Mitigating Risk with Analytics
When a crisis hits, many business leaders are caught flat-footed, unable to take decisive action. Generally, the reason for their inaction is the same — when everything goes wrong, the usual playbook no longer applies, which means they’re flying blind in a storm.
There are some businesses, however, that seem to thrive in a crisis and emerge out the other side stronger. They’ve planned for contingencies and adversity and are equipped to plan their way through crises. They know exactly which data to keep their eye on and how to react to any major changes. How are these businesses better equipped than others? Through analytics.
The Failure of Planning in a Crisis
“No one saw this coming” — a typical excuse, and one that isn’t entirely without merit. Businesses plan based on the rough assumption that the future will be predictable. Executives set budgets based on revenue that hasn’t been generated. When the variables change, the planning mechanisms inherently change as well.
Statistical models experience the same issue. Statisticians are working off of existing trends in consumer behavior, consumer confidence, priorities, the success of certain products, and more. When the situation changes drastically, those trends may no longer apply. Statisticians are very talented at answering questions with hard facts but are not the ones asking those questions in the first place.
By contrast, analysts thrive in ambiguous situations. Their skillset is in exploration, parsing raw data, and waiting for trends to emerge organically rather than seeking them out. If there’s a possible avenue of action that your c-suite hasn’t thought of, your analytics team will find it.
Why You Need Analytics
An analytics department takes time and resources to create but is a valuable and necessary investment. Beyond addressing and mitigating risk, an analytics department assists in following the shifting preferences of your consumers, redistributing your marketing budget, and finding the niches in your market that your competitors haven’t noticed yet.
In the event of a crisis, your analytics department becomes a necessity. A crisis requires flexibility and agility. Analytics can identify what’s profitable and what can be cut without crippling your post-crisis recovery options. An analytics team is well equipped to sift through the wealth of data to uncover actionable insights, essential for making well-informed decisions.
Build an Analytics Team Preemptively
An analytics team can take time to establish. Analysts need domain knowledge of the industry and business you work in. They also need a history to compare to, time to build sources, and partnerships, subscriptions, and relationships with data vendors, industry partners, and data collection specialists. All of this requires time and investment to establish.
A Culture of Analytics
It is important to understand that analytics won’t always turn up results — it’s a field of pure study with no agenda. It is possible that a data set may produce no meaningful results after analysis.
An embrace of analytics must come from the top. Establish a culture of objectively following the data wherever it leads is crucial for a successful analytics approach. Creating such a culture may be challenging, but when done correctly can be the difference between surviving or thriving in times of crisis.
The Bottom Line
If you haven’t begun already, now is the time to embrace analytics. Run your company on a policy of learning, adapting, and evolving to fit the changing norms of the world, and you will be rewarded. No one can predict when the next crisis will hit, but the companies that survive it will be the ones who are best prepared to expect the unexpected.