The term “big data” is relatively new and unfamiliar to many and seems out of reach for small businesses. However, data-driven decision-making has become increasingly important as we progress into the age of information.
What exactly is big data? This refers to the large volumes of both structured and unstructured data that exist within and outside a company. There are three Vs associated with big data—volume, velocity and variety. Volume is the amount of information that companies collect through various sources (social media, business transactions, info from phone applications), velocity refers to the speed of data processing and variety refers to the various data formats (text document, database, videos, etc). The data could then be a source of information a business can translate into insights. The ability to use data to drive decision-making can be seen a key ingredient for better customer retention, higher profitability and long-term survivability.
Companies can leverage big data to gain a competitive advantage. Enhancing customer experience, tracking social media activity to increase customer engagement, and understanding and optimizing business processes are just some of the examples of what big data can achieve. An online retailer, for example, can use a combination of social media activity, habits and preferences of current customers and A/B testing to improve the way it targets potential clients. These insights will help to increase traffic and conversion rate to/for the retailer’s website and reduce the cost of customer acquisition.
Now, let’s focus on how small and medium enterprises (SMEs) can leverage data for better decision-making. Imagine a convenience store that sells hundreds of items from personal goods to food and beverages. How are we supposed to know what the bestsellers are? Are the bestselling items necessarily the most profitable? Are there items that are more appealing at different times of the day or week? If so, how can we leverage this insight to increase sales and maximize profitability? It is of no doubt that anyone who works there long enough would be able to know just by observation. However, as human beings, we tend to make mistakes and sometimes miss out on supposedly the most important observations.
With enough data, we will be able to answer the above questions in a definite and logical manner. Storeowners will be able to focus on increasing the visibility of the most profitable item and reduce their inventory of unpopular items. Adopting predictive analysis could help owners to forecast demand and use the data to build an optimal inventory management strategy. Predictive analysis uses big data to identify past patterns to predict future outcomes.
A small tip for business owners is to always think about the 80/20 rule, also known as the Pareto principle. For many cases, roughly 80 percent of the effort comes from 20 percent of the causes. A convenience store might sell hundreds of items but most probably only 20 percent of these make up roughly 80 percent of the revenue. The same can be said for thousands of different business across the globe.
As the Philippines continues to grow, businesses are in great position to scale at an unprecedented rate. The opportunities and possibilities for SMEs to adopt big data analytics are vast. Business owners should spend more time thinking about how they can store their data in an easy way and collect this over time in a consistent manner. In this age of information, adopting various analytical tools has become very simple as guides and tutorials are readily available online for free. The only thing missing in the equation is the initiative and open-mindedness to adopt new tools and technologies.
Keanue Goh is a graduate of the London School of Economics and Political Science and is currently a Business Analyst at First Circle focusing on building up the company’s Business Intelligence Unit. First Circle is a financial technology company providing funding to small and medium enterprises in the Philippines. To discuss how First Circle can help accelerate your business, visit www.firstcircle.ph or contact Keanue at firstname.lastname@example.org.