Despite dramatic advances in data science and business intelligence (BI), many small and midsize companies still have not adopted a formal data strategy. Here's what's holding companies back.
Data is pervasive across almost every organization. And yet, many small and midsize companies still have not adopted a formal data strategy for business intelligence (BI) purposes.
Companies that don't have a formal BI strategy still make daily business decisions based on the information they have access to. Perhaps they just don't formally acknowledge that they make data-driven decisions. Or perhaps they don't have a formal process for reviewing and analyzing data. Even "gut instinct" is a form of data processing and pattern matching, when you think about it.
First, what is business intelligence?
Gartner defines business intelligence (BI) as an umbrella term that includes the applications, infrastructure and tools, and best practices that enable access to and analysis of information to improve and optimize decisions and performance. Quite a mouthful. Perhaps a better description is that BI provides actionable insights for your company based on available data. A rudimentary example of BI would be a weekly sales report. A more sophisticated example would be a customer propensity model that predicts the type of customer you should target based on past sales success.
But we don't have enough data …
A lack of data is a common misconception preventing many organizations from formally adopting a BI strategy. The rationale behind this argument is that data must come in the form of IoT sensors or databases. Baloney! Think about every piece of information that your employees use to help make decisions: accounting systems, ERPs, POS systems, spreadsheets, even handwritten receipts. Each one of these items is a data source. And we're not even taking into consideration data available from outside sources, such as weather and commodity futures prices.
You likely already have a diverse range of data sources in use to support decision-making. But if you're not formally tracking the thought process or analysis, you most certainly are not optimizing the decisions that get made with this data.
OK, we'll create a dashboard.
Building formal reporting tools is a great start. There are many self-serve visualization tools available that can help companies build easy-to-understand dashboards.
The issue for many companies is when they stop at basic dashboarding or, worse yet, limit themselves to ad hoc analysis. Business intelligence should drive a continuous process of self-improvement for an organization, which means making a formal effort to regularly review insights coming from trustworthy data sources. Non-data scientists often make rookie errors when analyzing data by ...
- Stopping an investigation as soon as the data confirms their initial hypothesis.
- Allowing confirmation bias to cloud their judgment.
- Broadly sharing initial results too early.
In fact, one risk with self-serve visualization tools is that they look great! A well-formatted report with an incorrect conclusion can be dangerous when shared with a broad audience that mistakes good formatting for thoroughness of analysis.
But the data is difficult to access.
If something is worth doing, it's worth doing well … sort of. Yes, it might take effort to get access to all your data. In fact, it is almost guaranteed that your organization will have data trapped in many difficult-to-access places, including legacy systems and old spreadsheets.
The thing is, BI becomes interesting when you start extracting novel insights that you weren't expecting to find. And this only happens when you can connect different systems that normally don't communicate with one another.
Don't worry too much if you can't connect everything at one. Start with what you have and build a plan to incorporate as many different data sources as possible over time.
I'm convinced – what next?
Well, the first step is to take a quick assessment of what sort of analytics is already being done at your company. Chances are, there are small groups already formally performing BI and analytics.
However, if your in-house team isn't sufficient, you'll want to consider working with a respected BI firm. Ideally, such a partner should be able to do the following:
- Work with you to build out a BI strategy
- Build simple dashboards that incorporate disparate data sources
- Ensure that stakeholders and technical experts can communicate and work with each other
- Recommend data infrastructure upgrades for today and the future
The good news is that there are hundreds, if not thousands, of firms out there that can help. Just do a quick search for "business intelligence consultants" or "BI consultants" and you'll find a long list of professionals in your area.
Before engaging, make sure that you've identified some specific goals. Don't dashboard for the sake of dashboarding. Ideally, you have a specific business problem in mind with an expectation of some data to review.
BI isn't rocket science – you just need to take the first step.