9 keys to creating a data-driven culture & strategy

Practically every growing business believes in the virtues of “data-driven decision making.” You hear the term across the full spectrum of startup life — from the two-person seedling to the post-IPO enterprise. 

But not everyone knows what a good data infrastructure looks and feels like. And very few founders and finance leaders have a clear strategy to create a data-driven culture. 

Finance must take the lead and be the foundation on which growth decisions are made. But how can you make this happen in practice?

In a recent CFO Connect event, Kolja Heskamp shared his experience in placing data at the heart of strategy for hundreds of growing businesses. Watch the full video below, and get nine key takeaways in this article. 

About the expert

Kolja Heskamp is a Founding & Managing Partner at torq.partners. Focusing exclusively on growing startups, torq.partners has helped more than 500 clients raise more than €750 million in capital. The team also works with VCs to conduct due diligence, and has accompanied two IPOs. Kolja’s previous roles include Interim CFO at Outfittery, Head of Finance & BI at Thermondo and Interim Director of Finance at infarm. His focus is on scaling finance, structured debt offerings, working capital management, and crisis management.

Data challenges in growing businesses

A lot of small startups don’t see the problem with finding good data and using it to make decisions. When there are only a few people in the room, information flows freely and decisions can be made in real time. 

But as Kolja shows, by the time you have even 10 team members, there are up to 45 individual lines of communication. 

Appropriate communication is key, and can get in the way before most companies even start thinking about needing data. 

The other issue is resourcing. And that’s a hard challenge to overcome. “Cash and the resulting runway is ultimately the limiting factor. But if you want a chance at being a company that reaches an exit or even an IPO, it will require an investment in data.”

As we’ll see, success relies largely on the intentions you set and your ability to follow through on these consistently. Even where time and money are in short supply. 

9 tips to create a data-driven culture for strategic decision making

Kolja’s presentation is a must watch if you really want the full detail around building a data infrastructure. Here are just nine of many nuggets of wisdom he shared. 

1. Set clear intentions

Being “data driven” has become so common a catchphrase that in many cases it’s useless. Kolja is adamant that a data infrastructure in itself isn’t the goal — empowering smart decision making is. 

You can’t take a classic project management approach to this. Because, whereas most projects have a clear end date, “this is not something that ever stops. Empowerment is a full time job. And you’ll have to do it from day one until the day you exit.”

How you gather, maintain, and (most importantly) use data must eventually be embedded in the company culture. “[Data management] doesn’t lie with one person. It really has to spread throughout the organization.”

And even if that takes years, it’s important to acknowledge and mentally prepare for that today. 

2. Create a common language

“Before people can start talking about data, you have to have a discussion about definitions first. This is potentially the biggest issue we encounter in growing organizations.” Every company has its own understanding of what seem like robust KPIs — customer acquisition cost, for example. Kolja says that this is just as often true within companies.

“Build a KPI booklet. Build a definition guide which tells you where data should come from. These things have to be universally true.” This is especially useful when the company is growing, people are coming and going, and each individual brings their own understanding of the business. 

And this will always be a living document. If you find a new definition or way to measure success, simply add it to the lexicon. 

A few keys:

• Use clear naming and definitions.

• Separate “manageable drivers” from “overview KPIs.” The former should be actionable, while the latter help you paint the picture.

• Have a hierarchy of importance. Some data is simply more valuable than others. 

3. Ensure you have data when you need it

Time is a critical factor in strategy. Strategic decisions are most effective when they meet a specific opportunity, need, or crisis. Which means the richest data trove is no use if you don’t have it when you need it. “Without timely data, you’re done for.”

In most companies, it’s the month-end close process that lets you down. “If you have a monthly closing process that gives you the numbers a month and a half after the fact, that needs to be fixed. If you can’t provide data in a timely and attributed manner, it simply won’t matter. Things will have already moved along too much for you to have any impact.” 

Finance teams don’t need any reminding just how slow and painful the close can be. But for Kolja, “finance needs to do its homework. Timely data is your responsibility.”

It’s worth the energy and investment to fix the hurdles in your closing process. You simply must have prompt and available data.

4. Assign ownership & responsibilities

You also need to decide who is in charge of specific KPIs, and what power they have to actually manage them. That goes beyond simply monitoring and reporting, but actually helping steer the strategy. 

“You can’t put someone in charge of EBITDA but tell them they can’t have input into hiring, pricing, or marketing spend. That just doesn’t work.”

You need to “develop a sense of trust” in your process and the people assigned to each metric. And the finance team is often best positioned to own these metrics. 

5. Position finance as a “sparring partner,” not a housekeeper

The data you rely on flows through finance. But too many companies see finance as data operators, rather than owners.

“We often see that finance is a housekeeping unit. You collect the data then just hand it over to your accountants, project managers, and business leaders. This removes the finance function from the business, in a way.”

“If you want to become truly data driven, you need to ask how finance is positioned within your company. I want to see finance and information gathering at the center of the business. You should become the sparring partner for other business units.” 

Eventually this leads to business partnering, with finance knowledge embedded in other teams. But until that point, the finance team still needs to have a seat at the center of strategic decision making. 

“This takes more than doing a lot of convincing. It’s about how you in finance live your role and show your value to management and the company. And if you start early, it’ll be a lot less effort.”

6. Find a working cadence

Startup founders and executives often fall into micromanagement when they feel they’re losing grip on data. In practice, this means asking for too many metrics too often, and not giving people time to analyze. And typically, it’s too early to really see results.

For Kolja, this is a serious red flag. “We’re not going to look at the data every single day and make rapid changes. If there’s the smallest dip, we won’t just kill a project.”

There’s a time and place — and a rhythm — for data-driven decision making. Concretely, KPI updates and strategy meetings must be separate. Resist the urge to make on-the-spot decisions based on the latest results or or projections.

“Give people data ahead of time, and give them time to interpret it. You can’t put people on the spot and expect them to make choices live. That might seem like the startup culture, but it’s not going to work in a growing business.”

And once you can separate (and limit) strategy discussions from day-to-day operations, “that frees your mind.”

7. Don’t obsess over tools

When entrepreneurs have a goal or see a problem, they tend to look for the best tools to solve it. When you see a nail, you look for a hammer. But no one tool helps you create a data-driven culture or embed it in your strategic decision making. 

“It’s ultimately a question of mindset and processes,” says Kolja, “and how you involve people. Eventually tools will become a factor, but there are plenty of free tools that will serve you for years.”

And why stress over software when you know you’ll change or outgrow it soon enough? “Startups should look at software infrastructure as a puzzle with moving pieces. The software you’re using now might be obsolete in 12 months anyway.”

But if he had to recommend something, it would be a dashboard or business intelligence piece that communicates data to the business. 

“A good BI tool like Tableau can stay constant when all the other tools are changing. Something universal — even if it’s not the sexiest tool in the world — helps give a sense of consistency.”

8. Get hands on, then give the power away

Do you need to have a dedicated person to build your data infrastructure and culture — someone with specific data expertise who’s done this before? Most often, you don’t. 

In Kolja’s experience, it’s almost always better to “start yourself. Understand what is happening.” Once you have a good understanding, have done the KPI mapping, and maintaining that mapping is becoming overwhelming, then you can create this role. 

“Eventually we want to move towards business partnering. And you’ll have to give control over specific KPIs and processes away. That might mean that, within the operations team you have a dedicated ‘operations controller,’ ensuring data is correct and liaising back with the finance team and business leaders.”

Building up your data infrastructure to the point where it can be dispersed via business partners takes time. In the beginning, it’s far more important to define metrics and set intentions yourself as the finance leader.

9. Accept that “gut feeling” decisions still have a place

The final piece of advice is to acknowledge that not every business decision can be based on data. And resisting this fact too strongly actively harms growing businesses. 

“Having an obsession with being data driven — specifically in early stages — is going to be the death of the business. Every organization needs to take ‘leaps of faith.’ Just be honest about whether you’re relying on data or making gut decisions.”

Make a simple distinction between “performance” and “growth” engines in your company. Performance levers should be well defined and trackable, and you can make investment decisions based on data. Growth levers or projects are typically new projects or investments for which you don’t have all the data you’d like. Here, you follow your intuition to find out whether they will eventually become performance levers.

As long as your gut decisions stay away from the performance engine, there’s no problem.