Small business analytics success hinges on resources, skills

The inability to harness the power of data and turn it into fuel for growth hampers the success of many SMBs.

Unlike large enterprises with massive budgets, SMBs are often unable to employ data scientists to build and maintain analytics operations and interpret data to make fully informed decisions. Instead of investing in small business analytics strategies, they rely on instinct and experience, neither of which is foolproof.

Onepath, an IT services provider based in Kennesaw, Ga., sought to quantify the struggles of the SMBs it serves. It surveyed more than 100 managers and executives of organizations ranging in size from 100 to 500 employees to gauge their experience with analytics, and on Thursday released a report entitled "Onepath 2020 Trends in SMB Data Analytics Report."

Key discoveries included that despite dedicating time and money to analytics, 86% felt they weren't able to fully harness the power of data, 59% believed analytic capabilities would help them go to market faster and 54% felt that they risked making poor business decisions without the benefits of data analysis.

Phil Moore, Onepath's director of applications management services, spoke with SearchBusinessAnalytics about the report as well as the difficulties involved in small business analytics efforts.

In Part I of this two-part Q&A, he discussed the findings of the report in detail. Here he talks about the perils SMBs face if they don't develop a data-driven decision-making process.

As the technology in business intelligence platforms gets better and better, will SMBs be able to improve data utilization as well as large enterprises?

Phil Moore

Phil Moore: The Fortune 500s of the world have deep pockets and can hire their army of IT guys and go after it, but the small and medium-sized businesses tend to have far less volume of data unless they are in the unique position where they are a high-data business. But the core [of the SMB market] is around legal, construction, health care, doctor's offices, and their data doesn't get to the volume of larger organizations. They're just looking for the metrics that help them run their business more efficiently, help them service their clients.

If you go to the other bookend and see an Amazon, of course they're on a grand scale in terms of the size of their business. And they're using analytics all up and down throughout their business, whether it be shipping, fulfillment, robotics, managing their warehouses. The SMB market won't have the same types of complexities that the big guys have. The market is different.

Are there SMBs who are able to harness the power of data?

The survey shows that 86% of the companies that are taking a swing at analytics -- that have some solution -- say they're underachieving, and they could be getting more out of their data.

Moore: The survey shows that 86% of the companies that are taking a swing at analytics -- that have some solution -- say they're underachieving, and they could be getting more out of their data. That leaves 14% that are delighted with what they're getting. There are always leading guys, the cutting edge, the folks that are more technology-centric or that appreciate and understand the value of technology and how it can help the business. Those guys are going to lead the way.

What will happen to companies that don't figure out a way to use data, and is there a timetable for when they need to get with it?

Moore: If you break down the SMB market into the different disciplines -- health care, legal, construction -- the folks that get and use analytics, their first benefit over their competitors is a better line of sight to their business. They're going to be able to make crisper decisions, which lead to either faster delivery of something to the market or better customer service, which indirectly will lead to higher profits. Right away they get a competitive advantage over their competitors that aren't using analytics, that are running their business by shooting from the hip -- which is running it with their intuition and their knowledge and their experience. That knowledge and experience may get proven wrong with data, because the eye in the sky doesn't lie. At some point, things get revealed in the data that lead to transforming business decisions.

For example, in the IT space, one of the transforming business decisions is how to go to market, changing from charging by the hour for every hour worked when a ticket is opened to offering a fixed-price, all-you-can-eat model. The data shows a fixed price will still be profitable if they optimize internal processes. So, IT companies are shifting, and the companies that are now going to market with a fixed-price, all-you-can-eat support model are crushing the guys that are still out there charging by the hour. The guys charging by the hour either have to transform or die. Those transformations that get driven by the data will happen in an industry-vertical way.

Is it critical small business analytics expenditures to be part of the budget right off the bat?

Moore: Yes, but the challenge we see is that they know they want to have analytics but they don't know how to budget for it. Therefore, it becomes unaffordable. One of the things we're trying to do is make it affordable so people can bridge the mental gap from wanting analytics but not being able to get it by offering a monthly, low-entry, very affordable template set of [key performance indicators], so once they see the value they know how to put a dollar figure on the value and then adjust their budget for the next year. If you go to a small business and tell them they need analytics and need to budget for it, they struggle with how much to budget. They put a line item in the budget but they don't know what they're getting, so it often winds up getting cut from the budget.

Editor's note: This Q&A has been edited for brevity and clarity.