Using Data to Create Action Steps
So far in our series we have discussed the basics of data analytics, how to start with the end in mind, and choosing which data matters most. This article focuses on creating action steps using your data to reach your goals. The following presents a five-step process to help you create a successful data analytics project.
Step 1: Identify Your Goal
Using a brainstorming tool like the Magic Wand can help generate ideas on how to improve your organization. From there, you and your team can select the most important initiatives that will give you the most value for the amount of work involved. Goals created through this process should follow the SMART (Specific, Measurable, Achievable, Realistic, and Timely) methodology.
Consider the example of a small retailer of outdoor apparel, Specialty Outdoors. They have a goal of reaching $250,000 in net income for the current year, up from $200,000 in the prior year. There are many factors that impact net income, so which do they focus on to improve? Increasing sales? Decreasing cost of sales? Decreasing overhead expenses? Focusing on in-person or online sales? The more specific their goal, the more easily they will be able to develop an action plan and hold their team accountable.
Step 2: Evaluate Data
One key factor impacting whether or not a data project is successful is the type and quality of data available (see Part 3 of the series for more information on what data to consider and how to make it more useful). Use your goal to determine which data will be most relevant in helping you determine action steps.
Returning to our example, Specialty Outdoors has a wealth of data in their point-of-sale system, including customer demographics, products sold, profitability, times of day in which products were sold, returns, and exchanges. Leveraging that existing data provides valuable insights about the company.
Specialty Outdoors could perform a market basket analysis to determine which products are frequently sold together, giving them insight into what type of products their salespeople should try to upsell. They would also easily have the ability to identify changing customer preferences over time. Are sales of a certain product to a specific customer demographic dropping off or increasing? This would help them determine if they need to adjust inventory levels of that item. An interactive graphic can even be prepared showing the geographic location of the company’s online sales, which could help them determine where to focus marketing efforts. If data needed to evaluate theses metrics isn’t currently available, Specialty Outdoors could establish a process for gathering the data going forward.
Step 3: Assess Where You Are in Relationship to Your Goal
When you set the goal, you established the finish line. In order to measure progress toward your goal, you need to know your starting point. Establishing a baseline helps you to accurately evaluate the impact of the action steps you take.
Specialty Outdoors decided to analyze the profitability of their in-store products as one part of their initiative to increase net income. By identifying their most and least profitable products and visualizing sales trends over time, Specialty Outdoors can establish a baseline of sales and profits on those products so they can make improvements over time.
Step 4: Assess Options and Make a Plan
Now that you know where your organization stands in relationship to the end goal and your data is providing the appropriate information, you can begin to assess options and develop your action plan.
With a goal and baseline sales in mind, Specialty Outdoors must decide on a course of action to increase their net income. Having purposeful steps for their team to take will make them much more likely to be successful. In this case, data shows the best actions include the following: provide sales people incentives to sell high-profit products and have management evaluate discontinuing low-profit products.
Step 5: Rinse and Repeat
A carefully designed and interactive data dashboard can help you visualize progress toward your organization’s goal. It will also provide deeper insights than reviewing raw data or even standard reports, such as financial statements. Continually measuring your progress toward your goal can help determine quickly if actions taken are working or not. And using advanced data analytics methods of measuring progress will provide valuable insights.
Specialty Outdoors’ first thought may be to simply discontinue some of their least profitable products. But by combining the profitability data with sales trends in one graphic, Specialty Outdoors found that some of their least profitable products were strong sellers, which indicates they can increase prices on those products.
Your organization will make effective decisions when continually evaluating the data in relationship to its goals.
Take a Step in the Right Direction
With the right information available in an easily usable format, your company can formulate action plans while using data to drive decision making. If you would like to explore opportunities to use data within your organization, contact Hantzmon Wiebel’s Business Insights and Analytics Team today.
Articles in the series:
Part 1:The Value of Data
Part 2: Starting with the End in Mind
Part 3: Selecting Data Sources