Mike Der is BI Manager for Mark Anthony Group who owns brands including Mikes Hard Lemonade. They are using sales data from stores to grow the business and increase profitability.LAURA LEYSHON
Turning masses of data into actionable information is a constant challenge for companies of all sizes, but when you're a small business in a highly competitive marketplace, it's even more critical to keep on top of trends.
You can struggle with spreadsheets and go with your gut feel, but to get maximum information businesses are increasingly turning to tools such as business intelligence (BI) and analytics software.
Wikipedia defines BI as "computer-based techniques used in spotting, digging-out, and analyzing business data, such as sales revenue by products or departments or associated costs and incomes. BI technologies provide historical, current, and predictive views of business operations."
BI software gives you the ability to dive into data and find trends and relationships you may not have considered, or to find the cause of anomalies you've noticed. It lets you produce high-level reports, then drill down, often to the individual record level, to dig into an issue. As you move up the food chain into analytics, it lets you generate forecasts so you can adjust to changing market conditions.
Say you offer 10 products, and you notice that sales of one of them are way down. By clicking on that line in the report, BI software lets you look at lower-level information - model or colour - and find that a certain item is not selling. Another click may show you that one salesperson's volume, or lack thereof, is the problem, or it may indicate that you didn't have sufficient inventory and couldn't sell more.
That might send you off to have a chat with the salesperson or the employees in charge of inventory.
Mark Anthony Brands (MAB), a privately owned importer and distributor of fine wine, premium beer, and specialty beverages including Mike's Hard Lemonade, Mission Hill Wines and Hell's Gate beers, may not be a mega-corp, but its product portfolio includes more than 2,000 stock-keeping units in various genres. Its four offices serve both the United States and Canada, and to stay on top of its complex marketplace, it buys data - lots of it - and uses it to determine its product mix and make sure it supplies its customers with the right products at the right time to maximize sales.
Mike Der, MAB's manager of business intelligence systems, says the company purchases raw data on sales of its products and those of its competitors, sold both at retail and in the hospitality space, from places such as the Liquor Control Board of Ontario. It imports the information into its data warehouse and uses IBM Cognos tools to analyze what types of beverages are purchased, and when and where they are purchased, often down to the individual store level.
This is invaluable to the sales force.
"We have true, fact-based selling," he says. "We know what consumers buy, and can match it with our products."
Last year in the slow economy, for example, MAB's BI reports showed that many customers were no longer purchasing a bottle or two of expensive wine, but they were moving to more, lower-priced offerings, and it was able to quickly adjust to accommodate the change.
Gareth Doherty, senior research analyst at London, Ont.-based Info-Tech Research Group, says small and medium-sized businesses (SMBs) actually have much greater value to gain from the technology in many cases than large enterprises. "If you look at the market environment in which the standard SMB operates, it's pretty defensive, and they don't have the deep pockets large enterprises have," he notes. "Every decision is pretty critical to the survival of the company. Any advantage you can gain into understanding consumer behaviour or behaviour of your competitors, or visibility into market forces to anticipate where the market is going allows you to drive revenue or manage costs."
In fact, Mr. Der says, "(BI) is the minimum price of admission in this market."
Mary-Jane Jarvis, senior consultant of business intelligence at Xenex Enterprises Inc., agrees.
"The key is having the right information at the right time in the right hands. When this happens, costs can be saved from such things as reduced inventory, reduced markdowns, reduced churn, more productive, effective, efficient processes. Increased revenue comes from increased market share, speed to market in advance of the competition. Increased profitability can result from one or both of the previous two, or as a result of new offerings or innovations. And all three will only happen if good business decisions are made based on good facts and in a timely fashion."
Or, as Bruce Ross, president of IBM Canada, puts it: "Business analytics helps all businesses quickly answer three fundamental questions across their organization: What is happening? Why? What is likely to happen?"
Those answers can provide huge payoffs. Blue Mountain Resorts in Collingwood, Ont., gained a 1,822-per-cent return on its BI investment in a single month, Mr. Ross says, and it managed to reduce labour costs, eliminate excess inventory, improve reporting and make better strategic pricing decisions in the process. It applied analytics to everything from determining necessary staffing levels based on weather forecasts to fine-tuning room pricing.
If a specific room type isn't selling as well as it had in previous years, a manager can look at which variables have remained constant and which ones have changed. IBM Cognos TM1 gives Blue Mountain the means to review the data from a variety of angles to isolate the particular variable that is a drag on sales. Armed with that information, a hotel manager can alter room rates, align them with previous year's rates, wait out a spell of bad weather, or implement a new marketing campaign featuring the affected area.
Mr. Der says MAB managed to prosper during last year's tough times thanks to its ability to see changing trends in alcohol consumption and adjust its offerings accordingly. He's now looking at even more tools to answer the increasing number of questions from sales and marketing.
"What is the ROI? It's the same as asking what's the ROI on tires for your car," he says. "We can't do business without it."
The analytics need not be complex, either, notes Dr Greg Richards, professor of performance management at the University of Ottawa's Telfer School of Management. "I don't teach students to use 'regression models,'" he says. "I use cause-and-effect tables."
There is a place where sophisticated techniques are useful, he says, but he teaches his students to look at causality.
A key to creating good decisions is starting with good data, says Jim Davis, senior vice president and chief marketing officer of SAS, which provides data warehousing, analytics and traditional BI applications. "If you can get quality data and apply analytics, it will help you understand issues specific to your business." But, he adds, "You have to look at it in terms of the problem you're trying to solve."
Mr. Doherty agrees. "It's not enough to put data into a system and run analytics," he explains, adding that he sees a continuum of user communities, from those simply using BI tools to provide consolidated reporting from multiple inputs through the use of multi-dimensional reporting that lets you "slice and dice" to dig into more detail to predictive analytics and forecasting.
The challenge, says Mr. Der, is making the tools easy for salespeople to use. "At the end of the day, you have to communicate with sales and marketing in a way they understand," he says. "They're not techie people." He provides a self-service portal with both pre-run reports and a facility to do custom reporting through simple prompts.
Simpler tools are hitting the market as vendors who initially targeted the enterprise with their BI and analytic tools realize that there's a huge need in the SMB space. For example, BI, analytics and data management vendor SAS Canada formed an inside sales team to move down-market, and it has worked with product teams to simplify offerings for companies that don't necessarily have experts on staff. SAS offers several hosted products as well as shrink-wrapped software.
IBM, which got into the market through its purchase of Cognos, has introduced a product aimed at, and priced for, mid-sized clients. Even Microsoft is now touting BI for the masses with an new offering for Excel.
Regardless of the solution you choose, Mr. Der advises, take baby steps. Know where the gaps exist in your data and look for a solution to provide insight into the information you have. Start with reporting, then grow into the other functions. "Then you'll have confidence," he says. "You'll understand how the tool creates value."
Special to the Globe and Mail