“If you can’t measure it, you can’t manage it,” said Peter Drucker, one of the most influential management thinkers of the 20th century. And he’s absolutely correct: you don’t know what you don’t know. I might even take that statement one step further. Without a fast, flexible system to handle your data, you can’t measure or manage efficiently enough to bring your business to the next level – even if your business is small, maybe even especially if your business is small.
Of course, you already have your accounting and your payroll tools. Once you reach a certain amount of annual revenue, or when you hire your first employee, those become necessities.
In the past, larger companies would often have (and some still do) whole departments of financial analysts dedicated to data gathering, number crunching and analysis. These associates might spend their days creating vast spreadsheets and turning those figures into basic visuals, i.e. a bar graph comparing Q2 vs. Q1 vs. Previous Year. They may have even made a forecast based on some simple assumptions or even an extrapolation.
But, according to Stefan Spieler at Camelot Management Consultants the role of finance and controlling is changing through digitalization:
“Creating value from data, that is, having the ability to extract data relevant to the controlling process in real-time and to make the right data available/transparent to the right people, and to quickly analyze it will become a decisive competitive edge”Stefan Spieler at Camelot Management Consultants
So what is Business Intelligence, or BI? According to Tom Drake at Business.com: BI is
“In essence, BI is about information analysis. It can be used to look at any aspect of your business. It can be used to see how well your sales efforts are going. It can be used to assess the efficiency of your manufacturing processes. It can be used to measure staff performance.“Tom Drake at Business.com
Why do you need BI?
Your Own Personal Finance Team
A good Business Intelligence system is a bit like having a team of financial analysts working just for you.
This team, however doesn’t take lunch breaks or vacation.
To be clear, BI requires some (sometimes significant) up-front investment, not only for the software itself but also to ensure that your data is clean and well structured. After this setup phase, you reap the benefits of faster, more automated reporting available at your fingertips.
For example, let’s say you like to track average value per visit on a daily basis to make sure you’re moving business in the right direction.
With a BI solution you can set this metric up in your dashboard and have it updated constantly – no need to run the numbers and update your spreadsheet manually in order to see how the month is progressing.
Make Better Decisions, Faster
To dovetail with the previous point – BI allows you to make better informed, data-driven decisions faster by allowing you to both have standard “dashboard” views AND to quickly perform ad-hoc analyses.
To keep with the first example, let’s go deeper on your daily value per visit metric. Imagine everyone on your email list receiving one of four different versions of an email campaign.
With BI you could easily compare value per visit from each version of the email to see which are converting best, and drill down to see how your advertising works on different demographics.
Profitability is possibly the most fundamental aspect of making sure your business continues to flourish.
A BI solution can help you improve that bottom line by helping you make better decisions through better modelling and forecasting. When considering multiple possible investments, scenario analysis can be crucial to ensuring the best option.
Perhaps you’ve already decided on an investment and want to see how different pricing, costing, or advertising scenarios could play out. By tweaking and adjusting each different variable, you can determine which is the best next move.
A Business Intelligence solution can make your life easier by aiding with early recognition of warning signs and creating greater transparency of root causes and value drivers.
You know which products bring which people to your website. You also know who buys what and which add-on products bring you the best margin.
This knowledge keeps you and your customers happy. A BI toolkit can drive clarity about what those complementary products are that are really bolstering your bottom line.
A good tool can also help you recognize small problems early – before they become catastrophes, helping you to stay nimble and secure your livelihood.
Action Instead of Analysis
Spend time developing and implement actions instead of putting together analyses.
Imagine talking to one of your industry peers one evening at a local meet-up who works in a similar niche. She grimaces recounting an incident last month involving a recent struggle her team is having due to a new competitor with similar offerings.
You smile knowingly, but with relief. Your early warning system helped you see the issue and your BI system helped you quickly find the root cause which allowed you to take quick action and right the ship.
Within a day of the competitor coming on the scene you noticed a dip in conversions and developed an action plan to drive more traffic back to your site and away from this new competitor.
Business Intelligence might seem like a tool specifically intended for big corporations with massive IT budgets. While some of the options out there aren’t cheap to implement, the value added through increased speed and transparency can be immense and more than offset the investment. A good BI solution can help you focus on the right things to take your business to the next level.