In a four-part article series, we’ll look at the role data plays in improving your understanding of your business, customers, marketing and interaction strategy. Think of it like a first date with your data; you may learn something new or it may be revisiting existing knowledge, but without a first date you won’t get a second.
For some, part one will seem extremely rudimentary, even obvious, but there are existing businesses that have a passion for what they do without completing these kinds of business data exercises and so, part one is for them.
Part 1: The certainty trinity – death, taxes and…more data
The oft-said (even sung) Benjamin Franklin quote goes ‘nothing is certain but death and taxes’. But really it should be a certainty trinity – death, taxes and… more data.
No matter what industry, buyer, product or service, the amount of data available today is exponentially greater than two years ago. The technology analyst firm, IDC, places today’s digital data world at 2.7 zettabytes, growing at 48 percent. There are more ways to gather more data about your customers and business than ever before but without some level of analysis, summary and trending it’s just more and more zeros and ones.
Top pressures driving business analytics for SMBs
Source: Aberdeen Group, “The Analytical SMB: More Data, More Users, Less Time”, November 2011
But it’s not just SMBs under this pressure, the biggest challenge for larger corporates (<1 billion in revenues) as reported by PwC in its 4th Annual Digital IQ Survey 2012 was the ‘inability to gather, understand and act on all the data about our customers’ at 69 percent.
Aberdeen research found SMBs with best in class business analytics achieved:
- 24 percent YOY increase in new customer accounts sold, compared to 12-11 percent for others
- 16 percent YOY reduction in total operating costs, compared to 12-9 percent for others
- 18 percent YOY increase in operating cashflow, compared to 6-5 percent for others
- 94 percent of critical information available within the decision window, compared to 31 percent for laggard SMBs
- just 8 days to integrate new data sources compared to over 4 months (133 days) for laggards – and only 5 percent are satisfied with the available data
So if you’ll make better decisions, reduce costs, sell more and improve cashflow, it’s a no-brainer that you should at least be on speaking terms with the data you have available (and we’re not talking just revenue figures)
Building better business insight
While the analysis and analytics market is chock full of software and services that helps turn data into insights useful for your business, you might want to set aside some time and cuddle up with a spreadsheet first.
You don’t need to be a spreadsheet whiz but you will need to corral the figures and feed them into charts to more easily see trends and deviations from the norm. Seeing patterns in the data is the key to deriving valuable insights. Start with the most granular data – you can always summarise but you can’t dig into the data if there’s no data there.
Most businesses would have a general understanding of topline figures and trends from their accountancy system. One of the benefits of data-driven insight is you can test your instinct or gut-feel with real-world data. Take that gut-feel and manipulate the data to test what is actually happening.
What’s the monthly revenue this year versus last year and the year before that? (for some services industries like hairdressing, clients served each month can be a good indicator as each staff member has a physical service constraint). Chart it. Now add a trend line, hopefully it’s going up. Does any single month deviate dramatically above or below the trend line? Don’t be tempted to guess why, dig into the data for that month – what elements of your business were different, or in different combination, to other months? If you can isolate it you might be able to replicate the positive effects or squash the negative ones in the future.
Take an assumption about your business – for example: ‘the busiest days are Tuesdays and that’s when we make most of our revenue for the week’. Use the data to test the assumption. If you’re pivot-table-able use that to summarise units sold and revenue on each day of the week (non pivot table people can use sorting and summary – it takes longer though) Does Tuesday stand out? Now calculate average revenue per unit for each day. Is Tuesday still winning? If not, you’ll need to investigate why and then see if knowing that gives you an idea to boost sales on the other days.
Eventually you’ll get to the point where spreadsheets don’t cut it anymore – you want more insight, faster with less work. That’s when talking to the various analytics and business intelligence vendors makes sense and by this stage you’ll have a good idea of what makes sense for your business and be able to ask the right questions.
And if you’ve got to this point mumbling ‘well, I already do all that and more’, give yourself a pat on the back, sip your coffee and smugly wait for the next installment – data and understanding your customer.