Your “Data-Driven” SME

In a recent blog post, we looked at how we could start to think about becoming data-driven. In this post, we’re going to look deeper in the idea into being data-driven.

There is a principle in police forensics called Locard’s exchange principle that talks about how every time an individual walks through a space he or she will bring something with them, and leave something behind. The discipline of police forensics is then based on the idea that by examining a space that has become a crime scene, there will evidence of the person there, and their actions inferred from that evidence.

If we look at our businesses, any action within that business will create these same forensic traces, and oftentimes these traces will express themselves as data. This can be as obvious as “the number of visitors to a blog post”, down to something as seemingly unimportant as “the amount of coffee the sales team gets through in a month”. All of this data is collectible, and once it has been collected it can be sliced and diced in such a way as to provide insights.

We know that large technology businesses do this all the time – indeed, it can be argued that the reason why these businesses get as large as they are is because they get very adept at doing this. Netflix is famous for it – they are able to track so much data about exactly how we choose what to watch and second-by-second how every frame goes over that they can tune their output to be exactly how we want it. The better the content, the more loyal the customer.

SMEs typically do not engage in this sort of data-driven mentality. As such, it offers a huge opportunity to business owners who are able to use data within their business to operate in a way that they become far more adaptable and resilient. Data-driven approaches create businesses that are healthier.

(As a social enterprise, I should point out that a lot of the malaise in the IT industry that negatively affects society comes from the data-driven approaches prevalent in these businesses. Large technology companies are rightly condemned in particular with regards to treatment of customer privacy. For me personally, you also have to question the morality of a business that deploys software that monitors how often a warehouse worker goes on bathroom breaks and marks then down accordingly. If we’re minded to create businesses that are or net benefit to people and planet, how we implement a data-driven approach needs to be done with care.)

Being driven by data allows us to make better, more efficient decisions. A business owner that I know well is in the business of selling stationery products, primarily to women. An analysis of her sales combined with careful surveying of her customers was able to show here that a decent proportion of her sales were (news to her) made to men, and those man happened to almost all be into bodybuilding. Overnight, she was able to develop an offering for that market, and was able to take that offering directly to that market in an efficient way because of insights determined from this data-driven approach.

For an SME, the lowest hanging fruit with regards to being data-driven comes from the sales and marketing process. Operationally, we tend to be close enough to our customers that a data-driven approach is of less benefit here, at least initially. Another way to look at this explains why we tend to see less data-driven behaviour in SMEs – SMEs tend to focus on operational aspects at their core, with sales and marketing as secondary aspects.

Marketing that works well for SMEs tends to be electronic in nature. Outside of referral marketing (where we get sales through recommendations), we either look at outbound marketing through email marketing, pay-per-click, or search engine marketing, or inbound marketing through content marketing. Coming back to Locard’s exchange principle, every time a prospect interacts with one of these electronic marketing methods, they leave some data behind – data that can be aggregated and interpreted. That data includes how many impressions we have, how many clicks, how many conversions, and so on.

The (somewhat trite) maxim of “half the money I spend on advertising is wasted, the trouble is I don’t know which half”, gets distorted in our favour with a data-driven approach, because it lets us turn the wasted 50% into something less than 50%, and lets keep optimising it to a lower and lower number. The trick is to make sure that we do this just with data, and not with intuition – data-driven tends to drive the number lower, whereas intuition tends to drive the number higher.

When we’re competing, and as of the time of writing we need to be competing in a way where we are building up our adaptability and resilience, this approach can really work. Luckily for us, it’s almost all mindset and as such does not require a lot of IT investment. A bit of Excel and careful thought is all we really need.

By Matthew Reynolds