I recently had a conversation with a finance controller regarding his communications with a long time business owner. He described his discussions regarding a change in thought process from the gut feel vs. true analytics. Earlier this year I had a similar conversation with a business owner doing home remodeling. When asked if he was using any formal data to guide him in his business, he stated, Im just working man, just working. It became clear to me to write about those of you who have been successful in your own businesses and contribute it to your gut instinct. No one can take away successes using instinct and intimate knowledge of how the business works and what the business targets as profit centers. Yes, a business can be successful by good hard work and many favorable outside market factors, especially if customers are routinely satisfied with the quality and level of service. Money can be made to a level of providing business sustainability to the point of employee confidence in the organization being there tomorrow. It is very possible to jump at, or even create, opportunities at the right time and in the right way to have grown the business to what it is today. The determination for this type of success must be steady and un-wavering. This is truly one of the hardest feats to pull off in business today. No one can take that success away from those who achieve it using their leadership. This entire paragraph holds true for the business owner and even the specific leaders within the organization that have kept a department and/or business alive and thriving. It does deserve a commendation from everyone around them. It certainly takes a unique person to get things to a sustainable level.
Now the potential problem arises. The mindset gets locked into past management successes and can block out new thoughts and ideas. You may also be one of those business leaders that is, or has, seen a shift in the market. After there is a strong foot print in one market, competition will seek out the opportunity to get a piece of the action. Most of which follow the exact same process as well
gut instinct, hard work, and determination. As competition grows, margins get tighter. Consider for a moment what the margins were when you first got into the business. As competition grows, prices are forced to come down to stay competitive, not to mention the percentage of demand does not rise at the same increase percentage of supply. As the business cycle continues, the business flattens out to a certain extent and potentially even declines slightly. Those strong sustainable margins become harder and harder to hold on to at the same levels. As the business cycle continues leaders and owners find they are working harder to maintain once past levels of success. The once touted gut instinct changes to uncertainty and potentially or ultimately leading to survival mode. This cycle can continue full circle over and over again during the course of life of the business. The bigger issue is many owners and leaders simply chalk it up to good business sense and a stronger GUT instinct.
Many business owners and leaders operate on these basic premises. After a period of success it becomes very difficult to influence or change the mindset. Consider the change in technology over the last several years. First off, many folks that have relied on the past technology are reluctant to change. The past technology has served them well and they have a certain level of comfort using it. It takes a lot of outside influence to change an old mindset to a new way of thinking. Business market changes, economic impacts change, pricing levels change, and many other influences to the organization have changed. While each one individually may or may not have a great impact to the business, they do have an impact. It is the extent and impact to the organization with all of them together where there becomes a struggle for maintaining. Now bring into the picture the presence of data. As technology increases so does the potential for data collection. The better the data, the more reliable the direction it can potentially drive. The days of running the business solely on gut instinct is very hard to hold on to. Using data, quantifiable statistics, and strategy, a business owner or leader can make better decisions that truly reflect both sustainability and growth. Running a business today is vastly different than 20 years ago. It requires a new way of thinking and utilizing sound and accurately collected data to not only see what was in the past, but what direction to go in the future.
Using data for setting the direction of a business can be a huge change in current thought processes for many leaders and owners. It isnt something to simply jump into with both feet, however. The data used must to be sound and its collection being consistent and precise. Other dependencies include how the data is statistically charted or calculated for decisions. Relying only on one positive sided statistic can be dangerous if there is no consideration to the actual data behind it. Anyone can twist data to drive a specific statistical direction. This is where quantification of the data is important. Data too vague will not produce precision towards decisions and direction. Data too detailed can become layered with confusion and contradictory information resulting in paralysis and lack of confidence for making decisions. No matter what, data is the key to sustainability and success. It is also the edge required for increased profit margins and growth. Collect data accurately and with the required level of detail. Quantify and utilize data for direction and decisions. Trust data for sustainability, growth, and success. You will be surprised the opportunities that are uncovered when using data to drive sound business decisions. If this concept is new, get help. Typically a minimal cost will provide a quick and sound ROI.