Becoming a Data-Driven Organization

This article originally appeared in the Loftis Consulting Blog

The unrelenting pace of 21^st century commerce has resulted in a flood of data that threatens to overwhelm small businesses.  Every company generates a vast quantity of data on sales, marketing, production, ordering, and every aspect of operations.  Most companies are doing nothing with this data, and the failure to make use of it is expanding what is for many small businesses their biggest competitive disadvantage.

Today it is essential for companies to know themselves better than they ever have before.  Management should identify a limited number of key performance indicators (KPIs) that capture the performance of the company, and focus on rigorously tracking those KPIs.  This data-driven approach can initially seem onerous, but the superior insight it provides makes it well worth any initial inconvenience.

Our clients have reaped significant benefits from efforts to shift their organizations to a data-driven mode.  Those benefits include:

• Early Warning Capability: Poor financial performance is often not the first but the last sign of a problem.  Regular reporting of KPIs can highlight trouble before it impacts the bottom line.
• Opportunities: Nothing bolsters the case for growth opportunities like data.  Website traffic and keyword search data is valuable market intelligence and analysis of that information has helped our clients identify unvoiced client needs and allowed them to reap the sales benefits of meeting those needs.
• Profitability: Analysis of raw sales data has permitted Gross margin analyses by customer, region and salesperson in order to identify unattractive customers, unprofitable regions and under-performing salespeople.

We are in a new world, a world driven by data.  With every aspect of a company’s operations producing data, the insights that can be gleaned from capturing, analyzing and acting on that data are increasingly becoming a valuable asset.  Conversely, failure to make use of the data your company generates will hinder profitability, inhibit your ability to react to changes as quickly as competitors and increase the likelihood that growth opportunities will be missed.

About the Author

David Johnson (@TurnaroundDavid) is Founder and Managing Partner of Abraxas Group, a boutique advisory firm focused on providing transformational leadership to middle market companies in transition.  Over the course of his career David has served as financial advisor and interim executive to dozens of middle market companies.  David is also a recognized thought leader on the topics of business transformation, change management, interim leadership, restructuring, turnaround, and value creation.  He can be contacted at: david@abraxasgp.com.