Most entrepreneurs will tell you that the decisions they have made "from their gut" have driven much of their success. But increasingly, that informal approach to strategic thinking isn't cutting it.
The reason: We live in an age of information. The amount of data being generated is exploding, while the cost of collecting and storing it is falling fast. The business owners who excel at harnessing that data will be the ones who truly take their success to the next level going forward. "Analyzing large data sets -- so called big data -- will become a key basis of competition," notes a report by MGI and McKinsey's Business Technology Office.
Harpreet Singh is an entrepreneur who understands big data both theoretically and practically. A Harvard fellow and former director of technology at Citigroup, Singh last year launched Experfy, which matches up top freelance data experts with companies looking to use data to solve their biggest challenges. Experfy can provide services faster and three to five times cheaper than can large consulting firms.
I recently spoke with Singh about how all companies -- not just the largest firms out there -- can gather the data they need and leverage that jumble of information into top-flight business decisions and actionable results.
1. Foster a data culture in your company. According to McKinsey, data is doubling every 18 months -- yet only 1% of data is being analyzed. As that trend continues, we'll all need to do some reinventing of ourselves and our organizations to do better at analyzing data and making smart decisions based on it.
That requires creating a culture within our firms where data is highly valued, so that we become progressively data driven. Start making decisions based on the numbers, and encourage your team to shift from the "throw ideas against the wall and see what sticks" approach to strategic development.
To start getting up to speed in this ever-evolving area, Singh recommends resources such as:
- Competing on Analytics (a book by Thomas Davenport that serves as a good primer on data)
- Experfy.com/blog (Experfy's blog with insights from industry thought leaders on how business owners can use big data)
- Singularity University's Exponential Conference Series (exponential.singularityu.org)
2. Focus on KPIs. What specific data should you should be tracking daily, weekly or monthly? Once you determine what really matters to the success of your business -- the KPIs, or key performance indicators -- set up systems to collect that information.
For example, create dashboards to oversee your work and provide you with an at-a-glance look at those KPIs and how they're rising or falling over time. "It could be your revenues, the number of customers you're acquiring, certain operational expenses, the number of complaints customer service receives, and so forth," says Singh. "If you can define what those are, that'll help you grow your business."
Singh cites the example of companies that do direct mail marketing. "They may be sending out thousands or millions of post cards or mailers without knowing who the customer is. If you can segment your customers and gather demographic data to understand what the customer profile looks like, then you can go back to your database of these million contacts and target exactly the ones with the highest likely response rates," he says. "Also think about the cost reduction that this data helps achieve. If you're sending out a million mailers every other month and you see how to reduce that number to a quarter million, the savings can be staggering."
Another area of interest to most entrepreneurs is how data can fuel client retention through predictive analytics. "Instead of trying to win customers back who leave, you can use data to help you see who may be thinking of leaving -- for example, by identifying those customers who haven't logged into their accounts for at least two months," says Singh. "Armed with that information, you can take steps to re-engage them before they cut ties with you."
3. Work with the right people. Data and data analysis are moving so fast that it makes sense to ally yourself with the right resources to help you wade through the numbers. Here, as with so many tasks these days, you can get the help you need through an online marketplace. Singh's company lets business owners post a need or problem they have in its marketplace connecting experts with short-term projects. The business problem can be reviewed by more than 1,500 data scientists, who can send detailed proposals of how they would tackle the issue.
One key to success in the journey to become data-driven, says Singh, is to start small: establish metrics, create dashboards, and tackle other initial steps. Not only will this help you test the waters with the professional you choose, it also will help that scientist better understand your company and design a more accurate data road map for you to use going forward.
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