Can Small Companies Justify Investing in Business Analytics?

Author: Bit Software
Date: 29- 06- 2011

Even in the case of extremely small businesses, a strategic deployment of a Business Intelligence solution can have 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 and quickly stop the bleeding.
- Should we treat all customers equally? (If you say yes, I’d suggest reading “Angel Customers & Demon Customers”)
In a company that has more than thirty customers, the Pareto Principle will be evident. Looking inside the famous 80/20 rule one can find that five percent of the customers generate close to 50% of the profits while the bottom 50% of the customers generate only 5% of the total profit. Many companies have a hard time identifying which customers belong to each group. A strategic deployment of Business Analytics provides the answers instantly.
Even when sales revenue is growing, management should be able to ask key questions and find the answers right away, so the train of thought isn’t interrupted:
- 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 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 is it failing to meet objectives? Why?
- Which competitors are threatening our business?
- In what regions and market segments can we maximize our growth?
A BI 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 BI solution was not affordable by small companies, not only due to licensing cost but also because the internal and external resources needed for set-up and maintenance.

This situation has changed though. Today, there are many new analytics applications, either on premise or in the cloud, that are powerful, user friendly and very cost effective; making them ideal to bring small companies to the forefront of the 21st century technology to become true analytic competitors.

by Bill Cabiro and Strat-Wise LLC

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