Our partners and Small Business Development experts from Knowledge Institute will be contributing quarterly posts to our blog, offering thoughts and ideas on business growth and development. We invite you to enjoy this first entry with tips on getting the most out of the onslaught of business data your organization has access to every day.
When Data Is Not Our Friend
By Dr. Deborah Osgood
We have access to more business data today than ever before. Data collection systems have become so accessible, affordable and efficient that we often end up with more data than we know what to do with. The fact is that unless data has a meaningful context, it doesn’t mean much. By itself, it’s just data. In a useful context, it’s information. Information leads to knowledge and, in the world of business, knowledge is power.
Data in Context is Knowledge Management
Knowledge Management (KM) refers to a process that helps to provide a more meaningful context for leveraging business data to support informed decisions. Last century, KM was often as straightforward as using an Excel spreadsheet to track sales performance. As technology advanced, more sophisticated bookkeeping and customer relationship management software became available to give multiple sources of data more meaning.
Today’s business environment demands a combination of data management tools. The rate of change and the dynamic and often unpredictable nature of our economy require it. Still, KM does not need to be complex. There are 3 basic steps for building a KM approach to fit your business needs:
Where Am I Going?
One of the best places to begin when answering #1 is with a financial forecasting tool. With the right tool, you can quickly gain a solid perspective of how much revenue you want to generate and exactly what it will take to get you there. If you’re unfamiliar with this process, start out by forecasting revenues for just one product or service. Once you understand what each piece of data means, move on to a more complex forecasting model for multiple products. Once you’ve developed the forecast, change your assumptions about certain data variables to learn what it means to your bottom line. For example, if you negotiate for lower rent, what does it mean to breakeven levels; if you offer a sales promotion, what does it represent to your profit margin; and so on?
Where Am I Now?
Once you have a solid grasp of where you want to be, step 2 reveals where you are currently. This is also where you’ll learn just how efficient your current KM approach is. For example, how long does it take you to understand who your customers are? Who is spending how much with you? Where is the majority of your business is coming from? How much are you spending to support this level of sales? In business, controlling cash flow is critical. In this regard alone, lack of control in the area of spending is one of the fastest ways to go out of business.
What is My Strategy?
Having benchmarked where you’re at and identifying where you want to go, you can now more effectively plan how to get there. While the common elements to this 3rd step include a solid strategic planning framework, also important is your KM System (KMS). A KMS refers to how you’re leveraging IT to give your data meaning. For most small and mid-sized businesses, KMS is about a customized approach to data management. There is no one size fits all. The goal is to minimize the number of different IT applications while maximizing data access to support informed – and timely – decisions. In this regard, an automated bookkeeping system is a must. This includes a system that delivers timely and accurate reports on multiple business performance metrics at the push of a button. Add to this an easy to use spending control system and you’re likely to be well on your way to achieving your business growth objectives.
About the Author:
Both a scholar and practitioner in the field of entrepreneurship, Dr. Deborah Osgood has been referred to as the “Oprah of small business development” by IBM, and a “powerhouse in strategic management” by Tufts University. As President/CEO of KISBD, she creates innovative learning programs and delivers business training, consulting and content marketing services to corporate and nonprofit agency organizations. For more in-depth entrepreneurial information, please visit www.buzzgate.org.
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