Measuring profit, revenue, shareholder value, market position, and division/department contribution is tedious and complex. Driven by regulations and disparate business practices within an organization, the C-Suite has to work on gut instinct more often than it should due to a lack of a clear perspective of the business. How many…
Measuring profit, revenue, shareholder value, market position, and division/department contribution is tedious and complex. Driven by regulations and disparate business practices within an organization, the C-Suite has to work on gut instinct more often than it should due to a lack of a clear perspective of the business. How many weeks are spent preparing quarterly numbers and reviews? What is the lag time between what is happening on the ground and when the C-Suite understands the effect on the business? What is the risk of making decisions primarily on qualitative information vs. factual data. If we’ve learned anything of late, data for insight into our mortgage and investment strategies and practices would have significantly mitigated trillions of dollars in bad debt and lost value.
Often, SMBs still maintain a town selectman style of governance, which at times takes CXO’s out of a strategic and leadership role and into the weeds of operations. Committee meetings regarding departmental investment can turn into discussions of marketing tactics, call center call times, and technology discussions. While there is a benefit to being accessible and close to the business, this tendency has the ability to create a lack of focus, direction, and leadership for the company. The problem is that the C-Suite needs to maintain this role in the absence of information. That is where a solid marketing intelligence strategy comes in.
Marketing has lead the way in business intelligence adoption to decipher the customer base and track activity performance. CMOs now have tools to look across their organizations to formulate strategies and drive nimble responses to market changes. They are attaching the value they add to the business as a whole to the activities they perform. While at times information can be allusive, CMOs are gaining a better perspective of their contribution to business outcomes than they ever have been.
The C-Suite too can benefit. Due to a focus on process improvement and performance management across the board in recent years, divisions and departments are equipped with information on their purviews. The foundation for market intelligence is there. It is made up of three pillars under business intelligence practices. To gain the most out of business intelligence, the three pillars should be combined to create market intelligence.
3 Pillars of Market Intelligence
1. Market data – external information
2. Customer data – internal performance
3. Operational data – internal processes
Market data provides an overall climate in which the business operates. Customer data provides a view of the businesses relationship to the market. Operational data shows how the business performs and reacts to the market.
The next step is to synthesize this information into a C-Suite Dashboard that ties market, customer, and operational data to business objectives, be it profitability, revenue/market growth, shareholder value, market viability/position, or all four. A CFO has continuously provided a perspective in financial terms – the bottom line. As an overall indicator of business health, this is a good measure. After all, it is the numbers we are trying to change. Well, maybe it is the numbers that indicate business health.
Consider the impact of how current questions can be changed:
Current: How much will I save if I reduce staff?
Future: How will cuts in a department affect market growth?
Current: How much will the acquisition investment produce in organic growth? Future: Will I achieve more organic growth with the acquired company as a stand alone offer or integrated with current offers?
Current: How is my product portfolio contributing to this year’s profit? Future: Do I have a product portfolio that will sustain and/or grow my profitability?
Current: Am I providing or increasing shareholder value? Future: Where do I need to invest in my business to increase or sustain my shareholder value?
Current: Should I expand into a new market? Future: Will expanding into a new market sustain or grow my company’s value?
The key to migration from the former to the latter questions above is the ability to merge the three pillars of market intelligence into an effective view of the business. By aligning each pillar to business objectives, the C-Suite can see how changes in each area contribute to business outcomes. If there are inefficiencies or successes in Operations, the effect is noticed in the business. If there are changes in Market data, CXOs compare and identify areas to stay or increase competitiveness. When customer data indicates shifts, CXO’s can determine how to continue to meet customer expectations or exceed them.
What you find by this change in questioning, is that business intelligence as a market intelligence tool allows the C-Suite to maintain its strategic focus and provide leadership to divisions and departments. Business units receive clarity on goals. Bottom-up suggestions from the business units to meet goals will be aligned to where the C-Suite has lead rather than business unit defined goals making assessments for executives easier to manage, determine viability, and instill discipline in process and approach.
SMBs will differ on what their goals and objectives will be. As a rule of thumb, the C-Suite should focus on a 3-5 year strategy and determine measures that indicate success of strategic business outcomes. Strategic is the emphasis. How you get there are the measures. For instance, a strategic objective may be to be the industry leader in green technology for household energy. The business outcome can be market share lead, market cap, or product innovation. If market share lead is determined as the business outcome, then the business determines what market share is measured by: product adoption, revenue, etc. These measures are then adopted by business units, then business units determine the indicators in their purview that influence these measures.
The reason to stress the strategic objectives in terms of a concept is that the goal is left to interpretation by the business. This is a trap that many SMBs run into. The strategic objective provides guidance to department executives on what types of approaches to utilize in order to obtain metrics. Simply stating that the strategic goal of the company is to grow revenue by 5% can create chaos and conflict among departments. Departments can differ on how to reach this goal and potentially inhibit each other’s efforts. The C-Suite is then challenged with increased assessment and management of activities potentially creating stalemates or slowing down the process to reach the goal set.
To offset this, have an objective and metric that states:
Objective – We will become a leader in our industry through product innovation.
Metric – Revenue increases by 5%.
By providing a view on the business in terms of outcomes and influences, through business intelligence practices, the C-Suite becomes market intelligent in order to act quickly for growth, stay ahead, or mitigate risk. CXO’s have a better tool to understand where and how it invests or pull back from internal areas or external strategies. Lastly, as the C-Suite incorporates this approach of outcomes and influences, goals are better understood and realized throughout the organization improving success.