The importance of DATA in business 📉
Times are changing and with them the way we work. Nowadays, data is an essential element for business strategies. How do companies usually deal with data analytics?
How many times have we heard Peter Druker's phrase: "What you can measure, you can improve" or the even better known phrase of W. Hewlett, co-founder of HP: "You can't manage what you can't measure".
However, it is quite common for companies of all sizes to have only the information required by law or regulator. Financial statements are, in many cases, the only source of information that companies of all sizes, industries and locations use to guide management decisions.
In those cases where different programs are used to control and/or manage different functions of the company, it is common to find partial reports that are obtained from the "Reports" area of the software. In this sense we find the sales report within the invoicing software that shows for example the invoicing by month and by branch or by product or by a set of variables, being this extremely useful to have an idea of the income that the company has. We can cite other examples, such as the reports of the human resources software, stock, expenses and so on.
From this point of view, a company that has an integrated management system or ERP will have all the reports in a single tool and presented in a coherent manner and the information would not be a problem...
Unfortunately, this is not the solution for the information requirements of a 21st century company. Not only because the world we live in is increasingly changing and because the World Economic Forum suggests that we are at the beginning of the 4th Industrial Revolution (which is changing not only the way we produce, but the way we live and relate to our peers), but because reality shows that it is more common than we would like, that analysts, assistants, secretaries and others, download large lists of these systems to create customized reports in spreadsheets (typically excel).
This shows that decision makers (owners, directors, managers, supervisors) are not satisfied with how their software presents these reports or, alternatively, need to cross-reference information from different systems to calculate, for example, the turnover each salesperson makes per peso invested in salary, in order to identify their best salespeople.
The strategy of creating customized reports in spreadsheets has in principle 3 major disadvantages:
First:
Time inefficiency: building reports in spreadsheets takes too much time, is monotonous and repetitive. I have heard of analysts who spend a week on monthly reports, neglecting other more productive and efficient tasks. The downside of these delays is that decision-makers find out what is happening in their company a week late, which in many respects is insufficient to react adequately to the changes detected.
Second:
High error rate: a study of academic papers carried out by geneticists, published in The Economist(https://goo.gl/yA1Pq8) found that, on average, 20% of them had errors in the spreadsheets. This leads me to think that at least the same error rate can be found in the reports generated by the administrative areas of companies and it will certainly be higher in those cases where the person who makes them has little technical training.
Third:
Low analytical capacity: this is where the waters are parted because the reports generated have low analytical capacity. By this I mean that they cannot answer second order questions such as, for example, where was the loss or extraordinary result generated? In the report you see that branch N invoiced 25% more than last year and the report ends there. What phenomenon is linked to this fact? Did product X increase its sales? Did salesperson Y stand out? Are sales through the web channel invoiced in this branch and before it was done in a different way? Did telephone pre-sales improve in that specific department?
These types of questions are the ones that are rarely asked because they simply cannot be answered quickly or economically and efficiently.
This analytical capacity is one of the necessary conditions for companies to mature and grow sustainably over time.
The ability to "play" with data to discover opportunities and weaknesses in real time is what allows you to continuously adjust to a changing reality and evaluate changes in procedures and the effectiveness of your actions.
Without such tools, which in recent years have become very inexpensive and easy to use, it is not possible to understand, for example, changes in demand and make the necessary adjustments to meet it adequately. Talent and experience are fundamental requirements, not to run a business professionally and successfully, but to know where to start analyzing the information available to us in our companies.
In short, managing using our intuition and complementing it adequately with information is a matter of organizational culture and there are no more excuses to start managing companies of all sizes and industries in our country in a more professional manner.
