INVESTING IN GOOD DATA PRACTICES
Most people understand the value of data in business. But how do you ensure you are investing your time and money to the point where you maximize your return on investment? Here are the top milestones a business may experience that should not be navigated without the use of data to ensure time and money are not wasted pursuing a direction that is not supported by evidence:
Unexplained changes - Let’s say sales have dropped and the reason is unknown. Data may help uncover what is contributing to that downturn. By organizing and turning your business data into actual sensical charts and graphs, you gain access to insights that may not have been evident before. And even if the data that is currently available does not help explain what has happened historically, you can ensure that moving forward, you collect the pertinent information and drastically decrease the chances of being blindsided in the future.
Planning for growth/scale - When a company grows and scales, there are so many variables that need to come into play to ensure the company will thrive. This includes: planning out staffing models and planning for hiring, understanding how financial resources need to be allocated, planning cash flows, strategizing release and pricing of new product lines, and maximizing operational efficiencies. None of these can be accomplished without good, clean and accurate data practices.
Coping with challenges - When times are tough, it is even more important for a company to operate at peak performance to conserve money and make it last. By analyzing data, you can find ways to decrease cash burn and formulate strategic shifts that may need to occur.
Desire to increase profitability - There are so many ways to attack a profitability problem in business. But, most methods require some investment of time, and you want to make sure you are getting the best return on that investment. So before you tackle the profitability problem, it is imperative that you have an understanding of what the most significant barriers to profitability are. Then, you can focus your efforts on starting with addressing those barriers that, once addressed and removed, will have the greatest impact on increasing overall profitability.
At crossroads with a big decision that needs to be made - By using data, you can gain a pretty good understanding of what your chances of success will be for each option as well as measuring and quantifying what you have to gain or lose. As an example, you can blindly decide that you want to add a new revenue stream and hope for the best. OR, you can dig into a little bit of data and gain a deeper understanding (i.e. maybe you have about a 20% chance of success if you decide to add this new revenue stream, and it will likely add an additional $50M in annual revenue for your company and the maximum investment would be $200K. That way, whether you decide to pursue the higher risk choice to take a chance at the payoff, or decide to explore other options, you have decided based on numbers, not just a gut feeling.
Piloting new solutions - Some businesses are more agile than others and thrive on an environment of innovation. These businesses will often pilot new products, new solutions to old problems, and experiment with new technologies and operational approaches. When embarking on a test and piloting new things, it is important to have a strong grasp on where the baseline data sits so you can clearly monitor the effects of experimentation on your business. Then you can also comprehensively evaluate the costs and implications of doing a complete roll-out of a new approach against the benefits and financial or operational gain.