A recurring theme today for entrepreneurs, managers and professionals is more than ever “Management Control”.
Management control opens up a world: a system of analysis and accounting and extra accounting techniques aimed at determining the performance of your company in the first place. Secondly, it is also possible to make better decisions guided by numbers (data driven) and in the third step make optimizations, especially in the cost structure but also in investment decisions or in the management of financial resources.
In order to make the control of digital management it is necessary to abandon the convenience of the own horticulture guaranteed by the Excel sheet and to centralize the data in an organic database to which to draw a business intelligence.
If the data are there and properly organized it is possible, with a software technology that is commonly called “business intelligence”, to try to give meaning to many questions: “Which customers have contributed to the revenue of the company or business under assessment?” “Where can the process be made more efficient?” , “How much does the product cost or a machining step?” “How much does a downtime cost?” “Is it worth investing in a process to make it more performing?” “How much is it worth to serve a certain market taking into account the different margin of contribution or a different mix of sales?”
For example, by developing a tabular or graphical representation of sales summary, at a certain time (month, year, etc.) combined with quantities and amounts, connected to the product and customer data, it is possible to create a commercial dashboard that describes, for example:
- the listing of the customer package, active and not with relative purchase frequencies;
- the “abc” customers that, according to the paretiane logics, evidences the 20% of buyers who have generated 80% of the sales;
- the historical series of sales to customers on a temporal basis (weekly, monthly or annual) to determine seasonality rate and trend (trend);
- the “abc” analysis of products organized by line, family or market;
- customer loyalty linked to the company and its products.
By further refining the analysis, it is possible to create groupings by classes of customers (such as customers belonging to the same channel, rather than a certain geographical area, sales agents, etc.), rather than groupings by product classes (such as product family, product category, etc.).
The keys of reading are multiple and the versatility of the readings will depend on the structure of the database: the business intelligence allows to facilitate this aspect, offering an immediate interpretation to better describe the business dynamics drawing from multiple data sources.
Business intelligence is a technology that today allows you to bind data from one or more archives in real time and provide answers to business surveys in a simple, effective and timely. And while this technology until a few years ago was complex and expensive, today it becomes accessible as long as there is an expert figure in designing architecture, developing its usability (reading and use) and ensuring its adoption (training).
Sometimes it takes a few minutes to describe a phenomenon such as, for example, the sales performance of agent A compared to B, or observe it from a temporal point of view to know the trends and volumes by market, group of customers or products or by geographical area.
From the moment the navigation of the data is available and the information is updated, we talk about punctuality of the data. This allows you to decide whether to invest in a loyalty campaign, rather than grant a delay or a commercial discount; This is because the choice may depend on the relationship that the company has established with its customer or on information on the performance of the segment to which the customer belongs or information produced by the central risk.
Being told what is happening in everyday life as a result of management is the new frontier for those who want an evolved approach to management control.
By enhancing the ability to read sales data, for example, with reliable statistics and dashboards displaying synthetic indicators, you can turn simple data tables into convincing infographics. Let’s take for example the “life-cycle” or life cycle of the customer. Each customer has its own life cycle: it begins to buy, reaches maturity and at some point, for various reasons, it can begin a more or less slow decline until it even stops buying. Identifying the “state of life” of each customer to understand whether it is worth it or not to continue to invest on it based on sales volumes and margins that it offers allows you to tailor the relationship with each customer and allows you to achieve high levels of loyalty.
It is also possible to make marketing interventions and targeted commercial interventions on specific groups or names of customers: those in the initial phase, those in the phase of growth, those in the phase of loyalty, those in the phase of abandonment (retention) and those who no longer buy. This is a good way to optimize turnover and margins.
It will then be possible to work on several fronts: on the “retention” of the customer, to have timely and always up-to-date information on his specific sales situation: frequency of purchases, receipts, sales volumes, margins, etc.
The same reasoning also applies to the life cycle of the product: in an initial phase, it absorbs a lot of investments, then enters a phase of profitability. The aim is to remain as long as possible at this stage and, when the product goes into decline (due to changing consumption habits or intensive competition) it is possible to decide in a short time a relaunch (then new investments) or a abandonment.
Other examples of the centrality of data can be identified in the so-called impact analysis of one marketing or business initiative versus another. Who has never wondered whether a promotional operation has had positive effects and how much these effects can be measured?
The versatility of business intelligence tools allows you to analyze every activity, function or process within the organization.
The more the enterprise is computerized the more “you will have trace” of what happens and you will be able to read, understand and use the data to make choices: to invest, to disinvest, to increase, to reduce, to maintain. These examples help us to understand how the timeliness of the information can make the difference on the economic accounts of the enterprises, both the productive ones, how those of services, because wide margins of error do not exist more and the competition is total. This leads the entrepreneur and the management to build reliable metrics (budget, forecast, etc.) from which any deviation means a trigger “alert” and timely decisions.
Just as those who drive to face a journey use a navigator to determine the most convenient route, so in the company a digital management control through business intelligence allows you to determine goals (travel destination) and strategy (itinerary); if there is a deviation from the planned route it will be the task of the business intelligence to provide the deviation alert and help to take an alternative route.
If you feel this need in your company, DL & Partners can support you with experienced professionals to design or refine management control with a digital approach.