Procurement 31 October 2017

How small business owners can use big data to transform company operations

Big wave of a computer code sweeping over a businessman, EPS 8 vector illustration
Big data refers to the large volumes of data that are too complex to be processed by traditional application software

Your processes are broken – but you already have the data to fix them, writes Alexander Rinke, co-founder of process mining firm Celonis, who explains how small business owners can use “big data” to improve day-to-day efficiencies and compete with bigger players.

As Michael Porter once famously stated; “Operational effectiveness competition shifts the productivity frontier outward, effectively raising the bar for everyone.” This adage has never carried more weight than right now, in the digital age. Global players like Amazon have perfected processes, but they’re not the only ones who can.

Recent research has revealed that nearly two thirds of SMEs are looking to big data to benefit their business, highlighting an appetite from smaller companies across all industries to transform their operations.

Customer expectations are rising and to stay competitive, a company must deliver products and services within hours instead of weeks. Inefficiencies aren’t tolerated and business processes need to be faster, more efficient, and more agile.

Almost every business pursuing this goal encounters a familiar pattern: flawed or inefficient processes are uncovered and management consultants get called in. Consultants are taught to survey the process in its existing state first, then map out the ideal process path and determine how to get from the former to the latter.

Whiteboarding sessions commence and interviews are conducted, all with the objective of optimising core operations like purchasing, logistics and production. If root causes of process inefficiencies are eventually uncovered, consultants can develop a plan of action and execute.

Read more: Seven data literacy trends small business owners need to be aware of

However, there are problems with the traditional approach: it can take weeks, months or years to uncover these causes, scope creep is common, and root cause analysis may not be completely accurate.

Even worse, because the existing process may not be up to date and because the traditional approach is built on so much subjective information, the “solution” might actually end up causing more problems.

Uncovering new insights

Every business is sat on a wealth of data that could help them to visualise and better understand their processes and pinpoint inefficiencies within them.

Large companies such as Vodafone, Cisco, and Siemens are already adopting technologies such as process mining, which uses big data analytics and machine learning to visualise and understand processes to pinpoint inefficiencies and provide proactive recommendations for improvement. Now it’s time for smaller businesses to do the same.

Tremendous amounts of data accumulate in businesses’ IT systems. This becomes much more valuable when information logs are reconstructed into a visual, real-time representation of how each task is being executed, acting as a real-time process MRI.

The process mining technology works to reimage every variation of the process, and business leaders benefit from complete transparency on key processes like purchase-to-pay (P2P), logistics, accounts payable and IT service management.

Defeating an unknown enemy

Competition isn’t getting any less fierce and small businesses are striving to squeeze out every last drop of operational effectiveness.

Finding solutions to known problems is tough enough, but it’s nearly impossible for SMEs find solutions to problems they don’t know exist.

Non-compliance wreaks havoc and it becomes common for business processes to deviate from the desired state more often than not.

Take purchase-to-pay processes as an example, which causes seemingly perpetual problems for procurement departments. Imagine that frequent price changes were causing delays in the process, a common issue whose scope of impact is nearly impossible to measure without someone knowing where to look and what to look for.

It takes considerable time to manually correct each pricing change and in a large organisation, these often occur thousands of times. The value drain adds up quickly, and systemic issues that could have been averted become cash-draining headaches.

Staying competitive in a digital age and keeping up with giants such as Amazon mean that best practices must be dictated by analysing data. Small companies cannot continue to rely solely on subjective input from consultants when striving for continuous improvement.

Instead, they must push themselves beyond outdated practices, creating unbiased visibility into their operations with technologies like process mining to improve margins, business agility and customer service. While many processes are not as efficient as they need to be for SMEs to stay competitive, the data is already there, waiting to be used to fix them.

Alexander Rinke is co-CEO and co-founder of Celonis

Find out why young consumers are over twice as likely to share data online than older generations

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