BUSINESSES make use of data every day in one way or another. Whether in the form of numbers on a spreadsheet, analytics on a dashboard or a pile of customer order forms, all of these contain data points we can use to better understand what is going on in a company. What varies across businesses is how data is utilized to come up with meaningful insights and to influence decisions.
Data is a powerful tool. When used appropriately, it can unlock opportunities to help organizations operate more efficiently, helping businesses grow and become more profitable.
Data can give us an objective understanding of business activity. We can answer questions like:
· “How much sales did we generate today?” If we want to go a level deeper, we can ask “How much can be attributed to new customers and how much is from repeat customers?” Answering this will not only show how much revenue is generated but also tell us which cohort of customers is bringing in more sales.
· “How much costs did the business incur in September 2021? Was it greater or less than what we spent in August 2021?” Knowing this will enable us to track company expenditures and compare how these varied during two periods in time. It will also help us guard against going over budget in business expenses.
Data allows us to accurately answer or at least give directionally correct estimates to organizational questions. It gives us operational oversight on the business and allows us to monitor key metrics like revenue, cost and profit.
Data can be used to identify patterns and trends in customer behavior that the business can potentially leverage. We can answer questions like:
· “Do more customers buy during the summer or during the holiday season?” Being able to answer this will allow us to observe customer purchasing patterns and determine if there is any seasonality. This can guide inventory planning and also serve as a basis of when to offer special promotions or discounts.
· “What products are usually purchased together? Should we create product bundles to boost sales?” Understanding which products are usually purchased together will not only give us a better understanding of buyer behavior but also help us make strategic decisions around product bundling and pricing to further drive profitability.
Data can provide actionable insights that will enable strategic decision-making within the business. This can give any company an edge over competitors.
The power of data is indisputable. However, simply having the data is not enough. Understanding how to use data to make sound business decisions and build sustainable strategies is what sets most companies apart.
For example, Company A might set quarterly objectives and understand what levers can be pulled to achieve those objectives. They can track underlying data points and check on a weekly basis how they are performing against the set goal. This type of tracking will help the company scale or pivot strategies, depending on what story the data tells.
Company B, meanwhile, might set quarterly objectives and establish operating plans to achieve those objectives, after which they focus on execution and check back in three months on whether the goal was achieved.
Between the two, Company A is more likely to achieve its quarterly goals. Throughout the quarter, it will be able to get a good understanding of what is going on in the business. It will immediately see if performance is good, which will indicate that it should continue what it is doing. If performance is unsatisfactory, this would indicate that it might need to revisit its approach.
By having a good grasp of data, we are able to minimize any risk by setting up constant feedback loops across the organization. As a result, we are able to set ourselves up for success in terms of achieving business goals, both in the present and the future.
Mariella Arrastia is a data strategist in First Circle. She enjoys using data to help make everyday business decisions and shape long term organizational strategy. To get in touch with Mariella, email her at firstname.lastname@example.org.