What Data is Important to my Business?

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If you are trying to understand what data is important to collect and analyze for your business, then you are probably on the right track. Let's try to answer this question indirectly by understanding the ultimate goals with utilizing data for decision-making. Once you understand these goals, you can look at the business metrics for each and identify areas of improvement that are important to you.

What are you trying to achieve by utilizing data driven decisions?

• Increase Revenue
• Maximize Profitability
• Reduce Risk

As a business owner, you have already been dealing with various business metrics, as they relate to these 3 goals. However, you may not have realized that many of them are actually data driven.

It would logically follow that all business metrics can be classified into 3 categories: Revenue metrics, profitability metrics, and risk metrics. To help distinguish for a particular metric, think of what part of the business depends on this information.

Revenue metrics: relate to sales and marketing. Therefore they are outward facing. They tell us something about how well or badly the company is marketing and selling its products or services. 

For example: On the sales side, you will want to know how many units of each product were sold over a given time interval and how this compares to the same time interval last year and the year before. You will want to look at sales by region, by product and by new versus repeat customers. You will want to know about the potential future customers, based on typical customers that shop for your products or services. On the marketing side, you will will want to know how effective you marketing campaigns may be. How many people have seen a particular advertisement or email marketing piece or mail offer? What percentage have responded, etc? 

Profitability metrics: relate to efficiency, logistics, production, and operations. They tell us about the efficient of processed by which the company creates and delivers its products and services to customers.

For example: How much cash is tied up in the form of unsold inventory; how much production is unsaleable due to spoilage or wastage; how often the company is unable to meet urgent customer requests and loses sales because of insufficient production or inventory; percentage of products rejected as defective; how much is spent on variable costs, raw materials and labour, per unit product.

Risk metrics: relate to risk management and reputation. These have to do with tracking and where possible reducing the potential dangers a company faces.

For example: What percent of net cash flow is the company spending each month to service its debt; how many months can the company survive at the present burn rate; what is the current churn rate - the rate at which new clients drop off within a set period of time.

Note that these are all important metrics. A company with large and rapidly increasing revenues may still fail to be profitable if it cannot deliver its offerings efficiently. A company with high efficiency may still fail if it is not allocating its cash properly and the debt ratio is too high.

What you need to do

Now that you have a more clear classification between the types of metrics, you will be able to identify the area(s) of focus. Identifying the required metrics is a good start to determining data you will actually need to achieve the revenue growth, efficiency and risk goals. We will take a deeper dive into the metric types in future blogs. 

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Is Data Important for Your Small Business?

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I’m sure you have been hearing Big Data buzz for the last while now. With increasing volume and variety of data available, it is easy to see that analysis of large datasets can uncover patterns, linkages and correlations that may be useful. It’s true, everyone is doing it.

It is for a good reason too; there is much value in it. Let’s take a look at the case of connected cities. Barcelona has been labelled as “The Most Wired City in the World” by Fortune magazine. Just look at a sample list of some of the technologies that have been implemented here:

• Lamp posts with sensors & Wi-Fi, capable of measuring noise, traffic, pollution, crowd levels AND the number of selfies posted nearby
• Digital chips on garbage containers to indicate when they fill up
• Sensors under each parking spot

Of course, smart cities are just barely off the ground. The potential is very large in increasing efficiency and preventive measures. The energy and human labour cost savings are estimated to be about $17 Billion by 2019.

Much of the newly opened up potential stems from the ability to gather data and make decisions based on the analyzed information. Take a moment to think how having this data would be able to assist from an oversight perspective. Police can be dispatched based on increased noise levels in the area; traffic lights can learn the current traffic levels and any unusual slow-downs caused by accidents and adjust the timing to aid movement. These are just examples of simple intuitive solutions.

Let’s take this a step further. Picture Barcelona, but below the surface. There are underground fiber optic cables, separately run by each telecommunication company, each running below their full capacity. With varying demand, there are times when these are using only 5% of their capacity. Lastly, consider the fact companies don’t have an insight into what capacity others are running. However, now the solution is to knit the solutions into one system to allow monitoring of the capacity from each company and efficient re-routing of capacity as per the business need. This results in less underground work (each company will not need to dig and install a new cable), less costs for the company and increased monitoring of the demand.

We can go on and on about the capabilities of having various data for profit and efficiency purposes. Barcelona Football Club’s new stadium (expected completion year: 2021) is expected to not have any fences and provide Wi-Fi. Companies will be able to get and analyze data about people who are there and link fans directly to merchandise, based on their preferences. Well, you get the point.

Useful data, however, is not only Big Data. Majority of smaller businesses have data that can be used for similar benefits, at a smaller scale. If you are a business owner, you can also find the value in data analysis.

Why are some businesses not doing anything with their data?

It is possible that some business owners are not sure what insights would be useful to understand, since the focus of their work is day-to-day activities. It’s fair, running your business is tough enough and it is easy to blur the long-term picture.

Another reason could be is that some business owners know what insights they would like to see and understand but they lack the data; they don’t know how to properly gather, organize and put the processes in place for tracking. It’s true, data need to be gathered before analysis can be done.

Another possibility is that some business owners also know what insights they would like to see but don’t know how to analyze the data they have on hand.

Realizing the importance and the potential value that data insights can bring to your business is the first step to maturity. Our team will be posting piece-by-piece framework of the data maturity model developer here at Surge Analytics.

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