Every company has a goal to become something better in the future. The key to achieving this goal is a solid vision about where the company is going and solid decision-making about how to get there. Many companies miss the hidden step: The decision system needed to make the right decisions quickly along the way. I’d like to take you on a journey for the next few minutes about the different stages of decision systems companies may have. Be warned. If you are not creating your best decision system, your competitors will! By doing so, they will threaten your company’s future plans!
Companies with little or no information are often the companies growing the slowest or not growing at all. They are likely to have no accounting or minimal accounting systems yielding basic financial performance information but not much more. This is because accounting gives limited information about past performance only. For companies experiencing this minimal information situation, some additional facts may be found in the accounting and financial reporting, but your true company performance picture is incomplete. It’s unlikely to find out if your marketing team is generating the ideal number of leads, or what your sales team’s effectiveness may be or how well (or poorly) your service department is generating revenue and most of all, you will be disadvantaged to find out why any of these are happening.
When companies are operating on this limited of an information system, there is an indication management is not understanding how valuable the impact of information on their business. This is a very large handicap to becoming successful as limited information causes poor problem identification and as a consequence, leads to inconsistent and erratic decision-making. No matter what decision is made, because information is so limited, the outcomes of these decisions are highly susceptible to mistakes just because the analysis of the problems are inaccurate. This kind of a situation is akin to shooting at a moving target while blindfolded. Hitting the target quickly and without delay is very difficult.
If you are a company in this situation, and you have a desire to make better decisions, you should evaluate creating more detailed reports and dashboards covering all areas of the business to begin the journey to better issue identification. This is step 1 to increasing your chances of implementing decisions that resolve issues more quickly.
Companies with well planned and well designed accounting, Customer Relationship Management (CRM) and other information systems can capture more useful decision making information allowing the freedom to grow rapidly through better decisions. It will be management’s job to establish what information to capture. Once information is captured dashboards and reports and Key Performance Indicators (KPI’s) can achieve a more solid and consistent decision making system. This is because you can now get key information about:
The effectiveness of your marketing efforts:
- Are your events producing leads?
- Which events need improvement? Elimination?
- How many leads are each marketing activity producing?
- Are the lead volumes you generate enough to support your sales goals?
The effectiveness of your sales efforts:
- Are your sales teams efficient in converting leads to sales?
- Which member of your sales teams needs training and improvement?
- Are your customers responding to your sales messaging?
- Are your sales radiating to additional products and services? How much?
The effectiveness your services teams at generating revenue:
- How much revenue does each team generate?
- How much revenue does each team member generate?
- Are the teams working at their capacity? Can they generate more revenue?
- Which team members need training and improvement to reach your goals?
- Are they selling? How much?
- Are your teams cost effective?
- Are they profitable? As a team? Each team member?
- Are they leaving your customers happy and wanting more?
As you can see, capturing the right information from each area of your business means more relevant and detailed information may be delivered to you. That information can pinpoint, quickly and accurately, what your identified issues are and steer you to a corrective course of action to improve your company performance.
I highly suggest trending your information, in a consistent way to lead you to insights regarding what works and doesn’t work in the day-to-day operations. This means displaying your consistently calculated information over time in a graphical way. This leads to insights regarding where poor practices may exist. Most companies apply this in an operational way, but it can be applied to marketing and sales too.
For example, you can easily calculate, in an automated system, the average each customer spends on your products and services every month. Calculating this, the same way, every month, and then creating a graph can give you a picture of your customer’s behavior about spending habits. Doing this will give you a very clear picture of what the customer behavior is and allow you to gain insights into what sales strategies may increase your sales per customer trend in a positive way such as turning a seasonal slow sales trend into a high sales season.
If you are a company practicing these information techniques, you are doing well and can improve your departmental performance and your overall company performance. Congratulations, you are on the way to greater performance each quarter and each year!
Company Wide Insights
With a strong decision information system in place, correcting specific issues within the business, across different areas of the business such as marketing and sales can provide management with a comprehensive, mosaic style view, from which strategy insights for the company can be gleaned and developed.
Companies doing this are aggressively looking to mine information for any valuable observation to get a strategy and gain an advantage. The right adjustments to company strategies can position any company for a stronger stance in the marketplace. This means out maneuvering many competitors as companies doing this now have a fast and adaptive ability to understand the changing marketplace and can shift strategies quickly as they see the marketplace shifting. This shift may be reactive or proactive depending upon the strength of the information and management’s talent to anticipate the marketplace.
As a strong decision systems are established and departmental strategy insights become clearer, this places management in the proactive position of smoothly and fluidly adjusting their strategy company wide, with marketplace impacting ideas placing your company in the market dominance position you wish in the future years.
Companies practicing these steps are the most successful companies. Almost all large public companies are doing this, and almost all private companies of larger size are also doing this. They are doing this because this practice leads to great success. It’s that simple.
To better anticipate the marketplace, some companies today are leveraging predictive analytics information systems. These systems can predict many things within a business such as customer preferences, sales predictions and more. For example, predictive analytics can predict the outcome of a customer’s purchasing decisions under various circumstances. To be more specific, let’s use a real business situation. If a customer buys your low margin introductory service, and as a consequence, multiple additional choices are available to that customer for future sales opportunities, these predictive analytics systems can calculate the probability your customer will buy more services for each available choice. In addition, you can get insights into which available choice of the customer is going to lead to the highest possible sales dollars. This means you can provide your sales teams with the strategy to suggest to the customer those options that lead to highest future sales.
Every company has stages of evolution in their management decision systems. Your decision system can provide you with the information you need to position reactively, proactively or in anticipation of your markets. Here is a recap of the systems companies use:
- Minimal Information inhibits your growth potential
- Information giving departmental insights yields moderate performance improvements
- Company wide information provides management with far more comprehensive insights
- Strategy shifting insights lead to fluid strategy changes. This often comes from highly skilled, forward thinking management anticipating market changes
I invite you to contact me if you have questions!
Rodger Stephens, CPA, CGMA
Prize Performance LLC is a consulting firm specializing in accelerating business performance for small to medium sized businesses. Contact Prize Performance LLC today to take your business to new places!