General Business Forum Brought to you by 9 Spokes
Dismiss Notice
Hey Guest, make sure to follow us on Twitter! Say hi and we'll be sure to follow back!

Data analysis and why small businesses should think small

  1. Francois Badenhorst

    Francois Badenhorst Deputy Editor Staff Member

    Posts: 86 Likes: 16
    1 |
    In association with 9 Spokes

    In business, there’s a lot to be said for flat-out, unabashed copying. As the Nigerian entrepreneur Ndubuisi Ekekwe phrased it rather bluntly in the Harvard Business Review: “When you can’t innovate, copy.”

    It’s a mentality bred in reaction to the rather stark dichotomy of ‘innovate or perish’. For small businesses that’s a mindset that can’t really work: your average UKBFer isn’t exactly going to have Bruce Wayne levels of R&D spending.

    In many instances, imitation rather innovation makes the most sense for a small business owner. But is that always necessarily true? It’s a cliche - but the grass isn’t always greener on the other side. Take data analysis.

    As Julian Birkinshaw, professor of strategy and entrepreneurship at the London Business School, explains; large businesses spend a lot of resources to crunch big data to come up with insights they can use across large bodies of consumers.

    “By definition, they’re trying to capture these large trends and different segments,” he says. “That’ll be exactly the wrong thing for a smaller company to do.

    “As a small business, what you’re trying to do is differentiate yourself from larger business. Almost always by focusing on one subset of people with whom you have a particular affinity or understanding or some a service that fulfills their needs.

    “You never beat big companies at being a big company.”

    Birkinshaw isn’t arguing against data analysis; his point is more nuanced than that. Small businesses can and should keep an eye on metrics and key performance indicators – but it should be tailored for a small business's requirements.

    As UKBF member ffox puts it: “It depends on what you want and what you need. Having said that, all business owners should be aware of the metrics of what they do. If it’s small enough, and the owner is smart enough, it can all be done in the head. This falls down when it becomes too much for one person to handle.”

    Some UKBF members are still in their early days and can opt for the most rudimentary of analysis. Others, like ffox, will need something a little more robust. “You must employ software and other tools to gather data as it is generated and the most important aspect of any software that processes or generates data is that information extraction must be simple and effective,” writes ffox.

    “But, before software purchase and before data harvesting starts, you must have a strategy. You must know what you intend to measure and how analysis of information is intended to fit your business aim and deliver benefits. It’s no use counting beans for the sake of counting beans.”

    For Webgeek, his strategy revolves around website traffic and analytics. “It's essential, for us, and possibly many business owners, to know what traffic sources (and campaigns) are driving increases in revenue, increases in conversions, increases in traffic, so that we know what visitors are ‘worth’.”

    Fellow UKBFer Alan prefers to keep it rather simple but he does pay close attention to “ROI on marketing” and “operational time and cost which feeds into pricing strategy and estimation process”.

    GaryK also counsels simplicity in matters of data analysis. “For small businesses it tends to be more operational, debtors reporting, cashflow etc. which is pretty key. The key for an SME is keep it simple, focus on what you need, then if you have time focus on what you might want.”

    GaryK’s take is backed by London Business School’s Birkinshaw, too. “Small businesses shouldn’t throw out their own insight - but they shouldn’t abandon data either,” says Birkinshaw. “But it’s in a small business’s interest to keep it simpler. A version of the Pareto Principle applies: one tenth of the investment gets you eight-tenths of the way there.”

    Enjoyed this article? We’ve recently published a free guide from 9 Spokes to help you keep an eye on your cashflow, learn important metrics, and get under the skin of your sales while tracking and managing your people. This guide steps you through the basics and more - access it here.

    #0
  2. Adpoket

    Adpoket UKBF Newcomer Free Member

    Posts: 0 Likes: 0