The following is a guest post from Hung Nguyen, consultant at Sapling Financial Consultants. Opinions are the author’s own.
Information is currency in the modern market. Yet, CFOs of small and medium enterprises (SMEs), from Silicon Valley startups to regional business dynasties, often find their organizations riddled with data-related challenges due to a lack of resources and expertise.
Data accuracy, completeness and consistency are perennial problems for data-immature organizations. In these places, data is kept and operationalized in silos across different business units and functions. No common framework allows them to speak with each other and produce a coherent, accurate and timely picture of the company’s health.
The CFO’s tasks in these organizations are often unnecessarily complicated. They must reconcile ad hoc reports from different business functions without having reliable access to the underlying data points and methodology.
This pain point is more acutely felt in growing organizations. When more and more business systems are acquired as the company expands, the simple task of reporting on business activities can be such a time-sink that it takes away valuable resources for deriving insights and creating value.
The data challenge propagates downward as no single source of truth is present. Few departments have a complete picture of the organization and how they should harmonize their objectives in response to changing circumstances.
Addressing data immaturity requires the cooperation of technical and business stakeholders
To overcome data silos, SMEs must adopt a multifaceted approach addressing both technological and cultural barriers.
Investing in integrated platforms that synthesize data from various sources can break down silos and streamline access and analysis. These platforms, such as off-the-shelf enterprise resource planning (ERP) systems or custom database solutions, provide a single source of truth across the organization, facilitate the integration of different data sources, and enable cross-departmental analyses to provide holistic insights into the company’s operations.
The CFO should also address the people factor by empowering a data champion with a mandate to build a data culture throughout the organization. These are the change agents with a deep understanding of the business and technical aspects of data. They excel at communicating complex technical concepts and inspire and empower others to embrace data-driven practices and behaviors.
Most critically, the CFO’s ultimate goal should be to build an incentivized structure to promote best data practices throughout the organization. This starts with the executive team.
A data-driven executive understands all business decisions should be made based on data — and data alone.
They manage the organizations by key performance indicators (KPIs), not on intuition or received wisdom. Instead of speculating why sales are slowing down this quarter, they examine sales figures by different product lines, customer segments, sales cycles, etc., to identify irregularities and potential levers for optimization. If conversions are low, they might focus on coaching sales representatives. If a product line is slow-selling, they might market it differently or stop the product offering altogether.
In meetings with business unit leaders, the data-proficient executive expects them to provide data to support their findings and proposals. They do not take data at face value but are savvy enough to critically examine their reporting methodology.
This habit creates a positive rippling effect throughout the entire organization. As top executives make decisions based solely on data, there’s an expectation to provide data-backed answers. This further creates an incentive for other employees to adopt best data practices to advance within the organization.
The data-driven SME benefits from a virtuous circle of value creation
As the entire organization starts to see data as valuable assets and data analytics are embedded into the business’s daily operations, new opportunities for value creation arise.
The most immediate payoff is the reduction of inefficiencies in reporting on business activities. By leveraging a unified platform for data analytics, data-proficient SMEs can cut down time spent on aggregating data points from different silos and free up time for deriving insights from these reports.
Different business units also gain access to a coherent, accurate, and timely picture of the company’s health. Time syncing between departments is no longer about catching up on current status but offers an opportunity to harmonize strategic goals and their implementation company-wide.
In the marketplace, data proficiency can be a game-changer in identifying market trends and consumer preferences.
SMEs often operate in niche markets or specific customer segments. Integrating and synthesizing insights from different market intelligence sources, including sales data, market research reports, and industry trends, allows SMEs to get ahead of the competition in responding to shifting tastes and demands.
With the wealth of data collected from their customers, a data-proficient SME is in a unique position to glean insights into consumer preferences by analyzing purchasing patterns, demographic information, and informal interactions on social media. This enables them to tailor their offerings and marketing strategies to better meet the needs of their target demographics or even expand into new markets.
In today’s landscape, effective deployment of data assets is no longer a nice-to-have aspiration but a strategic imperative. In a market of giants with their deep pockets and obsession with the latest technology, the purposeful deployment of basic assets like data, combined with innate agility and ability to adapt quickly, proves to be a winning strategy for CFOs.
