When Data Makes the Difference

Over the years, we have been inundated with an increasing amount of data used in a number of ways to influence or to make arguments for one cause or another. We have become so used to hearing and seeing data that we think it has always been a part of our lives, when in actuality, the amount of data created and used is ever-increasing. The techniques for collecting and interpreting data are continually evolving, even as you read this article.

What is data?

In one line of thought, it is a record of past ‘transactions’ that are memorialized by amount, date or any other desired metric. These ‘points’ of information are used to extrapolate a possible future course if conditions remain the same, or the forecasts are modified depending on the weight of the modifying additions to the aggregated data.

Data comes in two forms: quantitative and qualitative. Quantitative data is data by the numbers – for example; how many in a group, what percentage, or how large is the sum of the groups. Qualitative data refers to how ’good’ something is, how well a product fills the need, what the client reactions are, etc. Both types of data are important to have in hand to make informed decisions.

One might think that data collection and usage is exclusively for the large corporations. Nothing could be farther from the truth. We live in a world where data is all around us, and we need to learn how to collect, produce, and synthesize it in order to fully understand the value that working with data can provide to smaller businesses as well.

Where does data come from?

There are two principal sources of data – internally to the company and externally from the company.

Internal data is compiled on a routine basis, in a consistent manner to avoid any bias, distortion or error introduced into the data sets. This data is anything that the business determines is needed to be collected, compiled and used in the future. An example here might be financial statements.

External data is any data that are collected through trade associations, the U.S. Government, third-party services, or other source outside the business. An example here might be Amazon Prime Account data.

What use is this to me?

Threat Avoidance:

Recognition that we are immersed in a World of data that is collected and used by others to gain market advantage should make the case by itself that we need to be proactive in understanding and using this resource for our company’s benefit, if we want to remain competitive.

On the Positive Side:

Maintaining the ability to determine your company’s future is a great reason to work with data through selecting the pertinent facts to make the case for your customers and potential markets to use your services. It’s important to own your business’s performance results and to use data to build the story of your value to your customers. Correct data usage will improve your company and its results.

Where can data be used?

Where and how you use data in your operations is a preference based on an understanding of what data you need to have, and for what intended purpose you have for using it. This is influenced by your technical capabilities, your market demands, your industry structure, your sales reach and capabilities, and your interest in growing your business, among a whole host of other reasons.

Here are a few suggestions:

Marketing

• Who your customers are, where they live and how much they earn and spend
• Knowing customer conversion rates through the sales funnel
• Creating new revenue streams
• Improving customer experiences

Finance

• Cost accounting through the use of your own accumulated data
• Benchmarking your company’s performance against peers
• Monitoring gross markups and profitability
• Pinpointing areas in internal operations that create value and areas that need improvement

Operations

• Machinery life and maintenance schedules
• Monitoring quality control
• Benchmarking your processes against your competitors
• Inventory management

Contracting

• Learning how to survive in a competitive industry

Decision-making

• Confirmations/denials of the effectiveness of a course of action
• Make / build decisions
• Understanding your capital requirements in advance of need

A couple places to start to familiarize yourself with the data that surrounds your business is to produce accurate financial statements on a monthly basis and learn how to read them. Use the information to make informed decisions to guide your business activities. 

A second idea is to access market research reports, specifically industry reports, to inform you of how your industry is structured, what stage of growth your industry is in, and where potential areas for expansion might be. 

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Marshall Doak is the Director of the Southern Oregon University Small Business Development Center and a supporter of innovation and the community that forms around innovation in the economy. In private practice as owner of Managed Successions, LLC, he develops and manages projects for public and private organizations for specific goal achievement success, including advising businesses wanting to transfer ownership and retain the value created over time. He can be reached through: mdoak06@gmail.com or 541-646-4126.

Photo by Mika Baumeister on Unsplash