Data-driven vs. data-informed decision-making: which should your product team use?

You may have heard the term ‘data-driven’ to describe teams guided by data. But being data-driven doesn’t always lead you down the path that’s best for your customers—or business.

Many customer-centric teams (like ours!) prefer to take a data-informed approach to making decisions and building products, allowing you to zoom out and focus on the needs of the customer from multiple angles to create a better user experience.

Read on to learn what it means to be data-informed, how it’s different from being data-driven (and why that matters), and our top tips for pivoting to a data-informed approach that puts your customers first.

What’s the difference between being data-driven and data-informed (and why does it matter)?

The difference between being data-driven and data-informed is a subtle but important one:

• Data-driven means making decisions based solely on data

• Data-informed means using data as one of several inputs, alongside factors like your company’s objectives and key results (OKRs) and employee expertise, in decision-making

“There’s often the misconception that the two are the same and many people incorrectly use them interchangeably,” says Andrei Beno, Director of Product at Hotjar. 

So which is better? In a customer-centric culture, teams should strive to be data-informed, not data-driven. Here’s why.

1. The types of data you have matter

For many, the term ‘data’ implies quantitative data (i.e. numbers). But customer-focused teams know that qualitative data (i.e. non-numerical data that captures how users experience and feel about your site or product) is equally as important.

Being data-driven often means focusing on hard numbers at the expense of other types of insights, but being data-informed means knowing that it isn’t a case of qualitative vs quantitative data—it’s both, working together to create the best product for your customers.

2. You’re only as strong as the quality of your data

More data isn’t always better. You can have all the data in the world—but if it’s not accurate or doesn’t address the right questions, it’s not going to help you make the types of decisions you need to get meaningful results. 

Being data-informed means you understand which data is the most important, and that you prioritize quality data to underpin your business decisions.

3. Human judgment and context are—and always will be—essential

A key principle of being data-informed is that data should inform decisions, not dictate them. This is where things like alignment with strategic goals—and your company values—come into play. 

For example, your raw data could indicate that a group of users really want a specific new feature, but when you look into the user behavior behind it, you might realize that

• This feature doesn’t align with company goals or the overall roadmap for your product

• These users aren’t part of your ideal customer profile so it doesn’t make strategic sense to prioritize a feature for this audience above others

• Customers could get the results they want from an existing feature if they had better training and content to help with product adoption

This additional context is crucial for product prioritization, ensuring your development resources are spent most efficiently for your team, business, and customers. In this case, the knowledge, context, and expertise your team brings to the table are all just as crucial as your hard data.

4. Data has limitations

As Andrei reminds us:

For example, think about BlackBerry. “If we were in 2007–2008 and were looking at the data in terms of consumer trends regarding mobile phones, we would have concluded that BlackBerry devices and physical keyboards were the future of mobile,” Andrei says.

Spoiler alert: they weren’t. Innovative touchscreen devices quickly took over. The large blind spot in data is what consumers actually wanted—which data alone wouldn’t have predicted. This kind of innovation can only come from going beyond the data and understanding your customers so deeply that you know what they want before they do.

6 ways to use data for more impactful, customer-centric decision-making

So how can teams take a data-informed approach? Here are six powerful ways to maximize your data’s impact. 

1. Invest in data infrastructure and empower everyone to use it

One of the biggest challenges of a data-informed approach is data quality and availability —that is, ensuring your data is accurate, up to date, and accessible.

Investing in the necessary tools and processes to effectively collect, store, and analyze data pays dividends. Having this infrastructure in place means you can rely on your data and use it confidently.

But this isn’t just about using the right technology: you also need to democratize access to your data and promote data literacy throughout your company. To do this, you should

• Give everyone access to data so they can easily find relevant insights

• Provide training or resources to help people interpret it

• Encourage people to use self-serve analyses to answer their questions themselves using data

2. Combine data with context

“Striking the right balance between data-driven decisions and the expertise and intuition of employees is hard, but it’s where the magic happens and how the best product teams stay ahead,” says Andrei.

This doesn’t mean giving in to biases. But to remain innovative, teams need to be able to rely on data and follow their conviction. Encourage employees to consider data alongside their domain expertise and the broader context of the business, by asking questions like

• Do product managers or team members have personal experiences they can share from a similar project? 

• What learnings from previous product launches should be taken into consideration? 

• What game-changing industry trends (like AI) do teams need to be aware of when building their roadmap?

3. Use segmentation and personalization

Once you have your data, make the most of it. Use segmentation to understand your audience more effectively, then leverage these insights to create personalized experiences and marketing campaigns.

For example, a B2C ecommerce company could analyze customer purchase history to recommend products tailored to individual preferences.

Or a B2B software company that discovers buyers who use a certain feature are stickier (i.e. less likely to churn) could create more tailored onboarding journeys and help content to increase adoption.

By using your data in targeted, strategic ways, you uncover more opportunities to connect with your customers and build long-term relationships.

4. Implement A/B testing

A/B testing (also known as split testing) is a research method used to test two versions of a page to see which one performs better. It’s an easy way to put your hypotheses into action and validate them with real users before rolling out major changes. 

Use A/B testing to make data-informed decisions about web pages, new features, products, or designs. Then, analyze user behavior and conversion rates from your tests to optimize your strategies even further.

5. Encourage cross-functional collaboration

Different teams engage with your customers at different points in their journey, meaning they all have unique insights. But those insights are no good if they’re siloed.

Instead, encourage customer-facing departments like marketing, sales, and customer support to share their unique findings. This leads to a more holistic view of your customers and their needs throughout the entire journey, instead of just focusing on one small step.

6. Create a feedback loop for continuous improvement

Being data-informed is an ongoing process. As you make these data-informed decisions, you generate new data points about what works and what doesn’t.

Take time to evaluate your decisions based on the outcomes and adjust your approach accordingly. This empowers you to continuously refine your strategy based on data-driven insights and feedback, and course-correct when needed as new data or learnings surface.

Adopt a data-informed approach to make better business decisions and improve the customer experience

Being data-informed—not data-driven—enables you to make more customer-focused decisions and stay innovative. 

The good news is you don’t need to be a data scientist to start taking a data-informed approach. By considering your data alongside other key factors, like your company strategy, metrics, and your team’s unique strengths, you ensure you always make the best choices for your business and customers—and retain your competitive advantage.