The small and medium enterprise (SME) business environment has permanently changed.
In the post-pandemic world, SMEs must think and act like large businesses to survive. Success in business is no longer purely based on customer relationships alone. Instead, like large enterprises, SMEs must embrace data analytics to remain competitive.
The importance of data analytics will only grow as organisations continue to seek an edge over their competitors. Where decision-makers used to pore over financial reports and business plans to determine how to proceed for the future, they now have a whole world of data at their fingertips to give them deeper insights. They can see not just what worked in the past but why it worked and how it worked. This more granular level of information means decision-making can be far more accurate. It also reduces the risk of lost time and resources on experiments that fail, allowing more time and resources to be dedicated to initiatives that are highly likely to succeed.
In an environment where SMEs have been under extreme pressure, such as 2020’s coronavirus pandemic, the value of this type of decision-making can’t be overstated. The future remains unpredictable, but it is possible to plan effectively. SMEs should analyse their business operations, accounting for historical trends as well as the current environment. By looking at past business challenges and the solutions that helped overcome them, SME decision-makers can develop plans with a high chance of success.
Apart from coronavirus, one of the biggest changes for SMEs in recent years has been the rapid shift to digital ways of working. This is the source of so much invaluable data that can be collected and analysed. However, many SMEs may have struggled to understand how and where to transform their business digitally for best results. For example, transitioning to accept online orders and payments may be seen as a no-brainer for most organisations. But there are plenty of less obvious opportunities to transform digitally that could streamline processes and slash costs. The challenge is to identify these opportunities and leverage them appropriately. This will require a proactive and strategic approach. The only way to get it right is to use sound evidence underpinned by data to support ideas that drive innovation, scalability, and business agility. Doing this will ultimately build business resilience no matter what happens in the external environment. Thus, data analytics provides a solid, empirical foundation, based on company and industry-specific data, for organisations to build resilience for the future.
What is data analytics?
In business, data analytics is defined as the interpretation and analysis of business, market, and customer data. When data is interpreted in the right way, it delivers valuable insights into business and industry trends, illuminating areas of the business that need attention or improvement. Importantly, it provides an early warning signal about underperforming areas of the business. Business leaders can use these insights to develop solutions and make decisions that will improve performance.
The stakes are high. Using data analytics to gain the necessary insights that lead to better decision-making can deliver significant benefits. These can include systematic efficiency improvements, increased employee productivity, a greater ability to attract customers and retain existing business, improved cost efficiency, increased revenue, and ultimately, better business resilience. In a challenging economic environment, these benefits can’t be overstated.
By contrast, SMEs that choose not to invest in data analytics will quickly find themselves left behind by savvier competitors. Savvy business leaders have already realised that data analysis is no longer only the realm of big business but, rather, a compelling and powerful tool that drives accuracy and mitigates risk in planning.
Data analytics is easier to embrace than most business leaders think
SMEs that have never used data analytics before may consider it to be a daunting task. However, it doesn’t have to be difficult. The best approach is to start with getting the data foundations right. To do this, business leaders should first take inventory of all the data that the business already has, then identify additional data that can be accessed easily. For example, even the smallest SMEs will have immediate access to their own customer and sales data, as well as business expenditure, and maybe even some marketing data such as social media engagements. Larger SMEs may have more in-depth marketing and financial insights, as well as employee and supply chain data.
Next, business leaders should identify the types of data that could help support better business decision-making. This could include trends data available through industry associations or online searches, and broader data such as the government’s economic outlook. This type of data will give the business a view into how external factors may affect the business, such as industry demand or downturns, potential legislation or taxation changes, and opportunities for innovation. Understanding this external information as well as the internal data about a company’s performance will give decision-makers a robust base on which to make decisions.
Once business leaders have identified their data needs, that data needs to be captured and organised in a secure, central location where it can be accessed by authorised users quickly. Simple data can be initially stored within a spreadsheet but, as the business develops, data can quickly outgrow this and cause complexities for the business. Therefore, the most effective and sustainable way to capture data is using cost-effective, cloud-based data platforms. The comparatively small investment in these automated platforms is significantly outweighed by the benefits that can be achieved, including data insights that drive cost savings, efficiency gains and valuable real-time business and market intelligence when these platforms are used correctly.
Data analytics is now the number one business tool for forward-thinking SMEs. It provides the ability to make informed decisions based on accurate insights, not guesswork or hindsight. The cost of not embracing data and incorporating insight-led decisions into planning is ultimately the difference between success and failure for SMEs in the new fast-paced digital economy.
Srdjan Dragutinovic, director, data analytics, RSM Australia.