Today’s economy is like sand dunes in a desert – constantly shifting in unpredictable ways. Business owners can never be entirely sure which way the wind will blow, but we do have the tools at our disposal now to mitigate risk.
One such tool is business intelligence, which helps find patterns in data sets to identify trends that offer numerous benefits to your business.
Unfortunately, not all business owners take advantage of business intelligence software and miss opportunities to increase their bottom line and otherwise grow their business.
If you’re not already using business intelligence systems, you should make it a priority to implement a solution to give yourself a leg up on the competition.
Before we inspect how business intelligence impacts the short and long-term trajectory of your business, let’s first define what these systems are.
What Exactly Is A Business Intelligence System?
Business intelligence is a rather broad term that is used as a catch-all to describe many different types of software, as opposed to a more narrow technological term, such as a video player application.
Essentially, any software that collects and analyzes data to help leaders make more sophisticated business decisions falls under this umbrella definition.
Not only do these systems identify areas for improvement through historical analyses, but they also use algorithms to make future projections.
The amount of time it would take a human being to collect data, sort through it, and make numerous calculations is excessively high.
Instead, it’s better to let a software program do the heavy lifting and conveniently package data and conclusions into easily readable forms, visual tools, graphs, and dashboards.
Naturally, the primary goal of any business intelligence software is to promote improved decision making to better the chances of the business’s success.
However, there are other benefits, too, such as reducing inefficiencies that deteriorate profits and improving the day-to-day operation of the business.
1. Determining Which Projects Aren’t Feasible
Numerous opportunities can sometimes be too much of a good thing for a business and cause a leader to feel overwhelmed.
What’s worse, the leader may think that trying to pursue as many opportunities as possible is the only path toward success; more often than not, however, it’s the path to failure.
Though passing up an opportunity may feel bad, you need to factor opportunity cost into your decision.
After all, there is such a thing as the Pareto principle, which is also referred to as the 20-80 rule. You may have heard this principle referred to as the principle of factor sparsity or the law of the vital few. The core of this idea is that roughly 80 percent of efficacy (or outputs) comes from approximately 20 percent of the inputs.
If you notice that you’re spending 30 percent of your time on a project that’s not bearing fruit, it’s time to consider abandoning it. Instead of pouring even more resources, time, and money into that project, chalk up your lost time as a sunk cost and cut out the dead weight.
2. Finding Which Services Generate the Most Revenue
The antithesis of finding which projects aren’t working is using business intelligence systems to identify which services are generating the most revenue.
Of course, revenue is only one part of the equation, and you need to factor in other metrics such as margins, profits, sales cycles, and other similar concepts.
Business intelligence systems can use weighted metrics depending on your priorities to aid the calculation of which services are the most potent additions to your bottom line profits.
But without the right software, knowing which services are your highest performers isn’t always apparent.
3. Determining Which Customers to Target
To be frank, there are manual ways to determine which customers to target. For example, good old fashioned trial and error is one way to probe the market through advertising campaigns to see which market segments respond best to your product or service.
In addition, many businesses create marketing personas to identify and define their target audience.
But business intelligence software provides an advanced, automated, and more accurate way of determining which customers to target.
As the old saying goes, marketing to everyone is akin to marketing to no one.
These days, advertising platforms (Google, Facebook, etc.) have such highly advanced algorithms you can drill down and sift through markets based on criteria like ethnicity, financial status, language, age, gender, and more.
Some young businesses use a marketing approach where they throw everything at the wall and see what sticks.
Conversely, mature and practical businesses who want to make every iota of their marketing budget count know that they need to clearly define their audience before moving forward, and make corrections with business intelligence insights along the way.
4. Cost Accounting
It’s common for some businesses, especially small businesses, to lack an accounting department. As such, it’s difficult for them to track costs.
Some try to track operational costs with software, such as QuickBooks. Others forgo accounting for operational costs altogether and fail to streamline their day-to-day operations, which hurts their bottom line.
The good news is that business intelligence systems help automate the process of tracking costs to help free up the business owner’s time, which he or she is typically short on, to begin with. When you’re launching or running a small business, every dollar counts, and you need to make sure you know where all of your money is going.
5. Identifying Slow Periods in Your Industry
Different industries ebb and flow at varying rates; however, while some sectors have noticeable tides, others do not.
For instance, a business selling Christmas wares can clearly expect to receive the bulk of its business in December. Likewise, a company selling water sports equipment will naturally expect to have slower months during the winter.
Unfortunately, other industries aren’t so black and white, and you may be failing to identify recurring lulls of revenue in your industry. And knowing when business is going to drop – especially in cyclical patterns – is crucial to the survival of your business.
Consider the losses and missed opportunities your business would experience if you decided to launch an online marketing campaign during the slowest time of year.
How much of your marketing budget would be wasted? Would your business go the way of the dinosaurs because slackening sales and profits would fail to sustain your business as you attempt to expand?
Business intelligence systems will help uncover these periods so you can create better strategies to adapt to patterns in your industry or niche.
How Business Intelligence Systems Help Prepare Strategies for Emergency Scenarios
In addition to the benefits and advantages of business intelligence systems mentioned above, note that they also allow leaders to plan for disasters and emergency scenarios.
If you don’t already have a safety net in place, your business could be in for a world of hurt. Disaster recovery strategies are a necessary part of running a business in the digital age.
This is especially true of businesses that heavily rely on an underlying information technology infrastructure or do a significant portion of their business through an e-commerce website.
Too many companies fail to backup and secure their data, which can incur irreplaceable data loss when they least expect it.
But one of the most expensive factors isn’t immediately obvious: downtime.
If your website crashes during one of the busiest times of the year (Cyber Monday, for instance), each minute of downtime equates to massive financial losses.
Just try to imagine how many sales you would lose if your e-commerce site were unavailable for a full 24-hour period during the busy time of year.
Furthermore, consider that downtime harms your business in other ways too. Downtime and other aggravations reflect poorly on your business and can damage your reputation.
Sadly, imprudent business owners don’t understand that disaster recovery is a necessity and not a luxury, and claim that they can’t find any room in the budget to implement a disaster recovery safeguard.
Believe it or not, business intelligence systems help business owners afford disaster recovery.
By improving the efficiency of the business, increasing margins and profits, and tracking costs, you can free up funding. In doing so, you can avoid disasters that would otherwise tank your business like the iceberg that sank the Titanic.
As we move forward into the new decade, it will be fascinating to see how quickly business intelligence systems advance. Data has never been as crucial and accessible as it is today, and software exists that can analyze the data faster and more deftly than a human being.
If you’re not already using business intelligence insights, you’re leaving money on the table that you could otherwise use for disaster recovery systems to prevent a catastrophe from demolishing your business.