Business intelligence, data mining, forecast models, on-demand analytics, CRM, complex database systems, SOAP servers…
If you are the owner or manager of a small or medium size business, all these terms are enough to make your head spin! You might be asking – what exactly are these and how do they relate to actually getting product out the door? And more importantly, why should they be of any importance to you?
Now, consulting firms like the one I work for would like you to believe that you need ALL of these, and that without them your analytics efforts will fail… Of course, selling projects to our clients is the reason we are in business, and so it befits most IT and Management Consulting firms to go down that route.
But the truth is that you do not need fancy schmancy systems or an elaborate infrastructure in order to have an analytics operation in place. And since analytics is one of the key components of an effective cross-sell strategy, that’s good news for most small businesses!
If you have ever read a book like Competing on Analytics, you might be under the impression that effective cross-selling strategies are only a byproduct of high-cost database systems, large-budget departments, innovative management, and high-tech companies. Indeed, many of the examples mentioned in that book (such as Netflix) reflect companies whose whole value proposition is significantly based around using analytics to generate revenue or lower cost.
But even a small business can use “scratchwork” analytics to try to gain insight into which products and services generate a disproportionate percentage of the revenue, and if there are any strategies that allow for cross-selling between high-margin and low-margin products. Several of these businesses unfortunately gain the wrong insight from their data, and develop the wrong strategy (think of the daycare center mentioned in the first few pages of Freakonomics), but that is a result of using data incorrectly rather than setting up the system.
So, how does a small business start harnessing the power of analytics? Here are my five tips to start a core analytics operation for a small enterprise:
- Obtain a scalable, but simple (and low-cost), database system. MySQL and MS Access are the front-runners, especially for companies that run primarily on a Windows platform. I have heard that Filemaker is particularly effective for Mac, although most enterprises usually don’t run on an Apple platform. There are numerous applications for Linux and Solaris platforms, including MySQL.
- Establish concrete goals and targets, both for the overall analytics operation as well as the component strategies (i.e. go-to-market, cross-sell, etc.). By concrete strategies, I mean the following:
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We will reduce our go-to-market time by 20% on all new product launches by optimizing distribution channels
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We will aim for a 20% conversion rate after packaging Product A with Product B (cross-selling)
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We will aim to increase our branding relevance by X percent (where X can be measured by search popularity, customer retention, etc.)
- Know your resource constraints. This includes the budget (both fixed and recurring for monthly expenses), the people, the technology, etc. Many of the small businesses I have run into outside of my job as a consultant or through contacts from school completely underestimate the time commitment to setup even a basic product tracking system in Access.
- Have a staggered deployment plan. Deploying an analytics system at once (and especially going live in the middle of a business cycle) is a sin. It doesn’t allow you to incrementally check for mistakes, and to correct your missteps.
- Understand what your system can’t do. An Access database system that calculates ROI on distribution channels and targeting campaigns is NOT going to help you forecast demand after a certain point, no matter how you try to spin it. And similarly a Sales tracking system in MySQL is not going to be “integrated” with other business functions, unless you are willing to invest more resources into it.
