If you’re a small business, here’s an interesting question for you… what does your gut tell you about your business performance?
For many Australian SMEs, the answer would likely be: not much. According to research by the Commonwealth Bank of Australia, almost 62 per cent of SMBs lack any form of reliable data strategy, preferring instead to count on their intuition for all decisions. In the past, this approach may have worked. Previously, data was a luxury that only large corporations could afford to harness; for small businesses and underdogs, ‘going with your gut’ was the only way to survive or thrive.
But in today’s data-rich world, businesses can access far more data at a far lower cost than ever before. Yet many Australian entrepreneurs still base their business decisions on their gut, instead of collecting and analysing data at their disposal. How well do those instincts perform? Considering as many as 50 per cent of Australian SMBs never make it past four years of operation, it seems clear that businesses need a better way.
Why pick vagueness over certainty?
The speed of business has increased, and entrepreneurs require one trait to succeed: precision. The ability to accurately detect opportunities – and move fast enough to exploit them – ultimately determines the short-term success and longevity of any business. When SMB owners only have one chance to get it right, putting all bets on gut instinct alone becomes a risk not worth taking. Experienced business leaders, on the other hand, can trust their intuition because they’ve honed their instincts to read their markets and industries over many decades. That’s a luxury most Australian SMBs, particularly those in their first few years, may not have.
Today, they have access to data that is just as powerful, if not more accurate. With the right analytics tools, businesses can study past sales patterns or inventory numbers to detect inconsistencies and spot areas for improvement. Or they could go the other way, tapping into data projections to spot emerging customer trends and sales possibilities, and create plans or strategies to leverage on those discoveries. Data gives SMBs a solid platform from which to justify their actions to their teams, owners and investors alike.
Moving from confusion to clarity
In the past, huge amounts of time and patience were required to study datasets. Larger corporations had to depend on a team of data analysts and large-scale platforms to crunch the numbers and create reports – which, in turn, gave many of them a market edge which they’ve retained until today.
Today’s enterprise analytics platforms, however, are as powerful and thorough as their predecessors, if not more so. Many modern business intelligence and analytics platforms present data visually, with user-intuitiveness and multi-platform accessibility in mind. With the right platform, any small business can empower their teams with the latest data, giving them a clear snapshot of operations and performance that they can then act on in real time. The more comprehensively SMBs can combine different sources of data – like supply chains, sales, and even social media – the clearer that picture becomes. And the more widely they make this picture available to everyone within their business, the more effectively they can work together to make the right changes, in the least amount of time.
Intuition’s not dead – but it can be made better
This doesn’t mean that gut instinct is rendered entirely irrelevant. Many of today’s successful small businesses still consult their gut in their decision-making process – but only after having thoroughly studied the facts. In general, combining data and intuition yields the best results for any SMB’s long-term profits and growth.
A boutique retailer, for example, can use sales data to identify which product is selling well, and compare that sales data against supply chain performance to determine how well they’re performing against customer demand. After doing, so, however, ‘gut feel’ comes into play: does the retailer increase inventory of their best-selling products, or diversify into new items that address the underlying customer need? The only way to find out for sure is to try out either strategy – and, in turn, assess how it impacts sales and the supply chain in later months.
Small businesses cannot continue ignoring data and expect to excel against other, more digitally-savvy competitors. With both eyes fixed on data, business owners and their teams will find themselves better able to see opportunities and challenges before it’s too late. Only then will Australia’s small businesses be able to wield better control over their bottom lines, sustain their operations, and reach their next stage of growth.
About the author
Lee Thompson is the Group Vice President, JAPAC with Oracle NetSuite. He brings more than 20 years of sales leadership experience to NetSuite, working for high tech companies including TechnologyOne, and Salesforce.com.