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Don't Drive Your Business Without Data When you have good information about your customers, innovation can result.

By Iman Jalali Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Without using data to guide decision making, most small businesses and startups do what they think makes the most sense: They chase competitors. They chase trends or follow fads. But chasing and following means the business isn't leading. It means being in second place, at best.

Companies in the lead have mechanisms in place to capture important customer data. Part of their culture is collecting and interpreting information about their company and their customers.

But data is useless if the company is looking at the wrong things or asking the wrong questions.

Related: 5 Dashboards for the Data Every Business Needs to Track

Knowing the right questions to ask can be tricky and takes time. Time is the one thing most young companies just don't have, so asking the right questions the first time around is critical.

There is no set of standard questions that will apply to every industry. But asking questions like "Where did the customer come from?" and "How did the customer find the company?" can be a great starting place.

It matters, for example, whether customers are finding the business because of an ad or a marketing campaign or through word-of-mouth. Are the customers talking to one another? If so, where? Are they local customers? How are they finding the company?

But learning how a customer arrived is only the first part. Following the customer engagement and purchasing arc by asking questions that generate data is essential. Find out why customers bought certain products or why someone did not make a purchase.

When a company has good data, innovation bubbles up from user and customer behavior. Then the company can anticipate and react to customer needs instead of what it thinks their needs or wants are. One way is guessing. The other is knowing. Magic happens when a talented and creative team is unleashed to solve real customer needs instead of guessing about them.

When a company starts using data to address what's really happening in and around the business, members of the team look and feel like geniuses.

Related: Transparency Can Overcome Consumer Resistance to Sharing Data

Then competitors will be chasing the company. They may imitate it. But because they're not using the right map, they won't see the next turn in the road coming.

"You need to go out and dominate your market through the use of data analytics," entrepreneurship advisor and author Josh Felber told me. "Companies trying to compete are not watching their numbers. The ones that dominate are using data to market to their ideal client with laser precision."

Some business leaders have known the difference between acting on what they know and what they think they know. Nearly a century ago, in 1922, John Reith, general manager of the BBC, saw it when he said, "He who prides himself on giving what he thinks the public wants is often creating a fictitious demand for lower standards which he will then satisfy."

Using data correctly is the difference between a businessperson thinking he's on the right path and knowing it.

Related: Market Research Has Lost Its Mojo. But Here's How It Can Get It Back.

Iman Jalali

Consultant, Entrepreneur & Former President of TrainSignal(acquired) & Former Chief of Staff, ContextMedia

Iman Jalali is Chief of Staff at ContextMedia in Chicago, a healthcare technology company. Previously he served as president of TrainSignal, which was sold in 2013 to Pluralsight. He is actively investing in small businesses, tech startups and real estate across the country.

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