Business analytics – if you are like most small business owners you have heard of it. And, if you are like most owners you are not exactly sure what it is or if you need it. Let us break it down and see if it is right for you.
What it is
Business analytics refers to the methods you use to measure the performance of something – projects, machines, employees, crews, products, shifts, processes, customers, etc. These measurements give you numbers, real data not guesses. You then use the numbers to make fact based management decisions.
How it works
Owners often know what they want; they just do not know how to make it happen. Their goals are good, but too vague. Therefore, they do not know where to start. Business analytics shows them how to turn open-ended goals into achievable tasks.
Think simple, simpler and simplest. In a small company the analytics should never be complicated. They are only a tool to do the job better, and should not be a job itself. You can start small – with the most obvious problems – and still get good results. Here is an example of how it works.
Your goal is to make more money. Problems have to be identified before they can be fixed. So, you develop a method to collect information (data) about productivity and quality, the areas with the biggest problem costs. When you get the data you use it to identify the trouble (Bob’s crew is 25% less productive and has 30% more rework than other crews) and look for solutions (Bob needs some training, disciplinary action and/or fired).
Why you need it
Most small businesses owners are not using analytics to manage. Those who do have an unbeatable competitive edge. They are: profitable with higher margins, better able to allocate resources and capital, customer focused, more efficient, controlling risk, proactive and focused on success.
Good employees like fact based management, bad ones do not. Responsible ones like looking at and comparing their numbers. They take pride in having 5% less scrap than the guy at the next machine. Incentives and discipline are much more effective and successful when based on data, not management “playing favorites”.
Other benefits include: salary planning, greater understanding and control over financials (cash flow, balance sheets, profit and loss), on-time and under budget project management, and sales and marketing effectiveness.
People lie, memories can be faulty and guesses are not facts. Business analytics give you a way to stay focused on your goals, and a way to reach them. They make things more efficient and less stressful for you, your employees and customers. Numbers, by themselves, are worthless if they are not used to improve understanding, empower people and coordinate resources with decisions. They should be used for a purpose – to make you more successful.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: