Many small and medium-sized enterprises get tons of data from IT systems, surveys and analyses. But many forget to reconcile them when it comes to strategy.

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The kick-off event is almost over. The strategy film has been shown, the power point presented and the employees are enjoying the cake that has been served on the occasion of the day.

So it happens: The quiet guy from the IT department raises his hand and says:

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"I showed our platform to my big son yesterday. He said that someone at his high school was apparently making a free app that could do almost what we offer. How do you know if customers will pay for our solution in three years?"

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The director's response will reveal whether the company is using data strategically. If the answer is full of hopes and hunches, the warning lights should be flashing. Yet I have often found that hopes, hunches and personal experience often overshadow solid data when strategy needs to be put in place.

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ALSO READ Messy strategy by the little ones gives the big ones free rein

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That experience is confirmed by a new report from security firm Talend. The report shows that up to 78% of business leaders worldwide have no idea how to use data. And that a third do not use data at all to make decisions.

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The same picture can be seen in a report by EConsultancy and the web analysts at Lynchpin. It shows that less than half of companies' available data is used to make marketing decisions. And that 48% of data is not incorporated into companies' business plans.

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Data must be collected - not just collected

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My experience from 25 years of strategy consulting is that the challenge is particularly great for many small and medium-sized enterprises. Often it's about internal collaboration.

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The marketing department buys surveys. The IT department retrieves behavioural data. HR has a recruitment sense. The front desk talks to the angry customers. Communications subscribes to a lot of newsletters. But data and knowledge are not always gathered, weighted and prioritised in strategy.

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Often, data from the department that shouts the loudest dominates. I've even seen departments work against each other - without knowing it - because they don't unify their data. This results in a fragile foundation for business strategy and an unclear analysis of the future.

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Data determines strategy value

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As a company, you have to ask yourself: Are we using data right when we design our future?

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We live in a time when change comes faster than you can almost write the strategy. And one change rarely comes alone. When a pandemic strikes, it brings supply problems, new framework conditions - even new international tensions.

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That's why it's extra important that data is used wisely, compiled and weighted when drawing the company's map.

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If the strategy is not data-driven, there is a risk of drawing a map that does not match reality.

Yes, our product is in demand now, but what does the marketing department's data show about changes in customer behaviour? Yes, we have talented employees right now, but what does HR's data show about the future recruitment base? Yes, we have healthy supply lines from abroad now, but will regional development continue or should we explore new suppliers?

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Using data has its pitfalls, of course. When the amount of data is large, you can quickly get the charts to show what you're looking for - and then you're done. That's why data-driven strategy should be driven by curiosity - not the need to confirm your own hunches.

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One thing, however, you can be sure of. If the strategy is not database-driven, you risk drawing a map that does not match reality. And then not even the best strategy film, power point or kick-off cake can save the day.

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This column was published on Jyllands-Posten Finance and in Jyllands-Posten, Erhverv on 11 February 2022

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