How Data-Based Decision-Making Can Take Small Business to the Next Level

Until recently, large corporations maintained an advantage relative to small-to-midsize businesses, armed with data analytics technologies and expertise to drive more informed decision-making. In the past, larger companies made decisions based on facts and metrics while their smaller competitors made assumptions. Now, businesses of any size have better access to education and technology resources as well as data analytics tools — which are quickly becoming a driving force behind fast-growing small businesses.

Data-based decision-making drives insights into small business operations, including marketing, sales, customer relationship management, accounting, finance and logistics. When organizations transform their cultures to encourage data-driven thinking and hire data-driven people, they can leverage it to:

• Gain business insights into what is working well and what is not
• Forecast and identify industry and economic trends impacting the business
• Discover buying behaviors and map out sales cycles and customer journeys
• Improve the customer service experience and add informational value to customers and clients
• Identify effective marketing channels to optimize spending for revenue and profitability

History may eventually look back on the 21^st century as the start of the big data age for small businesses. Consider these statistics:

• 67% of smaller businesses spend more than $10K a year on analytics, according to Small Business Trends.
• IDG research claims the amount of data these smaller businesses manage is 47.81 Terabytes, which is expected to grow more than 50% in 12 to 18 months (from March 2020).
• TechJury reports that 97% of all organizations are investing in big data and AI.
• BARC reports that organizations benefit with a 69% chance of better strategic decisions, 54% chance of enhanced operational process control and 52% better understanding of consumers. These insights result in an average 8% increase in revenues and a 10% reduction in costs.
• An MIT Sloan School of Management study reveals that companies that were primarily data driven benefited from 4% higher productivity and 6% higher profits.

How Can Small Businesses Optimize Outcomes with Data?

1. Use data to create a culture of critical thinking: A data-driven culture is a departure from a traditional business culture in which experience, expertise and intuitions combine to drive decision-making. With the availability of data, subjectivity in decision-making is limited. Critical thinking in business relies on accurate data relevant to established business objectives. In this new paradigm, data collected from testing and surveys holds greater value than an individual’s experience in a market or industry. According to a PwC survey, highly data-driven organizations are three times more likely to report significant improvements in decision-making compared to those who rely less on data.
2. Find patterns and correlations: A study of data over time reveals patterns and correlations. From these studies, data analysts can extract insights and accurately predict trends, make forecasts and guide decision-making that achieves established objectives at a much higher rate. Patterns and correlations become evident in every facet of a business, from accounting and finance to operations and logistics.
3. Get more data inputs: Successful organizations meticulously plan to collect and prepare data from both internal and external sources. Internal sources can include input from business leaders who inform the questions data analysts seek to answer. External sources include information from vendors, partners, customers and clients. Modern data analytics software makes the more relevant data points available, allowing more potential for meaningful extrapolation.
4. Visualize data in an impactful way: Data software enables analysts and executives to view dashboards that contain charts, graphs and maps that provide highly accessible views into patterns and correlations. Like larger corporations, smaller businesses now value MBA graduates with specific training in this area.
5. Align key performance indicators to business objectives: Small business leaders can direct their employees to specific metrics or key performance indicators (KPIs) in order to drive established objectives with focus. Data analytics tools help determine which tasks are essential, and visualization tools help leaders precisely track progress toward goals. For every department, KPIs will be different, such as throughput on a manufacturing floor or annual customer retention rate for customer service.
6. Build models for effective and efficient business decision-making: Doing so promotes accurate predictions and avoids the use of subjective decisions, which are susceptible to bias and sub-optimal choices. Combined with big data and algorithms, modeling in decision-making can help improve business performance.

Now that we are squarely in the age of big data for small businesses, the market for trained data-driven professionals has increased exponentially. There has never been a better time to stake your career on the power of big data for businesses of all sizes.

Learn more about Southern Oregon University’s online Master of Business Administration with a Concentration in Information Analysis and Decision-Making program.