By Bill Cabiró
Even in the case of very small businesses, a strategically
deployed Business Intelligence solution can have a major impact on the growth
and profitability of the company.
Having a clear view of the profitable customers, products, regions
and market segments is fundamental to understand the causes and expand upon the
successes.
Equally important is to find those customers, brands, markets,
segments and competitors responsible for draining cash to quickly stop the
bleeding.
Should we treat all customers equally?
If you say yes, I’d suggest reading “Angel Customers & Demon
Customers” by Larry Selden & Geoffrey Colvin.
This is because in a company that has more than thirty customers,
the Pareto Principle will be evident. Looking inside the Pareto’s famous
80/20 rule not only one can find that the top 20% of products contributes 80%
of total sales.
We can also find that the top five percent of the customers
generates close to 50% of the profits while the bottom 50% of the customers
generates only 5% of the total profit. Even worse, the bottom 40% usually
does not generate any profit at all!
Many companies have a hard time identifying which customers belong to each group. The good news is that the strategic use of Business Analytics provides these seemingly difficult answers instantly.
Many companies have a hard time identifying which customers belong to each group. The good news is that the strategic use of Business Analytics provides these seemingly difficult answers instantly.
Regardless of the business situation management should be able to
ask critical performance questions and find -first hand- clear answers at the
speed of thought without interruptions or the involvement of analysts:
- Is
revenue growing profitably? Where? How and Why?
- Are
we paying sales reps commissions for bringing in unprofitable tonnage?
- Can
we quickly tell whether the growth trend is just over last month, last
quarter, same quarter last year or this year to date?
- How
about the profit growth of the last 52 weeks compared to the previous 52
weeks? Is it really growing?
- Is
our growth accelerating or decelerating? How much?
- How
is our profit growth versus budget or business plan? Where are we failing
to meet our objectives? Why?
- Which
competitors are threatening our business?
- In
what regions and market segments can we maximize our growth?
A modern Business Intelligence solution is fundamental to find
answers to the seven layers of WHY's in order to get to the root cause of
issues. Being able to understand and correct these issues faster than the
competition provides the company a competitive advantage regardless of how
small the business is.
In the past deploying a Business Intelligence solution was not
affordable by small companies, not only due to the high licensing cost of the
software but also because of both the internal and external resources necessary
to set it-up and provide maintenance.
This is no longer the case. Today, there are many choices of
analytic applications, either on premise or in the cloud, that
are powerful, user friendly and very inexpensive.
Designed for
business users, they include interactive data discovery and self-serve visual
analytics that require minimal IT involvement, making them ideal to
bring small companies to the forefront of the 21st century technology to
become true analytic competitors.
References:
1) Angel Customer & Demon Customers by Larry Selden & Geoffrey Colvin
2) The 80/20 Principle by Richard Koch
3) Competing on Analytics y by Thomas H. Davenport, Jeanne G. Harris
4) Strategic Knowledge IQ Test
2) The 80/20 Principle by Richard Koch
3) Competing on Analytics y by Thomas H. Davenport, Jeanne G. Harris
4) Strategic Knowledge IQ Test
