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Turning Data into Assets

Column Annie Yang over hoe het mkb data kan benutten

Annie Yang, lector Digital Business, over hoe het mkb big data kan gebruiken om hun organisatie te verbeteren.

By Annie Yang

Big data are no longer unique to large corporates but also small and medium size enterprises (SMEs). Data are underutilized assets. SMEs should appropriate the value of these assets in practice. Those who do are the leaders in the market.

The coronavirus COVID-19 has been deemed to be a disruptive change to us. Although we keep the distance from each other, we have shown our positive attitudes, resilience, and determination to make the most of it. Companies and organizations have been influenced by this crisis from various aspects. Governments have made different measures to support business, particularly, small and medium size enterprises (SMEs), that are usually confronted with constraints of resources.

As a researcher of SMEs, I wanted to know more about what happened to them. Instead of sitting behind the computer and reading the figures, I went to them, virtually, with two questions:

  1. What happened to your business?
  2. What lessons have you learned?

Company A – Offline B2B versus Online B2C

Company A, located in the Netherlands, is a supplier of hair and beauty products within Europe. The majority of its clients are business customers in the Netherlands, such as hair and beauty salons. Additionally, this company runs an online store for consumers. Before the outbreak of coronavirus in the Netherlands, more than two-thirds of sales were generated by its offline B2B sector.

After the lockdown, the business of hair and beauty salons were severely affected. Consequently, these business clients stopped purchasing from Company A. Since the mid of March, Company A has not received any purchase orders from its business clients. This means that it lost two-thirds of sales.

Due to the cessation of its main B2B business, many employees had not enough work to do. These employees belonged to the core team of this company; they were in charge of the daily operationalization of the B2B sector. Their labor cost, at the moment, counted for 80% of the total cost.

 

Figure 1. Sales of Offline B2B and Online B2C of Company A before and after the Lockdown

Currently, all the sales stem from its B2C sector, the online store (see Figure 1). The number of orders per day has increased by approximately 35% without any additional marketing activities. “We sell necessary hair and beauty products online,” explained the owner of the company, “and to reduce the risks of being infected, consumers have become more inclined to purchase online.” He thought that these two major reasons together explained the increase in its online sales without additional marketing efforts.

However, the profit of its necessity products was low and the number of orders remained limited. As a result, the company’s online business is not sufficient to sustain the fixed costs of the company. “If the sales of the online store could be maximized, at least, the loss of the B2B sector could be minimized,” said the owner. But the question to him was how – how could they quickly increase the sales to reach the ideal situation shown in Figure 1?

Company B – Threat, Opportunity, and Challenges

Company B runs an online store with necessity products for end consumers in the Netherlands. The store was established one year ago. It was a late entrant in the market. However, the owner strongly believed that some unique products would differentiate their store from others and the possibility of same-day delivery was unique in that market. Unfortunately, the business did not develop as rapidly as expected – usually, there were only a few orders every day. She thought that ineffective marketing was the major reason for not reaching the target market. Furthermore, the marketing budget was limited.

Since the outbreak of coronavirus, the sales have increased dramatically. Figure 2 illustrates the daily sales in February, March, and April, 2020. (For confidential reasons, the numbers have been disguised.)

Figure 2. Daily Sales of Company B between February 1 and April 30, 2020.

As Figure 2 shows, before the end of February, the first noticeable increase occurred. Very soon, after the lockdown, another wave of sales arrived; the daily sales were seven times more than before.

Threats and opportunities may coexist. Having seen the dramatic increase in sales, the owner thought that she may embrace her business booming. Nevertheless, the company was quickly confronted with several issues.

First, the company does not have sufficient manpower to handle the orders, including manual pick-up, coordination with its logistic partnering company, and customer services.

Second, the partnering logistics company was in a shortage of couriers. In turn, even though Company B could pack and prepare the orders in time, the logistics company could not guarantee timely delivery.

Third, some products seemed to be very popular. This led to the shortage of products in stock. To take care of the inventory and supply, the company needed to predict the sales of products. Unfortunately, they were not able to do so by themselves.

Last but not least, the company wanted to provide a bit of personalized service to the clients. Due to the delay, customer satisfaction was negatively influenced. They wanted to inform their clients in advance about the delay and provide them with the estimated delivery time. However, it required too much time to manually match the information between their own system and the logistics company. In turn, Company B could not implement this idea.

Lessons Learned

When I asked the owners of the aforementioned two companies what they had learned. They both mentioned that they should have learned more about their customers, goods, and services. If they had gained better insights into their business, they could have reacted better to the risk, even turned a tide. They showed awareness of using data and the potential of big data for their business. However, when they wanted to use the data, they did not know what to do and how to use the data.

The conversations with the owners of these two companies revealed the desire to leverage data from SMEs. Due to the pervasiveness of information technologies and the advent of digital media, data has been created, stored, and accumulated continuously. The exponential growth and availability of data lead to Big Data. Despite the size, large or small, if a company harnesses the rich data well, it can gain unprecedented opportunities for its business and management.

While these SMEs well recognized the potential of big data for their companies, they still failed to appropriate the value of such potential in practice. An underlying obstacle was the inability to leverage big data, such as capturing, processing, analyzing, and interpreting data in line with the business objectives.

For example, when I asked the owner of Company B about the changes in their sales, she actually could not tell exactly. That’s because the daily sales were not directly available from their system. I spent some time extracting the daily sales in the past three months from their system and showed the line chart to her. This simple line chart already made her surprisingly happy, as she had been seeking for this information to review the changes and predict the sales.

Big data are no longer unique to large corporates but also SMEs. Data are underutilized assets; SMEs should utilize these assets to improve their business. However, they need guidance and tools to support their ability to leverage big data. If you are interested in this topic, what and how would you like to contribute to this field?

Deze column is geschreven door lector Digital Business, Annie Yang

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