One problem that small businesses share with their larger brethren is the classic “big data” problem. Simply put, it refers to the notion of “too much data coming in the door every day,” as phrased by the experts at Aberdeen Research. While there are insights to be drawn from all that data, most companies can barely collect it, let alone make sense of it. And operationally speaking, most small businesses simply “don’t know what they don’t know” when it comes to the core operation of their business.”
So, they look to business analytics to provide visibility and clarity.
As Aberdeen notes, “the effective use of business analytics can transform the culture of an organization and drive measurable performance improvements.” For small business, where “cash is king,” it is necessary to create a fast and efficient information flow to improve process efficiency and ultimately improve cash flow.
Aberdeen’s research, when looking for Key Performance Indicators (KPIs) and their results conveniently divides companies into “Leaders” and “Followers.” It shows that Leaders exhibited a 19% Year over Year cash growth versus just 1% for Followers. 87% of Leaders saw a decrease in cycle times (compared with 38% of Followers) and 64% were satisfied with the speed of delivery of information (versus 20% of Followers).
The obvious question: How did they do it? The short answer: organizational maturity – not in the sense of company longevity, but in the sense of culture and the firm’s need and desire to make decisions based on more than just gut feel. And of course, that’s where analytics comes into play.
Of Leader companies, over 70% focused on key indicators. That’s nearly twice the rate of Followers. So, for example, if profitability is the goal, consider tracking costs through the supply chain, examine your discount practices, analyze your high product customers or product lines, and track margin-eroding and perhaps unnecessary expenses. Whatever those KPI are that underpin that goal, track them. Not just by gut feel, mind you, but by actual data – the data you presumably hold in your accounting or ERP system.
It’s not enough to collect the data, you have to tease out, organize and analyze that data. And then, you have to act upon it!
There are tools by which to do this, including:
- Dashboards in the more modern ERP systems that can be customized to your KPIs
- Data management tools
- Data query, discovery and reporting tools (report writers, like Jet Reports, among others)
- Interactive drill-down charts and reports
And none of these even begin to explore the finer points of well-defined customizations to your systems that can help business owners quickly parse what’s important from what’s not, thereby giving their executive teams actionable decision support.
In our next and final post in this series, we’ll reprise the key takeaways from Aberdeen’s research, the “Recommended Actions” that your firm can take today to start moving away from gut-feel and into the realm of real, relevant, business analytics – the kind of stuff that will have you telling your business friends all about how you used Big Data to solve your small business problems!