Create a data driven business
In a fast-moving and fiercely competitive marketplace, making the wrong decision can leave your business reeling. But ambitious businesses growing at pace must make decisions on an almost continuous basis, often very rapidly – how do they avoid missteps? The answer is to take a data driven approach, using comprehensive and considered data to set the course for growth.
Creating a data driven culture will help businesses secure a competitive advantage, and at Livingbridge we believe the gap between those who get this right and those who don’t will widen exponentially. Data enables more qualified and informed decisions, more confidence in those choices, and conviction in where teams are prioritising their investments. This will provide clear differentiation against rivals lacking a data driven approach; such businesses are effectively operating blind.
This is why Livingbridge’s growth acceleration team includes a dedicated group of specialist data and insight experts. The data & insight team’s aim is to guide our investees to acquire the capabilities they need to become data driven businesses, empowering them to take bold decisions on the basis of their data.
What is a data driven approach
Taking a data driven approach to managing your business means ensuring everyone in the organisation understands the key data that drives the business and where to find it, so they can make informed decisions with conviction.
The shift to a fully data driven approach doesn’t happen overnight. But over time, as you make greater use of more sophisticated data, the benefits will begin to multiply rapidly. Proving the value of a data driven approach in this way will help ensure a data culture takes root across the business. To support this Livingbridge’s data & insight team have worked with many of our investee companies to:
- Create and identify the relevant management information. The key to getting started is to focus on the “killer data” – for any given business and business function there will be handful of key indicators that illustrate performance. The sales team might focus on lead conversion rates, for example, while finance might be more interested in deferred income.
- Build visualisation tools. Simple analytics tools such as dashboards make it much easier for all business users to understand what the data is telling them and what action they should take accordingly.
- Validate the model through constant iteration. As data flows in, the business can constantly test the impact of changes it makes – how many leads is a direct marketing campaign creating, say; how many of these leads are converted? Data driven marketing should be tested and optimised constantly to continue to widen the advantage between your business and its competitors.
- Empower business leaders to “self-serve”. The idea is to create a culture where business users see the value of the data driven approach and are able to apply it for themselves. As trust grows, they will ask many more questions of the data.
Data driven business intelligence in practice
Becoming a data driven business can be powerful. Our data & insight team has been part of that journey with many of Livingbridge’s investees, seeing the valuable results secured from developing their data capabilities.
Helping Hands is a case in point. When we invested in the home care provider in 2018, its biggest challenge was customer acquisition, with direct marketing costs looking prohibitively high. Our growth and insights team worked with Helping Hands to develop a customer lifetime value model, establishing that the revenues it could expect to earn from each new customer were substantially higher than the acquisition cost. This gave the company the confidence to press ahead with its direct marketing campaign. Over time, Helping Hands used the model to ask more sophisticated questions – focusing marketing spend, for example, on areas of the country where the balance between customer acquisition cost and lifetime value was optimal.
Stowe Family Law, where we invested in 2017, is another good example of what is possible. The business was monitoring how many people came into its offices to make an initial inquiry, but the real driver of its revenues was actually how many of these inquiries translated into fee-paying clients. This depended on Stowe’s lawyers and how they managed those initial meetings, but the lawyers themselves had no access to data on conversion rates and how these drove revenues. We guided Stowe on how to give its lawyers access to simple data dashboards; as a result, they became far more engaged in the sales process, working with marketing to identify the most valuable leads, focusing on conversion and generating significantly increased revenues.
Livingbridge’s data & insight team works with businesses to build their own infrastructures and capabilities, empowering them to take a data driven approach for themselves. But we also develop our own models and capabilities to which investee companies can link using APIs. At Helping Hands, for example, we were able to give the company access to a model mapping travelling times between destinations; this was a crucial tool in helping them reduce the churn rate amongst its carers, who were identified as more likely to leave when they had to travel greater distances between appointments.
We believe such capabilities will be increasingly crucial to ensuring businesses can remain competitive, whatever sector they operate in. Growing quickly can be a journey into the unknown, but a data-driven approach can provide a clear sense of direction.
How to create a data culture
People make better decisions it they have more information at their disposal. This is the principle at the root of why it’s important for businesses to create a data culture. When everyone in the organisation has a full understanding of what data drives the business and can easily access it, they are naturally able to make far smarter choices.
Creating a data culture and the actions it drives is therefore really a question of securing a competitive edge. Businesses that are able to make more informed decisions, and to better prioritise what will drive growth, will have a clear advantage over those lacking such capabilities. It’s the difference between driving a car with a clear windscreen and a map, and steering with your eyes closed.
Why does a data driven culture matter? At Livingbridge, we believe businesses that can successfully instil one will outperform in the years ahead – and do so by an ever-increasing margin. In a fast-paced environment of rapid change and high levels of volatility, the ability to make qualified judgements very quickly will become ever more crucial.
This is why our growth acceleration team, an in-house team of experts designed to equip our investees to fulfil their potential, includes a dedicated group of specialist data experts. The data & insight team work closely with our investee companies to help them establish a data culture – to acquire the capabilities they need to become data-driven businesses and to hardwire the data driven approach into the way they operate.
This culture needs solid foundations. It requires businesses to identify the key drivers of performance across each area of their organisation and to build the right infrastructure for monitoring and reporting that data. Every business function should be able to pinpoint the handful of key levers and drivers that matter most to it and simple dashboards should allow them to view and analyse this data quickly and easily.
In practice, it takes time to embed a successful data culture. It’s often necessary to begin with high-level data and the most basic levers for moving the dial. As trust in the data increases and people’s confidence grows, they’ll naturally feel more comfortable drilling down into the numbers and working at a more nuanced level. Eventually, every action the business takes will be informed by what the data suggests.
Data cultures in practice
Livingbridge’s data & insight team has worked through the process of establishing a data culture with many of our investees, often with very powerful results. Their aim is to guide our investees through the process of acquiring the data capabilities they need, empowering business leaders to make data-driven decisions for themselves.
The specialist cloud services business Giacom, where we invested in a management buy-out in 2017, is just one example. The company was growing rapidly but lacked a means for understanding its total addressable market or which customers to target as a priority. We worked with Giacom’s sales and marketing teams to build a database detailing the potential customer base and a priority list for targeting new clients based on the attributes of existing customers. Giacom is now able to make truly informed decisions about where to focus its marketing efforts.
Email signature specialist Exclaimer, another Livingbridge investee, is a similar story. Our data & insight team worked with Exclaimer to organise and rationalise its data, building new tools that gave the company a much clearer idea of where customer leads were being generated and whether new revenues were coming from new or existing clients. This gave the company’s board and its sales team much greater confidence in the investment decisions they were making.
At pensions and employee benefits consultant Broadstone, where we invested in 2016, the challenge was to establish a culture where senior leaders felt more comfortable engaging with the full range of the business’s data – and saw the value of doing so. Here, we worked with the business to build a forecasting model that for the first time gave the board fully visibility of the company’s sales pipeline. This was a powerful shift for the company, giving it a comprehensive view of how leads were converting to sales for the first time.
In each of these cases – and at many more investee companies – the value of a data culture has multiplied over time, providing the business with a crucial sources of competitive advantage. We believe establishing a data culture provides businesses with a valuable opportunity to pull ahead in their markets.
What is best in class management information?
Business leaders need information to make qualified decisions. Without a management information system to collect, organise and visualise key business data, decision makers are effectively being expected to take decisions blind. A best in class management information system can therefore be a key competitive advantage, enabling businesses to make smarter decisions with greater confidence.
What is a management information system?
A management information system is the infrastructure that enables your business to gather and present the key data revealing how it is performing across the company.
In practice, however, there is no one-size-fits-all management information system that is perfect for every business – because every business is different. The first step is to identify the key indicators of success relevant to each function and then to understand what data the key decision makers need to inform what good and bad looks like in those areas.
That will mean best in class management information is carefully collated so that it aligns to the business’s commercial drivers and objectives. Many businesses fall into the trap of thinking that more information equals good information, monitoring an almost endless list of key performance indicators. In fact, every business function should be able to identify a small handful of KPIs that really matter, rather than missing the key data in a blizzard of information.
For the sales team, for example, key management information might include conversion rates from new leads. For marketing, digital campaign results could be a key indicator. Finance might choose to focus on deferred income. Human resources may be especially interested in employee turnover. There is no single right answer and every business’s key management information will vary.
Having identified what should be on your management information system, it’s just as important to be confident everyone in the business is able to use it. Unless decision makers are able to access this information quickly and to understand what they’re looking for, the system will fall short.
Management information in practice
Creating or improving your management information system is not just a technical task; rather, it’s focused on fundamental questions about the crucial drivers of your success and what might affect those drivers.
It should therefore be quite a cathartic process. Your management information system should be an enabler of growth, because it makes it possible for everyone in the business to make data-driven decisions. The process also forces you to think in some detail about what’s important for the business’s future success.
At Livingbridge, we’ve worked with many of our investee companies to develop best in class management information systems. Our growth acceleration team, an in-house team designed to equip our investees to fulfil their potential, includes a dedicated group of specialist data and insight experts who can guide businesses through the process of improving management information.
The results can often be very powerful. At Stowe Family Law, for example, our data and insight team helped the business’s leaders to identify a key missing element in their management information. The ability of the firm’s lawyers to convert initial appointments into fee-generating cases was a key driver of revenues, but lawyers had no access to data on conversion rates or what they meant for sales. Simply by rectifying this gap, Stowe was able to build much greater engagement with sales and marketing from its lawyers, with a significant boost to revenues as a result.
Elsewhere, at the online heating oil platform BoilerJuice, another Livingbridge investee, our data and insight team helped the company to build very simple dashboards that gave decision makers access to key management information with one click – including a colour-based system for highlighting good performance and areas in need of improvement. BoilerJuice’s customer acquisition rates increased 83% in the six months after our data and insight team worked with the company.
Management information, in other words, can be hugely important in the process of value creation. Businesses that take it seriously, building best in class management information systems, will be much better equipped to make bold decisions that accelerate their growth.
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