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Using Big Data to Find the "Why" Behind Profitability

Brent Grover, President — Evergreen Consulting

• competitive strategy • big data • pricing strategies • distribution industry trends

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Big data has become an all-important topic for businesses of all types and in all industries. But, what does the term really mean? What is big data and how can it be used to improve profits?

Randy MacLean, President of Waypoint Analytics,talks to Brent Grover, President of Evergreen Consulting, about the next evolution in profitability analytics. Brent has been in the business since the 1980s, when spreadsheets were the tool of choice and data was keyed in by hand, and remembers that one of the first changes occurred when Waypoint automated the data gathering and analytical process.

Initially, big data referred to data about customers that was held outside the business, usually by large companies with deep tech resources. But with advances in technology and its cost, today every company can have their own data store. However, once data is gathered and stored, what do you do with all this information?

In today's business climate, sophisticated data is essential to a company's survival. Businesses need to evolve from old and outdated measures of success to using new metrics and gaining new understanding of their operations by way of new analyses. Big data has to be addressed by the CEO or the CFO, and companies are choosing differing approaches to mining the gold from their data. Generally, today's distribution companies are choosing business intelligence (BI) tools attached to their ERP systems or streamlined third-party services that simply provide the data.

The key to any tool is to turn the facts into actionable knowledge. With the right tools, companies can be enlightened to how their business really operates, such as, which part of the business actually makes the money, rather than just looking at overall profit margin, or, which parts of the business cost more and in what specific ways, rather than just looking at overall expenses.

In other words, distributors can derive strategic pricing analytics to provide the "why" behind the profitability numbers. Brent uses the concept of the "Three Gets" to illustrate true costs:

The cost of getting the order

The cost of getting the order to the customer

The cost of getting paid

These costs vary from customer to customer. According to Brent, "If you don't know where you're losing money, how are you going to stop losing money?" If you convert the knowledge into wisdom and then take action, you'll be in a much better position to reduce the risk of failure.

For more information about Brent Grover, visit: www.evergreenconsultingllc.com

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