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Just as your customers need fresh product to remain loyal, you need fresh information about safety, operations and other aspects of your business to make sure your company remains successful.
Regardless of your position on the “food chain” in the snack food and wholesale baking market, you can’t manage what you can’t measure, and measurement of accurate, useful data provides you with information that’s critical to managing your operations.
By continually examining data in their discrete parts, known as data segmentation, you can be assured that the quality of your data is always good. When current information is easily accessible, you are able to take swift action to correct strategies or tactics that inhibit profitability.
Data segmentation is important, if not essential, because it improves the transparency of your business across company functions, including operations, safety, financial and human resources. This enterprise-wide “window” into your company’s activities and health allows executive and managers alike to analyze data more efficiently and insightfully, and permits data to be presented in clean, consistent formats. Such solutions are available in customized and off-the-shelf packages, and determining the best one for your specific needs requires internal discussions and consultations with outside experts. When selecting a data segmentation solution, the three most important criteria are security, non-disruptiveness and track record.
The need for the first criterion, which is safety, is self-evident. As for non-disruptiveness, you need to determine how well the data segmentation solution will integrate with the other systems you are using. With regard to track record, you should ask the software provider for permission to contact several clients, ideally in businesses that are similar to yours in size, to learn first-hand how they have benefited from using the software solution you are considering. If this advice appears to be common sense, it is. However, you would be surprised at the number of intelligent people who fail to take these steps before making investments in business management tools, which can have significant effects on productivity and profitability for many years.
Data Segmentation in Action
Assuming that you have selected a data segmentation software solution that is ideal for your specific needs, how do you best use it to measure and manage your business? A good place to start is with understanding the sources of your company’s revenue by asking key questions.
For example, how many bills are you sending out each month? How profitable is each customer? What are your three most profitable accounts? Why are they profitable? How far are they located from your production or distribution facilities? What products are they buying from you?
When a management team collectively answers each of those questions, and any others that may be relevant to assessing the health of the business, everyone has a common platform of knowledge from which to work. This company-wide access to the same set of data increases the reliability of the numbers that top, senior and middle management use to make strategic and tactical decisions. Such access also improves workflow in the realms of business management and safety compliance because there is no need to “verify” data gleaned from different sources, as everyone is literally on the same page.
Using a single database, which contains comprehensive information, eliminates, or significantly reduces, the number of conflicts occurring among departments. When a vice president of operations, for example, uses one set of criteria for measuring sales volume, and the vice president of sales uses another, problems arise when the chief executive officer wants the answer to a question related to sales volume. In the absence of using data segmentation software, the officer would get a different answer from each executive, which could create internal strife, better known as turf wars.
Furthermore, the absence of data segmentation software often means that it takes hours, or days, to mine the answer, flawed though it may be. In contrast, data segmentation solutions give users exactly what they need, when they need it. For example, if the chief financial officer requires full access to accounting details related to revenue, profits and volume, it’s available at the click of a mouse, complete with color codes (e.g., red, yellow, green) that show the profitability of each account on a quarterly basis.
Likewise, segmentation makes customer satisfaction, service and quality data easily accessible to anyone who needs to use it.
Parameters for Effective Data Segmentation
Any significant realm of business activity has rules that define the scope of permissible actions and available information. Regarding data segmentation, those conventions include defining business rules for data pertaining to customer accounts, including credit worthiness and location. It also can set standards for consistent interpretation of data across departments, including definitions of policies and computer logic for determining how data are organized and interpreted. Data segmentation can evaluate managers’ use of data in making correct decisions. Such a process can be performed at regular intervals by senior management.
Regardless of company size or industry sector, guidelines for developing and implementing data segmentation solutions are universal.
Most importantly, any useful data mining solution should complement the in-house information technology staff's capabilities and priorities because to do otherwise would be an exercise in futility and a waste of scarce resources. Likewise, to help ensure the effectiveness of segmentation activities, IT professionals should approach the additional capabilities with open minds and avoid falling victim to the not-invented-here syndrome that dogs so many companies across all market sectors.
By embracing this new capability for storing and analyzing safety and operations data, the IT staff can relieve themselves of a heavy workload because data mining solutions can help them continually establish and re-establish project priorities.
Furthermore, data mining solutions need not break the bank. Using web-based software on a subscription basis, the investment becomes one of mindset rather than of capital. Besides being cost-effective, data segmentation is easy to implement, highly scalable and requires little, if any, in-house support.
If data segmentation is done correctly, you should be able to leverage safety and transactional data seamlessly from existing platforms.
An effective data mining solution must be intuitive to users, enabling them to maintain or improve productivity, and it should not disrupt existing systems’ core capabilities.
The best data segmentation initiatives provide enterprise-wide access to a gold mine of data that helps to improve productivity and profitability. Because most software is designed to transact business rather than report or analyze activities in one or multiple parts of the enterprise, it is important to think of your company’s relationship to data like an engine is to a speedometer. The engine must operate continually and reliably as the speedometer translates raw data to information that the driver can act upon (e.g., slow down). Likewise, if information systems work together while accomplishing different purposes, management can measure real-time progress in specific areas.
Through effective data mining, you are able to find and measure problems and opportunities, often by using root cause analysis. Knowing the origin of a problem allows you to develop and implement solutions that improve the organization’s efficiency through management’s actions rather than just treating the symptoms of a given problem. These gains can be validated quantitatively and qualitatively.
By producing a single version of the truth through data synchronicity, staff time can be used to work on strategically focused projects that give the company better value for the money spent on salaries and benefits while outsourcing tactical responsibilities to temporary employees and contractors.
This new way of doing business can empower your company to improve its competitiveness without putting physical assets or employees and their knowledge base at risk. Clearly, the companies that are most savvy in the realm of data management know their strengths. They can determine quickly whether they want to take on a specific piece of business, and how lucrative that new contract or order would be if it materializes. If 80% of the revenue is coming from 20% of your customers, for example, you will know how to best allocate resources to strengthen the loyalty of your best accounts, as well as generate profitable new business.
The advantages of data segmentation make this management tool a necessity rather than a luxury in today’s hyper-competitive business climate. Manufacturers and wholesalers in the snack food and baked goods market that fail to use data segmentation unnecessarily jeopardize the futures of employees, suppliers, customers and strategic partners.
Editor’s Note: This paper was written by Sam Liberto, chief executive of ThoughtDrivers, based in Pittsburgh. Go to www.thoughtdrivers.com for more information.
How to Improve Data Quality
April 30, 2010