Specialists In Helping Enterprises Utilise Data To Drive Their Performance. DATA = OPPORTUNITY Seven Common Failures To Utilise Data And Great Ways To Tackle Them. BY DAVID MAHER - DIRECTOR RBI rightbraininsights.com Failure #01. NOT INVESTING IN DATA The world is changing and shrinking. A converging world represents a real and present iceberg to those businesses unwilling to alter the course. Technology is creating almost endless sources of data. How you utilise, capture, store, and analyse this growing resource will be key to ongoing competitiveness. Your data is an asset. Invest in it. That means ensuring it is accessible, accurate, secure, timely, has history to it, and is detailed. For many small to medium enterprises investing in their data is as simple as ensuring they have accurate work records, precise and timely financials, and a contact record. All of these can be found in cloud based accounting systems such as Xero, and its associated add-on such as Workflow Max. Unfortunately, too many companies do not comprehend the power that resides in being able to capture and analyse their full data set. Without investing in your data, you miss the opportunity to put the pieces of your puzzle together, thus relying on gut feel and (at best) vague assumptions about past performance to inform your decisions, ultimately compromising your long-term results. 01 Tips To Investing In Data 1. START NOW! Just like weeding a garden, start early when problems are small, and it will be a lot easier than when they are 6-feet tall and full of thorns. The sooner you start organising, correcting, and cleaning your data, the less costly the exercise will be. 2. CONDUCT A DATA AUDIT DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA DATA 02 The easiest way to sink your company is to slam into an iceberg you should have seen coming. The only way your data can help you navigate around such challenges is if it is up to scratch. Start digging into your data and see in what state it really is. 3. FOCUS ON QUALITY OVER QUANTITY Understand what is a ‘must have’ and what is a ‘nice to have’. Focus on the ‘must haves’ and try to get them 100%, before you start worrying about everything else. The secret is to pinpoint the data that, when mixed with a solid assumption or two, has the power to unlock other areas of your business. Failure #02. NO INTELLIGENCE INFRASTRUCTURE It’s one thing to have the data in place, but simply possessing the data is not enough. What matters is the intelligence and decisions you can pull from it. Anything else is just numbers on a page. You need to have an intelligence infrastructure that can take whatever data you possess, analyse it, and create clear, concise and compelling insights. An effective intelligence infrastructure is able to quickly produce the critical insights you need on an ongoing basis-what you need to know every day, week, and month. Companies that fail here end up chasing their tails trying to figure out what they should easily know. Instead of focusing on building the business, they end up drowning ‘in’ it. 03 Tips For Building an Intelligence Infrastructure 1. UNDERSTAND YOUR MECHANICS A mechanic will spend years understanding the complexities of an engine so that they may skilfully apply their craft. Dig deep and get curious. Understand how your machine works, and it will be a lot easier to drive it. Here is a list get you started: - Where and how do you make money? Where and how do you lose money? - Who are your most important customers and why? - Where do your deals come from? What does your sales funnel look like? - How does this compare with other players in your industry? What are your conversion rates? - What is your return on your marketing spend? - What are our operational expenses? How has this changed over time and why? 2. ASK BIG QUESTIONS The finest businesses survive and thrive over the long-term. They ask big questions that take a long time to answer. Where your numbers really become powerful is in the context of a big ambitious question. What are your BIG questions? 04 As an example, one client (a marketing agency) once wanted to see how their pricing stacked up globally. Through some rather simple research and analysis we could ascertain where the agency sat in amongst 100 agencies from Asia, Europe and North America. The results lead to a complete repositioning of the agency. Failure #03. NOT TESTING ASSUMPTIONS Assumption is the mother of all screw ups. If you want some really powerful insights to drive your business and results then, yes you need the data, and, yes, you need the intelligence infrastructure, but make sure you test your assumptions. Be prepared to critically evaluate them. 5+2=3! FACT - you will make incorrect assumptions. That is a given. But only when you test them can you understand the implications of getting them wrong. Anything less and you could end up flying blind and not even know it. 05 Tips To Testing Assumptions 1. APPLY THE ‘SOUNDS RIGHT’ TEST The most basic test to apply to your assumptions is the ‘sounds right’ test. Simply take a breath and re-thinking what you are thinking. For instance, one firm we worked with decided that $3M in turnover would be a good goal for the next financial year, up from $2.2M the previous year. 07 2 % ? || OK? The problem is that for the previous 3 years turnover had hovered between $1.6- $1.8M and circumstances were not set to change in the coming year. Does it ‘sound right’ that the income is expected to jump $1.2M with no change in the circumstances? 05 ] & 2. RESEARCH AND JUSTIFY You must clearly understand the basis of your assumptions. Does it just ‘feel right’, or is there evidence behind it? For example, you may believe a valuation multiple of 6 sounds right for your business, but when a prospective buyer conducts due diligence, they will form their own opinion. If you cannot back up your original assumption, you could be left unable to negotiate effectively. 3. CHECK FOR ‘WHAT IF’S?’ It is the age-old question ‘what if?’ The easiest way to check your ‘what if’ questions is through sensitising. Sensitising means that you apply a margin of error over something. For example, you assume that a new venture will produce a net profit margin of 25% in 2 years. What if it was 15% or 10%? Is this tolerable? Is this ‘game over’? At what point would you walk away? What is your maximum? What is your minimum? Knowing this informs your stress points and watch-outs after the decision is made. 06 Importantly, if your intelligence infrastructure or once-off analysis is done correctly, it will incorporate the ability for you to sensitise multiple variables across different scenarios, thus ensuring you can test all of your options fully. Failure #04. RELYING ON THE ACCOUNTANT A frustration we encounter when first working with many of our clients is the false hopes places on an Accountant to come up with result driving insights. Often they simply do not deliver the goods. It is not their fault. It is just not their area of expertise. Someone studies for years to be an Accountant. They may know complex tax codes inside out and back to front. If you have a tax bill you want that person! However, when you are attempting to analyse your customer segments, understand the potential of a new market, explore a new idea etc… your Accountant may not be the best person to explore this with. They can certainly plan for the outcome with regard to taxation and compliance issues, but assessing the high-level opportunity may not be their strong point. Not all specialists are bad, but often when it comes to generating insights, it is a particular skills set of itself. If you want to get it right, you need someone who can look at the issue and think creatively. Creativity is not limited to pure design (how something is presented). It has a role to play across the data, analysis, and design stages. 07 Tips For Taking The Load Off Your Accountant 1. FIND SOMEONE YOU TRUST When someone is providing advice to you, no matter how big or small the decision, you must be able to trust them. Do not settle until you find someone who knows what they are talking about, can deliver, understands your real problems and can relate to you, and only has your best interests at heart. The benefit of finding someone you can trust is that they become your sounding board. You have the benefit of open and honest conversations where you can bounce questions freely. 2. LOOK FOR CREATIVE GRAND MASTERS The finest advisers in the world not only have rock-solid trust, but also operate like a Grand Master chess player: thinking moves ahead and assessing possible risks and opportunities. Creativity is important as it concerns how efficiently and effectively a problem is overcome. A great adviser will come up with a creative solution, but also conduct the analysis around the solution in a creative way. 3. SET HIGH STANDARDS Remember in school, the teacher that was harsh sometimes, but somehow always brought out the best in you. They knew you could do well in their subject and they would not let you slip. You want the same approach between you and your specialists. You need to hold them accountable, but they should also be holding you equally accountable. Look for people and companies who set high standard for themselves and their clients. Do not be swayed by the cheapest offerings in the market. Like so many things in life – you really do get what you pay for. 08 Failure #05. FAULTY DESIGN AND COMMUNICATIONS Insights need to do one thing - inspire you to act. They need to get you to make a decision, and, therefore, drive your results and value. Therefore, how an insight is presented becomes critically important. Here is where creativity plays a real role. How do you design your analysis so that it communicates clearly, concisely and in a way that is compelling? Just like a great piece of art or a beautiful piece of music, you see it and you are inspired. It does not only look beautiful, but it shows a clear course of action and that something needs to be done. Now! This can be a problem with data visualisation. Visualising large data sets is a trend right now, and for a good reason. As we mentioned earlier, there is immense power in data. However, too often, data visualisation goes too far into the art side and you find yourself looking at a beautifully depicted piece of data, but left wondering, “so what.?”. The point is that you can have the best data analysed through an incredible intelligence infrastructure. An amazing specialist is engaged. But if they cannot communicate to the leader in a way that s/he understands, their work is null and void. 09 Tips To Creating Clear And Compelling Design 1. FIND OUT WHAT WORKS FOR YOU What is it that you easily understand? Do you prefer pictures and charts over words and tables of figures? What naturally makes sense to you? In our work with creative entrepreneurs our design often has a heavy visual element. For instance one cash flow model we developed used a single line on a page. No figures at all. Simple, effective, clean and it made perfect sense to the reader. 2. FOCUS ON THE STORY Data and its analysis will only take you so far. What really matters is the story in the numbers. One law firm used their people utilisation numbers not as a wrist slapping exercise (typical for large firms), but as an opportunity to target training and development. The other factor here is to remember, especially when it comes to forecasting, your figures will not be 100% accurate. Rather than pinpoint accuracy, focus on the story: what is the trend relative to last year, what are the averages, what is the direction, etc..? 3. GET CURIOUS! If there is so much ‘bad’ design out there, what does good (or even great) design look like? What are you missing out on? One top-shelf resource for data design is the book authored by the head of production at Right Brain Insights, Brian Suda. His book, A Practical Guide to Designing With Data is accessible to those not trained in statistics or design. 10 Failure #06. FORGETTING THE HUMAN SIDE We live in a data-rich world. While data is being created all the time, there is an element to business and life that cannot be measured: the human side. The fact is, when you are making critical, long-range, expensive decisions there will be considerations and effects that data will never be able to capture. You need to recognise this. You find this effect most prominently when it comes to people, especially in the corporate world. Someone is retrenched for no apparent reason. The person was respected by their peers. Subsequently, when they find a new position they end up bringing their old team across with them, thus, eroding the basis of the original decision. Alternatively, there are also issues that can fall upon the decision maker. 50 years ago, decisions were made collegially. Today, there is more pressure on leaders than ever to make the calls and get them right. People are watching them, and they can end up being too frightened to address the real problem. It is the Titanic ignoring its circumstances and not changing course. . 11 Tips To Embracing The Human Side 1. NEVER LET DATA ALONE RULE COMPLETELY Data is only ever going to take you so far. Yes, it may take you a long way, but consider what cannot be measured. What are the emotional impacts of your decision? What will this do to the trust you hold with your clients? Is there a cultural impact to your decision? Does this new direction for your business contradict the very reason you set it up to begin with? While the data and the analysis may indicate several courses of action, ultimately the final call should be made only after taking such considerations into account. These questions may be personal and hard to answer, especially if your decision affects people you know and love, but the very fact they are hard to answer often highlights their importance. 2. INVOLVE PEOPLE RELATED TO THE DECISION TO HAVE A SAY The easiest way to never forget the human side is to include it from the start. Involve people and give them a voice. A great example of this is the Porsche production factory in Germany. There is a staffwide policy that states that if you can come up with an idea that saves us money without compromising quality, and we execute it, you get half the savings in the first year. One low-level cleaner came up with the idea that a robotic broom could be installed to reduce time and risk. They calculated that the robot saved close to 90,000 euros in the first year. Porsche held their promise. 3. RIDE THE ELEPHANT Ask yourself - what is the real problem here? If there is an Elephant in the room have the courage to ride it. Courage is not about being not afraid, it about acting in spite of the fear. Fear canparalyse your decision making and destroy your results. Upon seeing problems for what they really are, they often become less scary than they seem. 12 At Right Brain Insights, we aim to work for at least 12-24 months with our clients. During this time, we pride ourselves on saying things how we see them. Unfortunately, we have too often had to deal with the aftermath of failing to do so. Failure #07. BECOMING PARALYSED BY FEAR Fear works two-fold when it comes to data. Fear, and the subsequent paralysis it causes, can arise from having: a) a lack of data, or b) too much data. Whichever it is, they both result in the same outcome: you freeze, decide not to act, or end up leaping into a decision. If you have a lack of data, this can mean decision makers have questions that they simply cannot answer. They know the question is important but they are left to make a blind choice: effectively flipping a coin. You might be able to pull that off once or twice, but imagine a roulette table. Eventually the house is going to win. On the flip side, the same situation arises when you have data overload. Picture a computer when it freezes. It is overloaded by the task at hand and simply refuses to work. It has reached its limit. Human beings are no different. They are going to focus, or they are going to crash. If they are given a whole table of data or insights and are unable to ascertain what it is exactly they need to do, or where to focus, they could very well arrive at the same action as having no data or insights: effectively, ending up back on the roulette wheel. . 13 Tips To Remove The Paralysis 1. FOCUS ON WHAT YOU NEED If you are faced with a mammoth decision, and you are not sure how to break it down, try to focus on what you really need. Ask yourself ‘what is the real problem here?’ Is this about survival and just managing cash flow until the big invoice comes? Is it about how to position the business for sale over the next 12 months? Is it knowing if next month, or next quarter, will be good, bad or indifferent? By pinpointing the need you allow yourself to cut out the noise. There is so much data and infinite ways to analyse it. But you have a decision to make and limited time to make it in. Think about what you really need to know, and this will focus all other efforts. 2. EYES ON THE PRIZE! If you ever feel a decision is becoming overwhelming stop, take a step back, and remember to think about where you are heading. Go back to 30,000 feet and remember where you want this business/ project to be. Focus on ‘why’ over ‘how’. If you can become clear on the ‘why’, your specialists will look after the ‘how’. 3. GO EASY ON YOURSELF You are only human. We ALL make mistakes (admittedly some sillier than others). Endeavour to do the most you can with the resources you have. At the very least you can always justify your decision. Even if your decision is a mistake, we are all always learning. Seek to make new mistakes, rather than repeating the old ones. 14
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