Is Your Business On The Path To Making Incremental Profits By Harnessing Data?
- March 5, 2024
- Posted by: FOYI
- Category: Blog
Let’s say you found oil reserves in your backyard. Do you instantly make money by selling it on the streets? No. There is a long process from Oil to profits. You need to move the oil to a refinery in order to extract the fuel that is ready to be consumed by automobiles. This fuel then needs to be transported to the a distribution center. It then needs to go to a fuel station in a residential area where it needs to be stored. There needs to be a pump that makes it easy for consumers to fill their vehicles. A meter to measure the amount of fuel consumed and a process to source that funds from the consumer.
The actual process is most likely, more complex and longer than what is detailed above. The argument that I am making is that having oil in itself means little, a process to make it bring revenue into your account is needed.
Along similar lines, data in itself will not make your business any more or any less profitable. There is a path that leads you from data to incremental profitability. This article lays out the milestones along this path and also helps you figure out whereabouts your are at along this path.
Broadly speaking, the milestones along that path are as follows. Each of these milestones by themselves are very big areas of technology and in large enterprises, they are large departments in themselves.
Milestones between data and profitability
Sourcing, Storing, Processing and maintaining it regularly
Reports for Operations, Management & Executives
Insights, Simulations, Machine Learning and Artificial Intelligence
Business decisions based on data
Organized data
This milestone is by far the most important of all the milestones. Most of the challenges of making incremental profits from data are rooted in this milestone.
How do you know if your IT team has well organized data?
We have come up with a few simple statements that can help answer the above question. If the following statements are true for your IT team, then you are at the milestone or past it. Please note that in order to do this work, no other deliverable must be impacted. In other words, this work should not be hard for them but something that they can deal with when they have some spare time.
1. It takes not more than a few minutes to provide a list of customers who are active as of yesterday. Not the whole list of customers that you ever had but only those that you care in one way or the other.
2. It takes not more than a few hours to correct the inaccurate version of data that was presented in the past(say, a month ago). The context is that the data was provided by a person in the team at a point in the past and is being questioned for its accuracy. So if it was sales as on a particular day that is suspected to be incorrect, you would like to know the accurate sales data as on that particular day.
3. It takes not more than a few days to get a new employee to start writing basic SQL queries under no supervision for some simple data requests from your business leaders.
Reliable reports
The focus in this milestone is on reliability. In other words, you are confident of what you see and do not spend time in checking its validity for any more than a couple of minutes.
How do you know if your business has reliable reports?
We have come up with a few simple statements that can help answer the above question. If the following statements are true for your IT team, then you are more likely to have reliable reports.
1. The various reports within the same department provide the identical aggregated data at all times.
2. The reports from all the departments about a particular metric are identical or acceptably similar.
3. The various departments are all happy with a central reporting team and do not constantly request for their very own reporting analyst.
Actionable insights
This milestone is about bringing it all together. While the earlier milestones provide facts about what had occurred, this milestone is about the questions around why something did or did not occur. To this extent, anything from power point presentations to predictive modelling using Machine Learning or Artificial Intelligence can be deployed. The key is that there are insights that can be acted upon and not just facts and figures.
How do you know if your business has access to actionable insights?
We have come up with a few simple statements that can help answer the above question. If the following statements are true for your business, then you are at the milestone.
1. Your business knows who your most profitable customers are. Not just customers who get you the most revenue but profit.
2. Your business understands what makes a customer become profitable over time.
3. Your business uses the information from various departments such as Operations, Marketing, Sales and Finance to analyze which strategies are profitable and which are not.
Business action
The most important milestone in the path to profitability from data is to act on the insights from data. It is so important that your business can still get on the path to profitability from data with just this milestone. The other milestones amplify the effect of this milestone.
So what is holding you back from acting on the actionable insights?
If you are afraid of taking action on the insights, the best approach is to do it in small steps with experiments.
Concluding remarks
Every business is on its own unique journey. The time to move from one milestone to another as laid out in this article is different for different businesses. Sometimes a custom analytics strategy is a way to get your business from data to profitability.
Let’s start to draft a strategy to get your business from data to profitability. Contact us for an introductory call.