The Why and How of Using Data to Grow
Many businesses have heard about data and analytics and maybe they’ve heard it can benefit their business. Naturally, we think this is true in most cases (we are, after all, a business analytics consultancy!).
However, we find that there can be a gap between knowing that it can be beneficial and actually bringing it into a business.
Data and analytics sits outside the core competency for most small-to-midsize businesses. This leaves them wondering - Should I even bother with analytics? How can analytics drive value specifically for my business? If I want to use it, how do I start?
Our specialty is the intersection of business and analytics. We speak the language of the businesses while also having the technical chops to get into the data.
Below, we’ll share our perspective on the why and how of adding value to your business through data & analytics.
Why Use Analytics?
Simply put, the right data and analytics surfaces relevant and impactful information for important decisions that otherwise wouldn’t be known to the business.
Consider a couple scenarios that we see in businesses:
(1) The business is at a point where leadership can’t be intimately involved in the day-to-day. We see businesses grow on the intuition and hard work of its employees. Eventually, a business reaches a stage of maturity where it’s impossible to keep up with the information generated in the business or to look for patterns across it. How do you generate insights beyond top-line revenue numbers?
(2) You’re considering an acquisition or organic growth in an existing or new market. You’re going to spend substantial money on an acquisition or investing for growth, and if you’re a small or midsize business, you may be taking significant risk by entering a new market, trading off other opportunities to make the acquisition, or making a big bet on the growth of the business. How do you get more conviction on whether this is right for your business?
(3) The business operates in a space that generates high customer volume. Data and analytics is about answering questions at scale and recognizing patterns you didn’t know existed in the business. You can get to know a customer well, but can you synthesize information about 20,000 customer interactions over 4 years? It’s not about replacing knowledge, it’s about adding perspective and insights that, combined with the knowledge of the people in the company, drives better outcomes.
Let’s be clear. Analytics isn’t always perfect. It’s not foolproof. There’s no guarantee that a business will be successful because they use analytics. But, nothing in business is guaranteed. It’s about raising the likelihood of success for a business through increasing your company’s understanding of operations, opportunity, and customer activity.
The Foundation of Analytics Value
Impactful analytics always starts with (1) having a well-formed question and (2) having reliable available data to answer that question.
Let’s talk about both.
We spend significant time at the beginning of an engagement understanding the problem a client is trying to solve and the action or knowledge that will result from the answer.
Why?
A poorly formed question inevitably leads to a disconnect between the value of the work and the impact to the business.
If we’re not clear on what we want to answer, how can we answer it? If we don’t know what we’ll do with the information, how will we get value from the work?
This doesn’t suggest that every question needs to have an actionable answer from the start - part of the value of analytics is going down a road and not always knowing where it leads - but any work should in some way tie back to a business objective, strategic question, or important part of the business.
We find a well-formed question:
Has a meaningful connection to a part of the business - revenue, cost, customers, growth, acquisition, strategy, etc.
Doesn’t have a clear answer today - if you already know the answer, it may not make sense to go through an analytics exercise.
Is measurable, quantifiable, or has some other means to introduce data to the question
With a well-formed question, we next look to the data available to answer the question. A good question without available data isn’t an analytics question - yet.
Data can either be (1) internal to the company or (2) externally sourced. Sometimes the best answers come from combining the two.
Internal data will be information inside the company like revenue, customer activities, or customer attributes. For example, if you do home deliveries, internal data could be the date of service, customer address, amount paid, service / product purchased, and any add-ons.
Data that’s available must also be accessible.
Data that is stuck in a system and can’t be extracted, on scanned pieces of paper, or otherwise inaccessible has little value and/or takes tremendous additional work to create value.
Companies that already have strong data infrastructure - even if they have not been doing anything with the data - have a tremendous advantage in being able to ask better questions and get to value faster with analytics.
External data is any data that doesn’t tie specifically to the company’s operations. This could include relevant market indicators, market size and demographics, location of competition, and more.
For example, when looking at growth markets, understanding market size (number of people, households, etc.) and market composition (household income, age distribution, etc.) can be valuable to ensure product-market fit.
Depending on the question a business is asking, either internal data, external data, or both may drive value. A good partner will help define the right questions to be asking of the data and determine what’s needed to best answer it.
How to Start
Getting off the ground can be the hardest part of many tasks, and adding data & analytics to your business is no different. For businesses that are thinking about analytics but don’t know where or how to start, we recommend:
Start by thinking about the question(s) you want answered
Have a high-level understanding of the internal data available today
Begin targeted and small in scope
Think about the questions
Just saying you want to be data-driven doesn’t get you anywhere. Start by identifying the areas of your business you want to know more about. Is it customer activity? Revenue trends? Market research? Acquisition intelligence?
What is the part of your business that has the least visibility today or would benefit most from knowing more about the operations or customer activity?
Understand the available data
You don’t need to know all the ins and outs of what’s available, but a basic understanding of what information is captured - and whether it’s accessible - gives a good head start to early discussions.
Many CRM, ERP, and POS systems have a way to extract information that has been inputted. Do yours? Do you have other systems where you capture information relevant to your business? If yes, what information is captured, and is there a way to pull it out of the system to be analyzed?
Begin targeted and small in scope
Start by asking one question. To quote a very overused phrase, what’s the low-hanging fruit? Where is there available data and high impact to the business to answer the question?
Starting too broad strains resources and sends people in too many directions. You want to start with strong, impactful wins for the business. We find that picking one important question and finding a way to answer it is better than trying to chart out a roadmap on how to bring analytics to every aspect of the business.
We also find that adding new information to the business through data & analytics can get team members excited, spark thoughts on where to go with the analysis next, and bring up new ideas. (Okay, maybe that’s a bit of wishful thinking to say others get excited about analytics too, but exposing new insights about the business does get some people excited).
All of this is possible by starting targeted and small to ask one question, answer it well, and see where the results take you next.
Navigating what it means to add data & analytics to a business - and actually doing it - is keeps many businesses from ever starting the process.
We step in to bridge the gap and connect data, analytics, and strategy for businesses. Think analytics might be able to benefit your business but don’t know where to start? Let’s talk!