Economist and data analyst, David Maher, director of Melbourne-based company Right Brain Insights, shares his thoughts on how cloud software is a valuable tool for companies to understand and use critical business data. This article is the last in a 5-part series.
Congratulations! If you’re reading this post, your enterprise is probably on its way to becoming data-driven. Put your feet up and crack a cold one.
No – wait!
So you have all of this data. Now what?
The answer to this is simple - focus on the story.
Use your data through your intelligence engine, relative to your goals, to spot what is working and what is not working to navigate your enterprise.
Of course, forces such as economic conditions, unruly staff, customers and suppliers, and everyday spot fires will pop up, but it is now about understanding simply where you are, have been, and could end up, all relative to where you want to be.
That means, making decisions about what to do, and (if not more importantly) what not to do.
Focus on the story to inform these decisions. Why? Here are 4 reasons.
1. Gut-feel does have a place
I pity the fool that forgets this. Data can’t tell you everything. You’ll want it to, but like a good teacher or parent, it isn’t going to hold your hand. Especially when it comes to human relationships, use your data, but just not in isolation.
2. Don’t become caught up in noise
The systems and processes you’ll be executing now will generate mountains of data over time. Some will be useful, but most will be noise.
Focus on the big stuff first. For example, how much income do I need per month, at what margin, in order to maintain a positive cash flow? Questions like this impact so many other areas of an enterprise, from culture to how long you take to pay people.
You can inform a question like that with just a few simple data points: actual and budgeted income, bank balance, actual and budgeted gross margin, actual and budgeted operational expenses, and having a fair idea of what your balance sheet movements will be – asset purchases, tax bills, super payments etc… Point being, a change in something like one data point – say gross margin – impacts the answer drastically.
3. Communicate and drive performance
No true business is built on one person. You need people to lift you up. They need to know what to do, when to do it, what is good, what is bad, and why? Having simple numbers, communicated in a clear story to them, helps them stay on track.
For instance, do you have a cash flow problem? You may select to tell your team what is driving such a problem, rather than focusing on the problem per se. Don’t say ‘We’re out of cash in 90 days’. Rather, you could approach it with something like: ‘Team, we have an issue coming up. However we can solve it. If we can drive sales of $X at a margin of Y% we’ll sail right past it. Let’s make it happen’.
4. Don’t become caught up in nail-biting accuracy
This is especially pertinent when forecasting. If you are doing a forecast, the only thing you can guarantee is that it will be wrong. It’ll just be to what degree. Sure, if you build airplanes accuracy matters. A lot! But with informing decisions, especially high-level ones, focus on key trends and patterns.
For instance, are your expenses growing month-on-month at a faster rate than income. If so, your margins WILL be squeezed, cash levels will drop, and sooner or later something will need to change. The point is, by monitoring that single difference between two growth rates you can understand the story. One number can indeed tell you a lot.
Do you want to learn more about how to use data to drive successful business decisions? Sign up for the up-coming webinar by clicking below!