn and improve from experience. The opportunities
for these technologies in business and health care are extensive. In a recent
Forbes article, Marr (2017) highlights disease identification and diagno-
sis, crowd sourcing treatment options and drug response monitoring and
disease surveillance, as areas where AI is having significant impacts in the
health domain. Smart cities, smart manufacturing and smart cars are also
capturing public attention.
Core to generating new value from decision support and analytics,
managers should experiment with and explore new opportunities in AI/
ML, visual data discovery, and data storytelling. Moving beyond tradi-
tional graphs and charts, this era of infographics pushes boundaries in
terms of trying new ways to use data to tell a business story through the
effective use of sophisticated approaches to data visualization.
Collaborative decision support is fostered through the increased avail-
ability and use of mobile technology and Web 2.0 technologies. BI is no
longer solely for senior. Self-service BI provides opportunities to share
data. Also, improvements in software facilitate new ways for embedding
decision support features in existing software applications.
With increasing investment of resources in data and technology and
heightened expectations for digital transformation, we anticipate many
organizations will establish dedicated centers for analytics and self-service
BI (cf. Lebeid 2016).
Data governance and security are high priorities for most organiza-
tions. Security is a ­consideration for managers in all businesses looking
at cloud analytics and cloud storage options. While self-service BI in the
cloud affords many benefits to individual users, realizing this level of
 Analytics and High-Velocity Decision Making 41

flexibility and agility is challenging in terms of security and data gover-

nance (Potter 2015).
Analyzing data is often challenging and more data can increase the
complexity of an analysis. More data does not mean better analysis. ­Hiring
data scientists, buying more hardware or software or hiring consultants
does not guarantee success. It may be necessary to implement capabilities
like in-memory processing or software like Hadoop. Additional training
is probably needed and possibly new staff might also be needed.
McKinsey director David Court (2012) argued multiple success
­factors must be present to use new technologies: creative use of ­internal
and external data, developing workable models, and transforming the
company to take advantage of data. Finally, Court notes “you’ve got
to make a decision support tool the frontline user understands and has
confidence in.”
To exploit these trends six critical success factors must be present:
(1) managers must want to use analytics and decision support, (2) knowl-
edgeable and innovative data and decision support analysts, (3) high qual-
ity data, (4) accurate models for forecasting and prediction, (5) appropriate
technology, and (6) effective data-centric culture of the process.

Select Analytics Tools and Technologies

Selecting the most appropriate analytics approach and tools for a specific
task or project is important. The approach that is the best fit depends upon
many factors including: (1) the need and objective, (2) data availability,
(3) training and background of current data analysts, (4) vendor support,
and (5) the industry/type of organization. Choosing the wrong approach
and tools often results in a difficult and incorrect analysis. A ­ nalytics is
about asking specific questions and finding the best answers. As discussed
in a previous chapter, a question asking technique should also be used for
choosing analytics approaches and tools.
Descriptive analytics primarily uses data aggregation and statistical
tools like averages and differences. Predictive analytics use more com-
plex statistical models like regression and correlation and forecasting
techniques like moving averages. Diagnostic analytics uses tools like drill
down, interactive data visualization and data mining. Finally, prescriptive
42 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

analytics uses tools like optimization, simulation, scenario analysis, and

case-based reasoning.
In a Forbes article, Bernard Marr (2016) sets out six approaches
to analytics. In considering these approaches it is important to under-
stand when specific tools should be used. We have briefly assessed these
approaches in terms of the nature of the data needed and the business
goal(s) that can be met. The following is our assessment.

1. Business Experiments
Testing ideas is often a goal of data analytics. A business ­experiment
approach is used to test the validity of an idea. This may be a ­strategic
hypothesis, a new product package or a marketing campaign.
­Davenport (2009) advocates a “test and learn” approach to conduct-
ing business experiments noting that experiment design is key to
­generating a sound evidence base. We recommend using a business
experiment approach when seeking to test ideas systematically.

2. Causal Analysis
Finding causes helps understand a situation so changes or p ­ rediction
is possible. Regression is a primary causal analysis tool that is u
­ seful
when understanding and/or prediction is required and adequate
data are available on plausible predictor variables. Regression is a
­statistical tool for investigating the relationship between variables.
For ­example, managers might use regression analysis to understand
the causal r­ elationship between price and product demand. Use causal
­analysis when a complex situation is data rich and managers want
better understanding.

3. Correlation Analysis
This is a statistical technique that allows managers to determine
whether there is a relationship between two separate variables. It also
helps to determine the strength of the relationship between the vari-
ables. We might use correlation analysis to understand if there is a
relationship between ­positive customer experience and customers sen-
sitivity to changes in the price of a product or service. Use correlation
analysis to explore relationships.
 Analytics and High-Velocity Decision Making 43

4. Forecasting Analysis
This approach uses a time series of data values to forecast or predict
other ­values. For example, managers may use sales data from the past
to predict future sales values. Perform a forecasting analysis when the
primary goal is estimation of a variable(s) of interest at some specified
future date.

5. Scenario Analysis
Managers can consider “what-if ” questions by analyzing a variety of
­possible future events or scenarios considering possible alternate out-
comes (Power and Heavin 2017). Use scenario analysis where there are
numerous possible course of action and a high degree of uncertainty
about the potential outcome.

6. Visual Analytics
Data can be analyzed in many ways and the simplest way is to create
a visual or graph as a means of identifying patterns or trends. This
is an interdisciplinary approach integrating data analysis with data
visualization and human interaction. For example, a sales manager
could use an interactive map to better understand customer purchas-
ing behaviors by region. Use data visualization when managers are
interested in directly deriving insights from large volumes of data.
As mentioned previously, business analytics and data analytics are
terms used interchangeably to describe a systematic process of purpose-
fully examining and using data sets with statistical and quantitative
models, and leveraging the capabilities of sophisticated algorithms and
technologies. Often the goal is to draw conclusions about the under-
lying meaning or implications of the data. Business analytics empha-
sizes business uses of analytics, while data analytics has a broader focus
across organizations and settings. There is no single best approach
for meeting every analysis goal. Once the most appropriate analyt-
ics approach for a specific situation is selected, a manager or analyst
must select analytics tools and technologies to conduct the analysis.
There are many analytics and decision support software tools available
and many of them are open source and widely available. Managers
should consider and evaluate the technologies currently available and
44 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

the technical capabilities of staff available in-house before going to the

market for new software tools or to hire experts.
Managers and analysts continue to investigate new opportunities in
visual data discovery and data storytelling (Heavin and Power 2017).
Moving beyond traditional graphs and charts, sophisticated data visual-
ization technologies promote new ways of telling a business story from
data insights to data visualization. Analytics approaches are evolving.

Analytics Should Inform Data-Based Decision Making

Analytics is an integral component of a successful organizational digital
transformation strategy. Use of analytics can offer individuals, organiza-
tions, governments, and our global society “data-based” perspectives on
existing challenges and possible solutions. Analytics can provide facts to
improve data-based decision making and help find meaning in an increas-
ingly complex environment.
In her Teradata blog, Yasmeen Ahmad (2016) identified advantages
of analytics, including: (1) increased proactivity and the ability to antic-
ipate needs, (2) delivering the right products and services at the right
time, (3) improved personalization and service, and (4) optimizing and
improving the customer experience. Analytics provide these benefits
when incorporated in data-based decision processes. Analytics has been
lauded by some as the “silver bullet” solution to finding an organizational
competitive advantage. Sadly, it is NOT a “silver bullet,” but rather ana-
lytics is more like the raw unformed silver! Gaining Ahmad’s advantages
does seem reasonable, but the task is an ongoing challenge.
Data albeit “good data” on its own will not result in good decision
making (cf. Shah et al. 2012). In their study of data-savvy practitioners,
Shah and colleagues identify five challenges to data-based decision ­making
in organizations, these include:

1. Few employees have analytical skills;

2. IT departments need to invest more resources in providing informa-
tion and less in the technology aspect of IT;
3. There is broad acknowledgment good quality data exist, however it is
often a challenge to locate important data sources;
 Analytics and High-Velocity Decision Making 45

4. Managing data and providing information is widely perceived as

the sole responsibility of the IT function. Traditionally, business
­managers did not engage in data and information management.
The typical manager often neglects understanding information
that is received.
5. There is an urgent need to develop more informed sceptics. “Employ-
ees need to recognize that not all numbers are created equal—some
are more reliable than others.”

Notably, the Shah et al. study highlights the widespread mispercep-

tion that analytics is the responsibility of an organization’s IT function.
Analytics is the everyone’s responsibility, it should “put information in the
hands of business analysts and business users and offer significant poten-
tial to create business value and competitive advantage” (Jones 2016).
Benefits of analytics are always constrained or limited by the m­ anager
or managers who use the results to make decisions. In order to achieve
meaningful integration between analytics tools and technologies,
­analytics must support and reinforce data-based decision making and
­management. Key performance data should be included in a d ­ ata-based
management process that provides routine evaluations to improve
­organizational ­outcomes, including quality, and financial metrics. This
integrated more holistic and balanced view of providing analytics is
­illustrated in Figure 4.1.
Negotiating the balance between an organization’s approach to data
analytics and a data-based management strategy can be difficult. To
achieve this dual focus, it is essential that managers participate in the

Data Data–based
analytics management

Figure 4.1 Finding a balance between “Data analytics” and “Data-

based management”
46 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

process of analyzing data in a way that leverages new data insights and
integrates them into the organization’s management and decision-­making
processes. Shah et al. (2012) suggest that managers need to be better
trained to use new analytics tools, paying particular attention to building
analytics into managerial processes. If a balance is not achieved, managers
run the risk of investing in expensive analytics technologies that are not
used by managers. It is important to implement the “right” amount of
analytics to support a data-centric culture and that should lead to better
data-based decision making.

High-Velocity Decision Making

Consequential decisions can and often should be made using a high-­
velocity, high-quality decision-making process. High-velocity decision
making is a new label for a familiar idea: make reversible decisions using
streamlined, rapid data-based decision processes focused on issues, yet
make sure the processes are thoughtful and goal-oriented. Jeff Bezos,
Founder and CEO of Amazon.com, Inc., in his 2016 and 2017 share-
holder letters discusses decisions and decision making. His ideas are very
relevant to managers interested in using analytics and decision support to
improve decision making outcomes. In this era of digital transformation,
Bezos advocates for using high-velocity, high-quality decision making for
consequential and reversible decisions. The following paragraphs explain
the rules of high-velocity decision making:

Rule 1: Know what kind of decision you are trying to make. Is it a Type 1
consequential and irreversible decision? or a Type 2 changeable and
reversible decision?
Bezos notes Type 1 decisions are

consequential and irreversible or nearly irreversible—one-way

doors—and these decisions must be made methodically, care-
fully, slowly, with great deliberation and consultation. If you walk
through and don’t like what you see on the other side, you can’t
get back to where you were before.
 Analytics and High-Velocity Decision Making 47

Type 2 decisions are different.

Most decisions are changeable, reversible—they’re two-way doors.

If you’ve made a suboptimal Type 2 decision, you don’t have to
live with the consequences for that long. You can reopen the door
and go back through. Type 2 decisions can and should be made
quickly by high judgment individuals or small groups.2

Bezos argues

As organizations get larger, there seems to be a tendency to use the

heavy-weight Type 1 decision making process on most decisions,
including many Type 2 decisions. The end result of this is slow-
ness, unthoughtful risk aversion, failure to experiment sufficiently,
and consequently diminished invention.3

Rule 2: Strive to be a Day 1 company.

Bezos explains

I’ve been reminding people that it’s Day 1 for a couple of decades.
I work in an Amazon building named Day 1, and when I moved
buildings, I took the name with me. I spend time thinking about
this topic. ... Day 2 is stasis. Followed by irrelevance. Followed by
excruciating, painful decline. Followed by death. And that is why
it is always Day 1. .....

Day 2 companies make high-quality decisions, but they make

high-quality decisions slowly. To keep the energy and dynamism
of Day 1, you have to somehow make high-quality, high-velocity

2
Note: We assume a “high judgment” individual is a person with experience and
good judgment.
3
Bezos “The opposite situation is less interesting and there is undoubtedly some
survivorship bias. Any companies that habitually use the light-weight Type 2 deci-
sion-making process to make Type 1 decisions go extinct before they get large.”
48 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

decisions. Easy for start-ups and very challenging for large orga-
nizations. The senior team at Amazon is determined to keep our
decision making velocity high. Speed matters in business—plus a
high-velocity decision making environment is more fun too.

Rule 3: Strive to make high-quality, high-velocity decisions.

Never use a one-size-fits-all decision making process. Many deci-

sions are reversible, two-way doors. Those decisions can use a
light-weight process. For those, so what if you’re wrong?

Rule 4: Consider the trade-off between seeking more information and a

slower decision.

Most decisions should probably be made with somewhere around

70 percent of the information you wish you had. If you wait for
90 percent, in most cases, you’re probably being slow. Plus, either
way, you need to be good at quickly recognizing and correcting
bad decisions. If you’re good at course correcting, being wrong
may be less costly than you think, whereas being slow is going to
be expensive for sure.

Rule 5: Disagree and commit when appropriate for Type 2 decisions.

Trust other managers and know when to respectfully disagree and go
along with the group.
The phrase “disagree and commit” will save a lot of time.

If you have conviction on a particular direction even though

there’s no consensus, it’s helpful to say, “Look, I know we disagree
on this but will you gamble with me on it? Disagree and commit?”
By the time you’re at this point, no one can know the answer for
sure, and you’ll probably get a quick yes.

Rule 6: Go for quick escalation. Know when senior management should

make the decision.
 Analytics and High-Velocity Decision Making 49

Recognize true misalignment issues early and escalate them immedi-

ately. Sometimes teams have different objectives and fundamentally
different views. They are not aligned. No amount of discussion, no
number of meetings will resolve that deep misalignment. Without
escalation, the default dispute resolution m
­ echanism for this sce-
nario is exhaustion. Whoever has more stamina carries the decision.

Know when a decision needs to be escalated to the senior team.

As Bezos concludes “‘You’ve worn me down’ is an awful decision
making process. It’s slow and de-energizing. Go for quick escalation
instead—it’s better.”

Rule 7: Strive to have the spirit and the heart of a small company.
Bezos asks

Have you settled only for decision quality, or are you mindful of
decision velocity too? Are the world’s trends tailwinds for you?
Are you falling prey to proxies, or do they serve you? And most
important of all, are you delighting customers? We can have the
scope and capabilities of a large company and the spirit and heart
of a small one. But we have to choose it.

Case studies and news stories at DSSResources.com suggest that

high-velocity environments are increasingly common and that managers
must learn to make high-velocity decisions if they are to remain relevant
and part of the decision process. Managers must develop fast, incremental
processes for Type 2 decisions in high-velocity decision environments. In
some situations, those decisions should be made by software algorithms.
In rapidly changing environments, people will be eliminated from some
decision processes because they are too slow. Highly-structured Type 2
decisions will be automated. Also, analytics can be used to analyze and
understand business data that can be used to make high-velocity decisions.

Rule 8: Strategic, consequential, irreversible Type 1 decisions should be

made using a high-quality decision-making process that is methodical,
careful, and thoughtful, and made with deliberation and consultation.
50 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

High-velocity decision making is not the same as high-speed decision

making. High-speed decision making describes only how to make fast
decisions, while high-velocity decision making means decisions are made
quickly and, in a goal-oriented direction. High-velocity decision making
means a decision maker is aware of and considers the goals that are being
pursued. If the decision is a reversible, nonprogrammed decision about
new, novel situations requiring innovation can be made using a high-­
velocity, high-quality decision-making process.
Bezos’ views are similar to but do differ from results of Bourgeois
and Eisenhardt’s (1988) decision making research. In their classic study,
­Bourgeois and Eisenhardt investigated how executives make strategic
decisions in industries where the rate of technological and competitive
change is so extreme that market information is often unavailable or
obsolete, where strategic windows are opening and shutting quickly, and
where the cost of error is involuntary exit. They noted

Our results consist of a set of paradoxes which the successful firms

resolve and the unsuccessful firms do not. We found an impera-
tive to make major decisions carefully, but to decide quickly; to
have a powerful, decisive CEO and a simultaneously powerful top
management team; to seek risk and innovation, but to execute a
safe, incremental implementation. Despite the apparent paradox,
effective firms do all of these simultaneously.

In a related study published in 1989, Eisenhardt reported that her

“results link fast decisions to several factors, including the use of real-time
information, multiple alternatives, counselors, consensus with qualifica-
tion, and decision integration” (p. 573). She also noted “the emergent per-
spective highlights emotion as integral to high stakes decision making …
emotion is critical for understanding strategic decision making” (p. 573).
Strategic decisions are important, usually with long-term consequences,
and with large resource commitments. By definition strategic decisions
are consequential and some are not reversible. Reversibility means senior
managers are able to change, roll-back, and reverse a decision and that the
actions to implement the decision can be undone. Rather than two states,
reversible and irreversible, there seems to be a vague continuum of decision
 Analytics and High-Velocity Decision Making 51

reversibility ranging from completely irreversible to completely reversible.

For example, Bezos notes some decisions are “nearly irreversible.”
High-velocity decision making at Amazon under Jeff Bezos is appar-
ently effective. Making successful strategic decisions in an environment
of rapid change does create paradoxes we only partially understand. One
aspect of the decision process paradox is captured in the question—How
do we know when and if a decision is reversible?

Ethical Challenges for Decision Making

Modern managers are becoming more strategic about the capture, stor-
age, and value extraction from data. This strategic approach typically
means leveraging large data sets to extract insightful information that was
previously unknown. These insights are used to maintain or create com-
petitive advantage for the organization. Analytics may provide results to
identify new markets, new products and services, opportunities to grow
revenue, and opportunities to drive down costs with the end goal of
boosting organizational performance. These new uses of data are creating
ethical challenges.
For example, the general data protection regulation (GDPR) in
Europe and significant differences in data protection legislation across
jurisdictions has stimulated much discussion about data privacy, security
and protection by government agencies, regulatory bodies and manag-
ers in both public and private organizations. This ongoing discussion is
widely underpinned by ethical scenarios in business related to IT. Ethics
refers to “moral rules, codes, or principles which provide guidelines for
right and truthful behavior in specific situations” (Lewis 1985, p. 382).
The areas of analytics, BI, decision support, and big data are relatively
new, we continue to uncover new and increasingly complex ethical ques-
tions on a regular basis.
Some people think that building and using a computerized decision
support and analytics capability is ethically neutral. That view is poorly
informed and incorrect. People are faced with ethical choices when deal-
ing with computerized decision support that we are only beginning to rec-
ognize, consider and evaluate. Using a stakeholder perspective illustrated
in Figure 4.2, Asadi et al. (2016) consider three main stakeholders when
52 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

Individual

Societal Organizational

Figure 4.2 Analytics Stakeholders

evaluating the ethical implications of analytics. These stakeholders include

(1) individuals who use social media, (2) organizations who capture, store
and manage data, and (3) society. The societal impacts are significant as
governments and industry associations struggle to regulate and create
­policies for emergent and rapidly changing markets (Asadi et al. 2016).
Given the multi-stakeholder perspective presented in Figure 4.2, the
ethical considerations associated with analytics and decision support are
complex. While technology is neutral, the decisions that people make
about how technology is used to capture, store, analyze, and share data
are not ethically neutral. IBM Engineer Mandy Chessell (2014) ­proposes
nine categories of questions that should be considered by individu-
als and organizations when tackling ethical issues, related to data and
technology including:

1. Context: Why was the data originally collected? How is the data
now being used? How far removed from the original context is its
new use? Is this a fair and appropriate use of this data?
2. Consent and Choice: What are the choices given to all stakeholders
involved? Do they know they are making a choice? Do they really
understand what they are agreeing to? Do they really have an oppor-
tunity to decline? What alternatives are offered?
3. Reasonable: Is the data used and the relationships derived appropri-
ate and reasonable given the purpose it was collected for?
4. Substantiated: Are the sources of data used suitable, respected,
­complete, and timely for the application?
 Analytics and High-Velocity Decision Making 53

5. Ownership: Who owns the new insights generated as a result of data

analysis? What are the owners’ responsibilities?
6. Fair: How fair are the results of the application to all stakeholders
affected? Is everyone properly compensated?
7. Considered consequences: What are the potential consequences of
the data collection and analysis?
8. Access: What access to data is given to the data subject?
9. Accountable: How are mistakes and unintended consequences
detected and repaired? Can the interested parties check the results
that affect them?

Exploring plausible critical ethical incidents that may be faced by

managers, data scientists, and other users can help understand the com-
plexity of ethical decision making. So what situations might occur? Using
Chessell’s questions, please contemplate the scenarios in Table 4.2:

Table 4.2 Scenarios for data-based decisions with ethical implications

Scenario 1: A builder of a BI solution chooses not to include a key metric because the
data are hard to capture and display. Eventually that missing metric, for example the
weight of a prototype airplane, becomes a critical flaw that leads to major cost overruns.
Scenario 2: A sponsor proposes combining individual sales affinity card and credit score
data and a software developer becomes concerned that the privacy rights of customers
will be in jeopardy. The sponsor is a powerful figure in the company who does not
like dissent.
Scenario 3: A software developer realizes the quality of data for a proposed data analyt-
ics solution is flawed and inaccurate and still proceeds to build the system. The system is
never really used because of complaints of poor data quality.
Scenario 4: A software development team fails to validate a forecast model in an auto-
mated inventory replenishment system and managers report large inventory problems.
The company takes a major write-down on obsolete inventory.
Scenario 5: A manager/user of a data-driven DSS notices a sales problem in a store and
drills down into the underlying data and sees a large transaction by her husband. The
manager confronts her spouse with the information he found using the system.
Scenario 6: A manager fails to use an investment management and control system
in a timely manner and a subordinate makes a large, unauthorized trade. The trade is
ill-advised and significant losses result.
Scenario 7: The knowledge base for a knowledge-driven DSS derived with AI and
ML seems out of date and no one acts to fix the problem. The recommendations of the
system become increasingly error prone and erratic. Managers start ignoring the results.
54 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

As a thought exercise ask yourself: What would you do in each situ-

ation? Why would you take that action? Who is the responsible party? Is
the situation avoidable?
In many of these situations we encounter an ethical dilemma. Initially
the situation seems clear cut, but other scenarios are gray and they require
additional information, investigation, and even some expert advice.
Principles and values play an important role in making many sig-
nificant organizational decisions. When analytics and decision support
solutions are constructed, software developers make assumptions that can
have ethical impacts on user choices. Also, some decisions are considered
so value-laden that many people would be uncomfortable with develop-
ing decision support to assist a decision maker. One cannot specify all of
the ethical issues that might be relevant to a specific decision support pro-
posal, but once a proposal reaches the feasibility stage, the project sponsor
needs to specifically address the ethical issues associated with the project.
Also, during development developers need to be sensitive to how repre-
sentations like charts and tables that are designed to present information
impact a decision maker.
Privacy concerns are also easy to ignore during the evaluation of a ana-
lytics proposal. In many societies, people expect that certain personal and
behavioral information about them will be kept private. This information
belongs to the person and does not belong to a company, the public, or
the government. Managers must ensure that data used in the organization
does not infringe on the privacy rights if individuals. The exact extent of
privacy rights for employees, customers, and other data providers is not
always clearly defined. In general, unless there is a clearly compelling rea-
son to risk violating an individual’s privacy, the “fence” to protect privacy
of data should be higher and larger than any minimum requirements.
The following potential analytics and decision support ethical issues
require more thought: (1) data quality assurance, (2) hidden data capture,
(3) propagating data errors, (4) ongoing use of obsolete decision support,
(5) data mashups, data linking, and data fracking, (6) combining internal
and external data sources, (7) inappropriate use of customer profiles/data,
(8) legal liability issues from failing to use or from misuse of a decision
support capability, (9) data/key metrics exclusion, (10) analytics/decision
support model validation, (11) unauthorized data transfers, (12) lack of
 Analytics and High-Velocity Decision Making 55

policies or poor policy enforcement, and (13) invasion of personal pri-

vacy. Organization policies and National and Local laws should guide the
behavior of managers and developers on these and related topics.
We want to encourage and promote open discussion and proactive
behavior to insure ethical use and construction of analytics and comput-
erized decision support. To do so we need to explore the subtleties of a
wide variety of ethical situations that managers, developers, and system
users might encounter. When in doubt about the ethical use of a decision
support or analytics tool or the need to use decision support or the conse-
quences of poor design decisions on the behavior of decision makers, do
not ignore the question, rather ask others, consult, and discuss. Ignoring
ethical issues associated with building and using computerized decision
support is not an option.

Summary
The path to digital transformation is not an easy or even a straight one.
More wide-spread adoption of analytics is a key element of digital trans-
formation for an organization. This chapter considered analytics and
decision support paying particular attention to the increasing need for
high-velocity decision making. Many tools including BI, analytics, and
decision support and other tools and technologies can be used to sup-
port the development of an ethical, data-based approach to organizational
decision making.
Amazon’s Jeff Bezos has pursued the development of a data-driven,
high-velocity decision making approach using analytics and decision
support to improve decision-making outcomes. He warns of the key
challenge for decision makers one-size-fits-all’ decision making.” Bezos’
approach advocates rapid decision making with less than complete infor-
mation, where the decision makers use their judgment to react quickly in
situations where a decision is reversible.
While this approach has seemingly worked well for Bezos, it
is ­important to consider the role of ethics in making decisions in
­high-­velocity environments. Perhaps there is an opportunity to build
questions, such as those proposed by Chessell (2014) into the decision
process. Ethical ­decision making is important for data-driven, data-based,
56 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

and data-informed decision making. Further consideration must be given

to the challenges of ethical decision making in this data-intensive era of
digital upheaval and transformation.
Type 1, consequential and irreversible decisions, requires ethical,
data-informed decision making, including use of analytics and d ­ ecision
support. Ethical considerations are also very important in making
­high-­velocity, reversible Type 2 decisions. Considering ethical issues is
relevant when managers use data-based decision making or implement
an algorithmic data-driven decision automation solution. Even though
some decisions can be “reversed,” some harms cannot be undone and
consequences associated with an unethical decision cannot be reversed.
Chapter 5 provides additional actionable advice to managers who are
implementing a digital transformation vision and strategy.
 CHAPTER 5

Implementing Digital
Transformation
Both a digital vision and implementing organization-wide actions are
important to digital transformation. Data-based decisions must also be
made about practical aspects of implementing digital technologies. This
chapter explores the how and what of implementing specific technolo-
gies in ­specific ­processes in an organization. In general, once the vision
is defined then technology shortfalls need to be determined. Investing in
technology that is not used or that is difficult to use is a problem to avoid.
To encourage agile development and rapid customized implementations
it is important to consider focusing initially on small-scale cloud-based
solutions. Buying large-scale, packaged solutions is fine for infrastruc-
ture changes like a new database environment, but such ­solutions are
rarely transforming.
Selecting appropriate technology is important to implementing
a ­digital vision, but the transformation of processes is also an import-
ant implementation concern. Everyone needs to be part of the task of
­transforming work systems and processes not just IT staff. It is important
to broaden the availability of skills needed for implementing a digital
transformation vision across functions. Technology is an enabler, people
and processes must change to implement a new digital vision.
Also, agile processes1 are important when implementing a digital trans-
formation strategy. Plans must adjust quickly during implementation to
meet changing requirements. Establishing and encouraging a data-­centric
organization culture must be an early goal as part of implementing new
processes and technologies. Promoting data-based decision making also
helps during implementation. Finally, implementation fails if customer

1
http://agilemanifesto.org/
58 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

needs did not inform the digital vision. Successful digital transformation
implementation requires constant collaboration with current and poten-
tial customers. In general, a digitally transformed business model values
meeting customer needs. Remember successful implementation of new
technologies for digital transformation requires commitment of all major
stakeholders. Keep stakeholders informed.
Digital transformation involves significant changes that result from
applying digital technology in new ways in an organization. For some
managers, the notion of digital transformation may be difficult and com-
plex to document, explain, and communicate. This chapter suggests a
number of ways to assess and increase the digital maturity of an organi-
zation. Complex technology innovations such as the Internet of Things
(IoT), cloud computing and storage, radio frequency identifiers (RFID),
blockchain, robotics, and mobile computing and telecommunications
devices are often an integral part of an organization’s digital transforma-
tion strategy. Opportunities for artificial intelligence (AI) and machine
learning (ML) in decision making are also often explored. Technologies
for data collection, storage, management, transfer, and analysis are at the
center of digital disruption. The following sections examine: (1) the dis-
tinctive features of digital transformation, (2) the role of data in digital
transformation, (3) fundamentals of data visualization, (4) understanding
data storytelling, and (5) using algorithms to turn data into actions.

Distinctive Features of Digital Transformation

Digital transformation looks different for every business. For some the
primary focus is about finding new ways to leverage technological inno-
vation, others identify customer engagement as a top priority for their
digital transformation strategy, and some businesses focus on changing an
existing business model. For a business, digital transformation may mean
pursuing some or perhaps all of these activities. Given the operational,
tactical, and strategic nature of digital transformation, one thing is clear:
digital transformation equals business transformation (Edmead 2016).
The breadth and depth of people, processes, and technology involved
in an organization’s digital transformation strategy is significant. If we
characterize digital transformation as a continuous improvement strategy,
 Implementing Digital Transformation 59

it is clear that some organizations and certain industry sectors are fur-
ther along the journey than others. As the digital landscape continues to
evolve, new business models and technological shifts in areas such as AI,
ML, and IoT continue to drive organizational change and evolution.
A number of authors have examined digital transformation maturity.
Solis (2016) identified six distinct stages of digital transformation matu-
rity: (1) business as usual, (2) test and learn, (3) systemize and strategize,
(4) adapt or die, (5) transformed and transforming, and (6) innovate or
die. His report advocates “six key elements within the organization that
must undergo simultaneous transformation, Analytics, Customer Expe-
rience, Governance and Leadership, People and Operations, Technology
Integration, and Digital Literacy.” Managers should assess where the
organization is in terms of these stages. Ideally managers are moving the
organization strategically toward stage 6 where a culture of innovation
dominates managerial thinking.
Evans (2015) identified six steps that can result in digital transforma-
tion maturity. The steps are sequential and are likely to be repeated again
and again. Step 1: identify your transformation objectives. Step 2: study
technology enablers in the market. Step 3: envision the future platform
for digital business. Step 4: master the digital services lifecycle. Step 5:
organize for digital business innovation. Step 6: execute an agile journey
to the future platform. Do and Repeat.
Many vendors of technology products have suggested digital transfor-
mation steps, phases, life cycles or approaches. Kolander (2017), product
marketing manager at Laserfiche, noted “The concept of the digital work-
place has been around for some time, and the definition continues to
evolve with new and improved technologies.” He suggests five basic steps
are: (1) Digitize everything, (2) Organize data and use data in processes,
(3) Automate data collection and data processing, (4) Streamline busi-
ness processes—remove the waste, and (5) Transform the business, drive
innovation by leveraging analytics to align processes with business goals.
Digitizing everything is impractical, managers must have a realistic
vision for the transformed enterprise. Managers must have some idea about
needed changes in the current business model and processes that must
change to support the new business model. The real benefit of digital trans-
formation comes from using digital data to help make better decisions.
60 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

Digital transformation involves directed technological change. There

are however a number of macroeconomic biases associated with techno-
logical change. First, there is a capital-bias associated with technology
change. Implementing digital technologies and re-engineering processes
is capital intensive and managers may want to avoid the capital expen-
ditures. Second, digital transformation is generally labor-augmenting.
­People can do better work and more of it and that may reduce work
force size and increase turnover. Third, a price effect has encouraged skill-­
biased technological change, and the skill bias seems to be accelerating.
Digital transformation is creating a shift in production technology that
favors hiring skilled over unskilled labor. These three macroeconomic
biases ­(Acemoglu 2002) can influence digital transformation decisions
by managers.
Box 5.1 is an assessment tool for managers to use to evaluate progress
on the “digital transformation journey.” The questions raise general issues
that are worth thinking about and answering.

Box 5.1 Digital transformation assessment tool (modified from

Laserfiche)

Digital Transformation Assessment Tool

1. Do you have a digital data strategy?
2. Do you have a disaster recovery plan for your data and i­ nformation?
3. Can your employees easily retrieve data and documents from a
digital repository?
4. Do you have a secure and centralized digital content repository?
5. 
Have you automated your business processes to minimize
time-consuming and manual steps?
6. Have you integrated your data and process systems?
7. Can managers monitor IT operations and ensure that IT imple-
mentations are aligned with business goals?
8. Does a sound data governance plan ensure security and quality
of data?
9. Do you have a strategic vision for how to effectively use data
resources, better meet customer needs, and maximize employee
performance?
 Implementing Digital Transformation 61

10. Can you analyze past data, especially to predict future outcomes?
11. Are content and data management and process automation strat-
egies aligned with organizational goals?
12. Is your organization an industry leader in implementing innova-
tive and technologically advanced process solutions?

So how do you assess the current stage of digital transformation for

an organization? The more questions in Box 5.1 where the answer is YES,
the further along the organization is in reaching digital transformation
maturity. For any gaps, plan for additional steps to reach transformation
goals. Ideally an organization will reach the point where a culture of inno-
vation dominates managerial thinking. Implementing a digital transfor-
mation vision is an ongoing process of change, a journey. Bilefield (2016)
advocates “Building a culture of constant change.”

Role of Data in Digital Transformation

Digital transformation is about more than data. The IoT, cloud comput-
ing, and mobile devices are technological innovations that are important
to digital transformation in many industries. These innovations support
individuals, businesses, health care organizations, and governments in
­collecting, storing, managing, and disseminating data.
In his Forbes article, Newman (2017) ranks IoT as the top trend
for digital transformation in 2018. As Newman points out it is not the
“Things” that are interesting, it is the data being managed by the many
devices that continues to create new opportunities for business.
Newman’s (2017) expectations about opportunities and challenges
for the growing IoT network are many and include:

1. Security is an increasing concern and challenge. The Internet

­environment has minimal regulation and as IoT continues to grow
protecting the privacy and security of data is important.
2. IoT will increasingly drive customer engagement and focused
­marketing strategies.
3. Expanding opportunities for IoT and data analytics.
62 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

The exponential rate at which data is generated is a challenge for

organizations. To meaningfully compete, where the focus is on data as
a valuable asset, digitally transformative organizations must investigate
ways to develop new capabilities to support continuous business process
improvement and technology development. To achieve this goal, orga-
nizations need to embrace cloud strategies. Organizations need to move
away from a siloed system of record to using cloud technologies that will
allow them to run applications from anywhere delivering data to end
users (Dubash 2017). Using data requires integrated, enterprise-wide data
storage solutions.
Cloud computing and IoT promise to tackle complex organizational
data challenges. The IoT allows us to generate and collect large volumes
of data anytime from anywhere using a variety of mobile, sensor, and
other devices. Cloud computing provides a path to direct that data to
the right place for storage, processing, and analysis. The cloud can help
connect IoT devices and provide storage capabilities as well as support
new applications for analytics. While the two technologies are different,
innovation in the cloud and for IoT will create new opportunities for
both technologies.
Digital transformation means using data, visualizing relationships,
data enabling processes, assisting in understanding customers, and mak-
ing better and faster decisions. Let’s examine data visualization.

Fundamentals of Data Visualization

Visualizing data means that we can see relationships that exist in a related
set of data. A visualization is often a short cut for understanding an
underlying pattern in data. The danger is that the pattern is spurious and
that we fail to test for the significance of the relationship. So what are
“best practices” for visualizing a data set? Should we start with descrip-
tive information on the data set? Should we have a prior hypothesis that
guides our analysis? Should we try a number of techniques and tools and
see if we find a relationship?
The answers to these questions are complex and managers should be
cautious about the the technical arguments some experts might make.
In general, best practices are conservative. We seek to ensure that a
 Implementing Digital Transformation 63

relationship really exists in the data set and that it is meaningful and use-
ful to its intended user. Be cautious in data analysis and display and use a
supposition or hypothesis to guide a limited number of statistical tests for
significant relationships. A hypothesis is a tentative explanation that can
be tested. The dangers of undirected or unplanned data analysis are real
and it is easy for analysts to fall into the trap of testing so many relation-
ships that by chance they find a spurious or false relationship.
In data-based decision making, it is desirable to begin with a hypoth-
esis about a relationship and then find a data set that will allow us to test
the relationship. The data set needs to be sufficiently large or meaningful
and derived in a manner that does not have bias. The relationship must
be from the data and not an artifact of how the data was gathered. A data
analyst should begin with a descriptive analysis of a relevant data set.
Then test a limited number of hypotheses to reduce the chances we will
find a false or chance relationship. The scientific approach provides safe
guards to insure the repeatability of the results and the truthfulness that
we should demand.
Data visualization can convey incorrect information as well as show
meaningful relationships. It is important that everyone associated with
creating and interpreting a visualization uses caution in choosing the visu-
alization tools and in interpreting the results. Visualization should tell
an accurate story. The presence of a powerful visualization can actually
hinder our data-based decision making if we are misled to think that
something is true when in fact it is false.
We begin a data-based decision making process with a question we
want to ask and a hypothesized answer. For example, we want to know:
Who are our best customers? We think that married women with chil-
dren are our best ­customers. The preliminary statement helps define data
we need to analyze to verify a relationship. So we need to obtain purchase
and demographic data and then find tools that will let us test the relation-
ship. The visualization alone is not enough, we must use statistical tests
to ensure that the relationship shown in the visualization is meaningful.
We need to correct for the bias that would lead us to incorrectly conclude
that a relationship exists when in fact it does not exist. We don’t want a
false positive—a type I error—anymore that we want a type II error—a
false negative.
64 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

According to Vitaly Friedman (2008), the “main goal of data visualiza-

tion is to communicate information clearly and effectively through graph-
ical means.” Data analysis insures we are effectively examining the data.
We study and summarize data with the intent to find useful i­nformation
and develop conclusions. We need effective data analysis and not just
effective data visualization. Showing a false relationship is not helpful.
Edward Tufte (1983; 2001) wrote a classic on advanced data visualiza-
tion. He cautions against decorative and noninformative content added to
charts. He notes one can deceive with visualizations by picking deceptive
scales or selecting data. To avoid distortions, Tufte argues for using all the
relevant data and presenting it accurately and in a visually attractive manner.
Further, Ryan Bell (2012) suggests developing visualizations using the
following steps: (1) understand the problem domain, (2) get sound data,
(3) show the data and show comparisons; (4) incorporate visual design
principles; (5) allow for quick visual comparisons; (6) add extra levels
of information and preserve the high-level summary data; (7) add axes
or coding patterns; and (8) add a network metaphor to show complex
connections. The basic visualization design principles are: (1) align and
position elements, (2) create clear contrasts and a visual hierarchy, (3) cre-
ate visual unity with repetition of design elements across representations,
and (4) use proximity and grouping of design elements with white space
(cf. Tchakirides 2011).
As Bell notes “Business analysts, IT staff and knowledge workers will
need more skills designing, building and using fluid, interactive, dynamic
visualizations.” A good starting point is the theory and practice writings
of Edward Tufte (www.edwardtufte.com). Finding and sharing meaning
is our goal. Better visualization tools increase our ability to understand
and persuade.

Understanding Data Storytelling

Managers must understand the fundamentals of data analysis and data
visualization, including some tools and techniques, for effective data-
based decision making. In this era of digital disruption we need to go
further than visualization and provide managers with the skills to use data
to communicate their ideas. Data storytelling goes beyond data visualiza-
tion. With data storytelling managers use data to communicate a message.
 Implementing Digital Transformation 65

Morgan (2016) suggests that data visualization is the proof or evidence

that may be used to answer the “what” question, while data storytelling is
the context that may be leveraged to answer the “why” question.
In the world of digital transformation, many of our stories may be
characterized as “data stories.” According to Brown (2018), “Real data
storytelling is a way to share facts in the form that your listener under-
stands, appreciates and remembers best—the story.” Data storytelling
means developing a compelling narrative that provides people with hooks
to access the plot and main characters. Like all good stories, data sto-
ries should have a beginning, middle, and end. These stories allow us
to use engaging narratives together with data anchors to communicate a
finely tuned persuasive story. Data stories may be used to sell ideas to key
decision makers about many topics including new technologies, potential
markets, and new products and services.
With increasing data volume and data complexity it is often difficult
to see the forest from the trees. We must identify and craft a focused
data story using the most effective analytics. Knowing the audience is
essential when developing an effective data story, there is no one-size-fits
all approach (Morgan 2016). In her article, Brown (2018) articulates this
succinctly “make your data stories real stories, and align data storytelling
with the desires and communication style of your audience.” As illus-
trated in Figure 5.1, effective data storytelling is a culmination of analysis
and thought about the audience, the narrative and the visualization.
Data visualization and data storytelling are means to improve decision
making. Part of implementing a digital transformation vision and strategy

Data
visualization Narrative

Data
story

Audience

Figure 5.1 Data storytelling approach

66 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

is improving the way data is used in decision making, which means

increased data visualization and more effective data storytelling. Kumar
(2017) offers a step-by-step approach for creating effective data stories:

1. Plan your story, assess a couple of alternatives before selecting a

­strategic approach.
2. Identify the main focus of your story—what are you trying to achieve?
3. Use powerful headings in your story.
4. Develop a road-map—articulate all of the key points you want the
audience to know about the story, a chart or an analysis. Stick to
the rule of three, group your ideas until you are left with three main
ideas. Add facts, analogies, and examples to the three main ideas.
5. Keep the conclusion brief—emphasize the highlights. Ask what last-
ing impression do you wish to leave with the audience? What’s the
call to action?

Morgan’s (2016) views align with those of Kumar, she emphasizes

the need for a focused data story. Morgan advocates the importance of
staying focused and avoiding distractions around the analysis process or
the operational details of the project. Figure 5.2 illustrates a process for
developing a data story. Start with asking questions about the data, then
the audience, develop a simple message and finally tell a story.
Almost 10 years ago, Google’s Chief Economist Hal Varian com-
mented “the ability to take data—to be able to understand it, to process
it, to extract value from it, to visualize it, to communicate it—that’s going
to be a hugely important skill in the next decades” (McKinsey 2009).
We now need to identify and develop the key skills required to analyze
data for successful data storytelling to support and enable improved data-
based decision making in organizations.

Using Algorithms to Turn Data into Actions

While the concepts associated with Artificial Intelligence (AI) and
Machine Learning (ML) are not new, the pace at which these techno-
logical innovations are evolving continues at significant speed. Many
vendors, consultants, and researchers who previously focused on “app”
 Implementing Digital Transformation 67

Story

What are the

concrete details?
Can we show the
Message results are credible?
Do we have a
What is the simple, interesting
simple way of engaging
takeaway? decision makers?
What is the attention
Audience What do we grabber?
want them to
Can we tell remember?
them
something
interesting?
Data Will they be
interested?
What did we
find? What facts
do we have?
What can we
show?

Figure 5.2 Creating a data story

development focus on algorithm development for distribution and

resale. In 2016, Gartner coined the term “Algorithm Economy” (van der
Meulen 2016).
Gartner describes this phenomenon as disruptive and innovative. An
opportunity for software developers to refocus their “app” endeavours and
instead engage with the idea of an algorithm marketplace. The idea of an
algorithm marketplace is that innovators can build “algorithms and other
software components to be brokered. These algorithms are not stand-alone
apps, but are meant to be used as building blocks within tailored solutions.”
Both algorithms and AI are attracting considerable attention. In a
recent Gartner paper, Panetta (2017) indicates that AI is at the top of its
hype curve. There are many competing definitions for Artificial Intelli-
gence. According to one Deloitte report, van Duin and Bakhski (2017)
state AI “is concerned with getting computers to do tasks that would
normally require human intelligence.” Artificial Intelligence is not dis-
cipline-specific, it leverages theories, practices, and existing knowledge
from a variety of areas including computer science, psychology, decision
sciences, information systems, linguistics, philosophy, and others.
Managers in organizations large and small are trying to come to grips
with the prospect of AI in general and the possibilities within the context
of their organizations. Data-based decision making can help managers
68 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

assess the possibilities. Potentially AI, ML and cognitive technologies can

assist with data-based decision making. For example, cognitive technolo-
gies like neural network and natural language processing (NLP) are being
used to make business processes and products smarter. In Allen’s (2018)
article, innovator Elon Musk commented “competition for AI superi-
ority at (the) national level (is the) most likely cause of WW3.” AI is
potentially transformative.
Machine Learning (ML) is an important subdiscipline of AI, “that
provides computers with the ability to learn without being explicitly
­programmed. ML focuses on the development of computer programs
that can change when exposed to new data” (Marr 2016). Marr identifies
diverse use cases for AI including:

1. Financial trading, including predicting changes and executing trades

at high speeds and high volume;
2. Health care practice, for example reviewing mammography scans;
3. Marketing personalization, such as direct mail and targeted ads;
4. Fraud detection including distinguishing between legitimate and
fraudulent transactions among buyers and sellers;
5. Making recommendations by analyzing your activity and comparing
it to millions of other users;
6. NLP where digital avatars chat and stand in for customer service
agents.

Possibilities for smart technologies are vast and continue to change,

evolve, and mature at a significant pace. Jeff Bezos at Amazon discussed
AI and ML. He explained

much of what we do with ML happens beneath the surface. ML

drives our algorithms for demand forecasting, product search rank-
ing, product and deal recommendations, merchandising place-
ments, fraud detection, translations, and much more. Though less
visible, much of the impact of ML will be of this type–quietly but
meaningfully improving core operations.2

2
Bezos “Obsessive Customer Focus” Key to Winning. https://amazon.com/p/
feature/z6o9g6sysxur57t
 Implementing Digital Transformation 69

As organizations identify new opportunities for AI the demand for

highly skilled practitioners in this area grows. In her recent Forbes arti-
cle “Winning the War for AI ­Talent,” Shein (2018) identifies the need
for organizations to attract the right t­ alent “data scientists, robotics and
AI engineers, and workers with experience in deep neural networks,
big data and analytics” as well as other technical areas. Perhaps some
of these technical areas do not even exist yet. Further Jeremy Barnes,
Chief Architect at Element AI 9 ­(Madhavan 2018) advocates for the
need to hire individuals who have both technical and domain knowl-
edge. He maintains that a deep knowledge of the business, its processes,
and domain-specific knowledge coupled with technical expertise is
­fundamental to AI success.
Building a talent pool is one key pillar of an organization’s d ­ igital
­transformation strategy, but especially for an AI focused vision. Once
some talent is available to help with assessing possibilities during
­data-based decision making, the next step is to identify possible business
problems that could be solved using AI technologies like ML. It is essen-
tial that these transformational possibilities are identified, explored, and
prioritized in relation to strategic importance.
Once the first transformation project has been identified and
approved, the action loop in Figure 5.3 is a useful guide to ensure that the
project stays aligned with and focused on the business problem.
Step 1 is to identify a business problem that you want to solve. This
might be an area of high organizational importance in, an area where
you are confident that the data set is high quality and/or the data set is
high quality.
Step 2 is to build a simple solution for your problem. This involves
examining the data set, processing the data into a format that is accessi-
ble for ML, training the model, generating the result and evaluating its
performance (Forbes 2017). Once the model has been trained and several
iterations are complete to refine the variables and to develop confidence
in the results, you can move to step three.
Step 3 is to use the results to operationalize business action.
AI experts recommend that implementing algorithms to take b­ usiness
action should be small-scale at the outset to assist with process augmen-
tation over automation (Madhavan 2018). Proposed AI capabilities
should be assessed during data-based decision making to determine how
70 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

Step 1.
Identify
business Step 3.
problem Step 2. Evaluate
Identify business
relevant actions
data

Figure 5.3 Business problem—business action loop

they achieve business goals rather than salary savings (Madhavan 2018;
Shein 2018).

Summary
Digital transformation will look different for every business. This chapter
examined digital transformation maturity. Also, it emphasized two
­fundamental tools of data-based decision making. First, data visualiza-
tion is defined and various approaches to effective data visualization are
reviewed. ­Visualizing data means that we can see relationships in the data
if they exist. Data-based decision making helps to insure we effectively
examine the data. We need effective data analysis and not just effec-
tive data visualization. Edward Tufte (1983; 2001) wrote a classic on
advanced data visualization that can guide us. Second, in a world evolv-
ing from digital transformation, many of our decision analyses can be
characterized as “data stories.” Data visualization and data storytelling
are means to improve data-based decision making. Part of implement-
ing a digital transformation strategy is successfully improving the way
data is used in decision making—that means increased data visualiza-
tion and more effective data storytelling. Finally, AI tools like machine
learning algorithms can be key elements in using data as part of a ­digital
­transformation strategy. To gain benefits, it is particularly important
to tackle important organizational business problems through focused
actions that leverage organizational talent and data to drive more efficient
and effective business models.
 CHAPTER 6

Finding a Way Forward

Digital disruption is changing how organizations create value and deliver
goods and services. Digital disruption is transforming industries. The dis-
ruption manifests itself in new digital tools, digital services, and expanded
data capture and analysis. Digital transformation initiatives by managers
in one firm in an industry promote more rapid and ongoing innovation
in that industry and in others. Successful adoption of new approaches
using digital tools and data leads to more change and more disruption.
We have a digital device society, with smart phones and IoT common
place. Digital disruption is not an “if it happens,” but rather a “when it
happens” phenomenon. Digital disruption is the change that occurs when
new digital technologies and business models affect the value proposition
of existing goods and services. Understanding and acting appropriately
when digital disruptions occur is necessary. Managers should embrace
change and build upon innovation.
Analyzing data are now a core decision support task for many organi-
zations. Managers must try to derive greater value from multiple, diverse
data sources using analytical tools and decision support applications.
­Digitalization of activities and processes has led to an explosive growth
in data. Big Data has hence increased the need for analytics. This major
change has increased the need for managers to understand the possibilities
of these technologies and their application in a variety of areas including
financial services, manufacturing, retail, pharmaceuticals, health care, and
government. As managers across these sectors formulate IS/IT strategies
and make investments, it is essential for them to consider how data-based
decision making and analytics can contribute to improved decision mak-
ing, improved information and knowledge management, and ultimately
to greater organizational success.
Most decisions are what Jeff Bezos labeled as Type 2 decisions that can
be reversed, altered, and changed. The cost of remedying a suboptimal
72 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

Type 2 decision varies, but use the data you have, analyze it, develop a
data story, share the story and get feedback, then go for it. Commit and
implement. Many of these operational and tactical decisions should be a
priority for implementing advanced analytics and algorithms. we need to
find ways to make the decision better and faster.
Strategic, Type 1 decisions deserve and require more thoughtful
data-based and data-informed decision making. New data may need to
be collected and analyzed. Implementation and commitment may need
to be made in stages. Knowing that a decision once made and imple-
mented cannot be reversed is a daunting thought. There is no going back.
The decision to digitally transform an organization is a Type 1 decision.
Craft a vision for digital transformation and analyze it carefully, then
senior ­managers must decide and make a commitment to the vision.
­Middle-level managers will and should be responsible for the related
Type 1 and Type 2 decisions that must be made to realize the digital
vision in that specific organization. Developing a clearly stated vision
statement and writing a scenario describing the transformed organization
will help guide s­ ubsequent data-based decision making.
Many busy managers want to grasp the basics of analytics, data-based
decision making, and digital transformation. That quest has begun. Prior
chapters discussed decision making and digital transformation, data-based
decision making, analytics and high-velocity decision making, and finally
implementing digital transformation. The overall goal for prior chapters
has been to help managers become more knowledgeable about the what,
how, and why of data-based decision making. One hopes greater aware-
ness of the importance of data-based decision making will help managers
better assess, choose, and successfully implement digital transformation
competitive opportunities.
Figure 6.1 depicts the factors that are determining the w­ inners and
­losers in the race to implement digital transformation visions and strat-
egies. The basic relationships in the model identify data-based d­ ecision
making as the key independent factor that can alter outcomes and results
in organizations including successful implementation of a digital trans-
formation vision. The relationship is moderated primarily by align-
ment of organizational elements, adequate and appropriate resources, a
skilled team, and the digital transformation vision itself. Characteristics
 Finding a Way Forward 73

Data–based decision making Outcomes

Improved efficiency and effectiveness
Hardware, networks
Decision Increased organizational control
Data quality
Data analysts output Competitive advantage
Decision support models Digital transformation

Moderators
Alignment
Alignment of organization with digital
transformation strategy
Organization bureaucracy, policies, processes,
technology capabilities, organization culture
Resources
Financial resources and constraints
Skilled team
Decision maker(s) ability, age, years of
experience, qualifications, and training
Vision
Ethics, values, and vision

Figure 6.1 Factors that influence organization outcomes

of individual decision makers and organizational factors are especially

important to success.
Digital transformation involves making decisions about technology
trade-offs and ideally choices are data-informed and fact-based. Data-
based decision making is both a process and a culture. Some managers
and organizations already value using data and facts to make decisions.
Part of digital transformation is to make systematic use of data in decision
making. Decision making using data and facts is both a precursor to dig-
ital transformation and the reinforcement of a data culture and improved
data-based decision making is and should be a necessary consequence of
digital transformation.
Global business activity is accelerating and decision-making activi-
ties and processes must be responsive to changing business needs and
a high-velocity decision environment. Understanding what is occurring
can increase the adaptive response of managers.
Finally, understanding the need for new technology supported
processes, better use of data in decision making, and possibilities for
revised and innovative business models is not sufficient. Managers must
74 DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

understand how to successfully implement digital transformation com-

petitive opportunities. A strategy without an implementation plan and
action taking is wishful thinking.
Society is in the midst of profound and irreversible change. Data are
everywhere and data provide the opportunity for new business m ­ odels,
increased efficiencies, and greater effectiveness in meeting customer
needs. The digital world is volatile, uncertain, complex, and ambiguous.
We cope with digital disruption by developing a vision, understanding
technology opportunities, simplifying our processes, and using data, and
by clarifying our intent and purpose.1
What can we conclude about the broad questions we identified in
the introduction? First, we asked how can managers become data-based
decision makers? Second, we asked how can digital transformation
­
become part of an organizational strategy? Third, we sought to identify
the new skills managers must develop to implement digital transfor-
mation? Finally, we asked how will we know an organization has been
­successfully transformed? So what have we concluded?
First, managers can become data-based decision makers by accepting
and understanding that many, if not most, decisions should be based on
and informed by data. Asking the “right” questions and getting factual
answers is the starting point to becoming a more systematic decision
maker who uses relevant data sources and prepares appropriate analyses.
Analyses don’t need to be complex, rather tools like data visualization can
help identify meaningful relationships for follow-up analysis.
Second, digital transformation can become part of an organizational
strategy when managers at all levels learn about leading technologies
edge and explore opportunities. It is important to pilot process improve-
ment projects make analytics and decision support to customer facing
staff and encourage risk taking and innovation. Managers need to take
­measured risks. Successful change needs to be rewarded quickly and
showcased. Failed innovation must be ended quickly, but those involved
must be encouraged to try again. Opportunistic decision making based
on data must be encouraged as part of the digital transformation journey.

1
Bob Johansen http://iftf.org/bobjohansen
 Finding a Way Forward 75

The path to digital maturity is neither short nor easy, the path often
involves a steep learning curve, some waste, and false starts. Embark-
ing on a ­digital transformation journey must start with experimentation
and innovation. Data must be captured and analyzed to determine what
worked and what aspects of the change need revision or even elimina-
tion. A digital ­transformation vision and strategy should have broad scope
and ­ambitious objectives. Digitally immature organizations need to have
­decision ­makers who focus broadly on technology and have strategies that
are not only operational in focus.
Third, the new skills managers must develop include analyzing data,
visualizing data and data storytelling. Every manager does not need to
be a data scientist, rather every manager should strive to be an intelli-
gent consumer of the new skills managers must develop include analyzing
data, visualizing data and data storytelling.
Finally, we will know an organization has been successfully trans-
formed when a data-centric culture is entrenched, when data-based
decision making is rewarded, when the organization is reporting strong
performance and results over a few years, and when performance exceeds
that of organizations serving the same or similar needs. We want to create
a self-reinforcing cycle of ongoing digital transformation where successful
change leads to further success.
Agility is the way forward to find a successful digital transformation.
Following a plan for digital transformation is important, but adapting
the plan quickly to changing requirements and needs is more important.2
Enjoy the digital journey!

2
http://agilemanifesto.org/
 Glossary
Algorithm economy—algorithms enable computing machines to make
sense of data and use it. Developing them for purposes of distribution and
resale is a recent activity. Companies are monetizing these algorithms to
realize their economic value.

Analytics—“extensive use of data, statistical and quantitative analysis,

exploratory and predictive models, and fact-based management to drive
decisions and actions. The analytics may be input for human decisions
or drive fully automated decisions” (Davenport and Harris 2007, p. 7).
­Analytics refers to quantitative and statistical analysis and manipulation of
data to derive meaning. Analytics is a broad umbrella term that includes
business analytics and data analytics.

Big data—very large data volumes that are complex and varied, and often
collected and must be analyzed in real time.

Business analytics—use of data and quantitative and qualitative tools

and techniques to improve operations and to support business decision
­making. Emphasis on using statistical and management science techniques,
including data mining, to develop predictive and prescriptive models.

Business intelligence—umbrella term that describe a set of concepts

and methods to improve business decision making by using fact-based
­decision support systems. Also, refers to a category of software tools that
can be used to extract and analyze data from corporate databases.

Cloud analytics—a data analytics service provided through a public or

private cloud.

Customer engagement—establishing a strong business relationship

between a customer and an organization. Customer engagement may be
a strategic objective of an organization’s digital transformation strategy.

Data—relevant facts, figures, and digital content captured in information

systems. Raw data are the bits and bytes stored electronically.
78 Glossary

Data analytics—applying quantitative and statistical methods to analyze

large, complex data sets. See analytics and business analytics.

Data-based decision making—a broad concept that prescribes an ongo-

ing process of collecting and analyzing different types of data to aid in
making fact-based, routine and nonroutine decisions. Use of diverse
data types from a variety of sources. A process where quantitative data is
­balanced with “softer” data that is more descriptive in nature.

Data-centric culture—data is highly valued in the organization. The

importance of data is embedded in everything we do.

Data-centric organization—an organization with policies and a culture

that encourage and reward the use of data in products, processes, and
decision making. Also, sometimes called a data-driven or data-informed
organization.

Data-driven decision making—collection and analysis of data to make

decisions. Data “drives” the decision making and decisions are made
using data or facts rather than intuition. Data-driven decision making
is often used interchangeably with the term data-based decision ­making,
but it often implies decision automation using artificial intelligence
and algorithms.

Data governance—processes and procedures implemented by organiza-

tions to ensure data quality.

Data-informed decision making—term used when data and facts are an

influential factor in decision making, but not the only factor.

Data storytelling—using a combination of data facts and a qualitative

“story” that provides effective communication of a business message.

Data visualization—communication of data using visual prompts or

representations such as charts, graphs, and other illustrations.

Decision support system (DSS)—a computer-based information ­system

that supports individual or team decision making. Five primary types:
communications-driven, data-driven, document-driven, knowledge-­
driven, and data-driven DSS.
 Glossary 79

Digital transformation—use of new information technologies such

as analytics, mobile devices, social media and smart embedded devices
to change and improve business processes, improve performance, alter
business models, enhance products, and change customer experiences.
Integration of digital technologies into all areas of an organization,
­fundamentally changing operations.

Digital transformation maturity—amount of progress in implement-

ing actions reimaging or reinventing an organization, typically leveraging
existing and new digital technology.

Digitalization—enabling, improving, and/or changing business oper-

ations and business processes and activities using digital data and
­technologies. Often used interchangeably with digitization and digital
transformation.

Digitization—using digital data to automate business processes and

workflows.

Ethical decision making—application of moral rules, codes, or ­principles

to guide choices for right and truthful behavior. A process of evaluating
and choosing among alternatives in a manner consistent with ethical
principles. Generally part of data-based decision-making processes.

Fact—a statement or numerical value consistent with reality or that can

be proven with evidence. A fact is something known to have happened or
to exist. In general, a fact can be verified as true.

High velocity decision making—use of streamlined, rapid decision

processes focused on issues while ensuring decision making processes are
thoughtful and goal-oriented.

Internet of Things (IoT)—computing or “smart” devices often with

­sensor capability and the ability to collect, share, and transfer data using
the Internet.

Machine Learning (ML)—a subset of AI systems that use algorithms to

learn from data and improve based on experience without being explicitly
reprogrammed.
80 Glossary

Operating or function-specific decisions—day-to-day, routine d ­ ecisions

with a concise decision question and a clear, well-defined, and structured
algorithm to make a choice among alternatives.

Predictive analytics—general term for using simple and complex m ­ odels

to support anticipatory decision making. Often a process of using a
­quantitative model and current real-time or historical data to generate a
score that is predictive of future behavior.

Prescriptive analytics—manipulate large data sets to make recommen-

dations. Decision support that prescribes or recommends an action,
rather than a forecast or a summary report.

Rationality—consistent with or based on logic and facts. Behavior that

demonstrates good sense and sound judgment.

Reporting analytics—Descriptive or reporting analytics describes or

summarizes past results, actions, or activities.

Strategic decisions—complex, nonroutine, unstructured decisions

involving many different and connected parts. Some variables may not
be well understood, often information required to make the decision may
be unavailable, incomplete, and in some situations information may be
known to be flawed or inaccurate. These decisions usually involve a high
degree of uncertainty about outcomes. If implemented, strategic d
­ ecisions
often result in major changes in an organization.

Tactical decisions—broader decision questions than operational

decisions, semistructured in nature, some but not all information
­
­necessary to make the decision is available, primarily internally focused
and made by middle-level managers.
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 Index
Agility, 75 data, information, and knowledge,
AI. See Artificial intelligence 7–8
Algorithm economy, 67 decisions and decision support,
Analytics 8–11
applications, 36 description of, 3, 5–7
basics of, 36–38 digital transformation impacts,
business, 36 12–14
current trends in, 38–41 ethical challenges, 51–55
data, 36 high-velocity, 46–51
data-based decision making, 44–46 key skills, 25–28
decision guide for implementing, modern decision support
39 applications, 11
definition of, 36 right questions, 15–17
predictive, 37 steps for developing, 28–30
prescriptive, 37 Data-centric organization, 17–19
reporting, 36–37 Data concept map, 8
stakeholders, 51–52 Data-driven decision making, 21–24
tools and technologies, 41–44 Data-driven DSS, 10
visual, 43–44 Data-informed decision making,
Artificial intelligence (AI), 67–69 21–24
Data storytelling, 64–66
BA. See Business analytics Data visualization, 62–64
Big Data, 2, 7–8 Decision support systems (DSS), 10
Business action loop, 69–70 Digital disruption, 3–4, 71
Business analytics (BA), 36 Digitally immature organizations, 75
Business experiments, 42 Digital transformation
Business intelligence, 36 assessment tool, 60–61
challenges, 21
Causal analysis, 42 description of, 5, 57–58
Communication-driven DSS, 10 features of, 58–61
Competitive advantage, 30–32 impact on data-based decision
Computerized decision support, making, 2–3
24–25 role of data, 61–62
Correlation analysis, 42 stages of maturity, 59
Digital workplace, 59
Document-driven DSS, 10
Data analytics, 36
DSS. See Decision support systems
Data-based decision making
analytics, 44–46
competitive advantage, 30–32 Ethical challenges, 51–55
computerized decision support,
24–25 Forecasting analysis, 43
92 Index

Global business activity, 3, 73 Opportunistic decision making, 74–75

Organization outcomes/factors, 72–73
High-velocity decision making,
46–51 Predictive analytics, 37
Prescriptive analytics, 37
Knowledge-driven DSS, 10
Knowledge, organizational strategy, 7 Reporting analytics, 36–37

Machine learning (ML), 68 Scenario analysis, 43

ML. See Machine learning Strategic type 1 decisions, 72
Model-driven DSS, 10 Strategic type 2 decisions, 72
Modern decision support
applications, 10–11 Visual analytics, 43–44
 OTHER TITLES IN OUR INFORMATION
SYSTEMS COLLECTION
Daniel J. Power, University of Northern Iowa and DSSResources.com, Editor

• Creating a Culture for Information Systems Success by Zakariya Belkhamza

• Information Technology Security Fundamentals by Glen Sagers and Bryan Hosack
• Building Successful Information Systems: Five Best Practices to Ensure Organizational
Effectiveness and Profitability, Second Edition by Michael J. Savoie
• Computer Support for Successful Project Management: Using MS Project 2016 with
Construction Projects by Ulhas M. Samant
• Decision Support, Analytics, and Business Intelligence, Third Edition by Daniel J. Power
and Ciara Heavin
• Computer Support for Successful Project Management: Using MS Project 2016 with
Information Technology Projects by Ulhas M. Samant

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reference materials for This book is targeted at managers, especially ­middle-level
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Making
managers who are trying to come to grips with using ­data-based
management and leadership
decision making in a transforming organization. The a
­uthors
challenges during their
explore a number of broad questions including: How can
­
professional careers.

DATA-BASED DECISION MAKING AND DIGITAL TRANSFORMATION

­managers become data-based decision makers? How can d
­ igital
POLICIES BUILT
and Digital
transformation become part of an organizational ­
strategy?
BY LIBRARIANS What new skills do managers need to implement digital
• Unlimited simultaneous transformation? How will we know an organization has been
­

Transformation
usage ­successfully transformed?
• Unrestricted downloading
and printing Dr. Daniel J. Power is professor of information systems at the
• Perpetual access for a College of Business Administration, University of Northern
­
one-time fee Iowa, Cedar Falls, Iowa. He has published more than 80 articles/­
• No platform or chapters/papers, and five books. Power was the founding chair
maintenance fees of the Association for Information Systems interest group on
• Free MARC records ­decision support and analytics (SIG DSA). From his vantage point
• No license to execute as editor of DSSResources.COM and Decision Support (DSS) News,
The Digital Libraries are a
comprehensive, cost-effective
a bi-weekly e-newsletter, he tracks a broad range of ­contemporary
analytics and decision support topics. Daniel J. Power
way to deliver practical
treatments of important
Dr. Ciara Heavin is a lecturer in business information ­systems
at Cork University Business School (CUBS), Cork, Ireland.
Ciara Heavin
business issues to every
Her ­
research focuses on innovative mobile decision support
student and faculty member.
­solutions in healthcare. Dr. Heavin is an investigator on research
­projects funded by the European Union (FP7), the Irish Research
Council and the Wellcome Trust UK. She has published in top
For further information, a international IS journals and conferences. She was managing
­
editor of the J­ournal of Decision Systems from 2011 to 2017, and is
free trial, or to order, contact:
now an ­associate editor at the Journal of Decision Systems.
[email protected]
www.businessexpertpress.com/librarians Information Systems Collection
Daniel J. Power, Editor

ISBN: 978-1-63157-658-4