Many industry pundits talk about the need for enterprise-level firms to harness their data so they can view their products and customers in a whole new way. For entrepreneurs, data no longer requires massive IT budgets and data scientists. And we aren't talking just about "Big Data," but any type of data that a business has and is able to utilize to some end.
The rise of cost-effective data analytics provides small businesses a way to compete with -- and even surpass -- entrenched competitors. Customers expect a lot. They want the right product or service to fit their needs, they want it quickly, and want it to work well. Data plays into satisfying all of those goals as it helps to streamline processes, produces relevant customer recommendations, and helps to continually refine and improve the company's products.
Small businesses can follow the lead of a company such as Nest which is transforming the normally staid thermostat and smoke alarm business. The core of Nest is data, because the product pulls user preferences, getting "smarter" over time for maximum efficiency.
Data for small businesses doesn't always need to lead to a technological or market breakthrough. It's mainly about refinement, using data to establish segments so marketing and sales can adjust to those segments. Data means finding the repeat loyal customers and providing them with outlets for brand building such as social media contacts or even an old-school free t-shirt. At its core, data for the small business means streamlining processes and finding what is most relevant to customers.
The power of data is so broad that it applies to any industry. Consider home cleaning. Homejoy is a startup firm that is using data to predict future demand based upon current booking trends. Knowing where the next push for home cleaning services will occur allows Homejoy to focus its efforts. They can reach customers right before the demand arises, instead of arriving late to the party. The consumers are impressed that the company simply "knows" what they want, and Homejoy enjoys further expansion.
Another example is Netflix. While no longer a small company, Netflix's success came from data as they built large amounts of movie-based meta-data which allows them to recommend movies which very closely match customer tastes. While their recommendations might not seem to be more complex than "you rented a comedy, here's another one" there is underlying data analysis that is deep and multi-layered that goes into the entire process. This is a key goal for small business, to use data to provide customers access to what they want without being pushy or creepy. The consumer doesn't need to spend time searching, and the business keeps generating transactions.
For small businesses looking for ways to rely on data to make better decisions, here are some guidelines:
- Decisions should be informed by data. While the small business manager needs intuition and experience, data should be a consistent driver for actions. Not everyone is a visionary that can spot trends on their own, but data turns people into experts.
- Thinking of expanding into a new area? Let the data tell you if that's a wise move or if you should focus elsewhere. Considering a pricing increase? Play with the data to see the cost/benefit of potentially fewer customers but possibly higher margins. Data enables broad A/B testing and experiments.
- Departments within the company need to measure everything. If something can't be measured then it can be surveyed. Spend time on the important metrics, especially the ones that relate to revenue and customer satisfaction.
- Data should see the light of day. Small business owners shouldn't ask for data from the entire team and then keep the results to themselves. Transparency is king. It not only drives accountability but it also spurs innovation and creative thinking.