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CEO pushes for data-driven strategy

Everyone knows executive support for analytics initiatives is important, but CEOs are starting to get behind analytics like never before.

Once, during an initiative to adopt a more lean organizational structure, Jim McRickard was shown all the steps that customer orders go through before finally being placed. The exercise was intended to point out inefficiencies, but for McRickard, CEO at construction industry supply company Dayton Superior, it highlighted the problem of price transparency. Prices changed so many times from the initial quote to final price that there was no way to determine why prices shrank or whether a reduction was actually necessary to secure new business.

"I'm sitting there and I'm supposed to be getting a lesson in operational excellence, and I just saw how often someone changes a price," McRickard said. "I knew we had to provide a scientific methodology."

From that moment on, he decided pricing needed to be based more on an analytic understanding of the company's products, competitors and customers. Implementing a data-driven strategy became his top priority.

Prices not set in stone

It's nearly impossible for anyone to know the right price for every product. Our thought was to put some science behind it.
Jim McRickardCEO, Dayton Superior

Dayton Superior, which is based out of Miamisburg, Ohio, primarily sells concrete accessories for large-scale building projects. Before moving to a data-driven approach, sales workers were authorized to drop prices down to a predetermined floor. But McRickard found that in the process of making a sale, they would almost always reduce the price down to that level. Often it was not apparent why the price reduction was needed to make the sale.

"It's nearly impossible for anyone to know the right price for every product," McRickard said. "Our thought was to put some science behind it."

He had his company implement price optimization software from Zilliant, Inc. called MarginMax. Sales teams use it to assess their own costs on each project and determine how competitive each local market is on price. Using this information, the sales force can determine whether to adjust prices up if sales costs are high or down if a project takes place in a market that has a lot of competitors. McRickard also uses the tool to monitor whether the sales team sticks to the recommendations and how well reps perform against their quotas.

C-suite boosts data-driven strategy

McRickard said the fact that sales teams know the CEO monitors their use of the optimization tool has made adoption more uniform. Knowing that the highest levels of management sponsor the project has made a big difference.

It's a common notion that management needs to support the transition to new data-driven strategies, but it's rare to see a CEO lead the charge. Mostly, you hear people from the technology side talking about how they need to convince the CEO or COO to support a new analytics initiative. But that is changing, and McRickard isn't alone. CEOs and other top-level managers are increasingly in the driver's seat pushing their organizations to become more analytically focused.

"Most executive teams recognize that they have to be data-driven in order to stay competitive," said Michael Bridges, managing director of Accenture Digital. "It's one of the more welcome shifts. There's nothing like having your bosses stand up and say, 'This is what we have to do.'"

He said part of this change stems from a general awareness among the C-suite that data and analytics are important to ongoing strategy. It's also driven by easy-to-use tools that executives can wrap their heads around.

In the early days of business intelligence and data warehousing, it took someone with at least a master's degree in technology to truly understand how data was stored, analyzed and reported. But Bridges said tools today are much less technologically heavy. They may even be cloud-based, requiring very little installation and configuration expertise. This arrangement enables executives who have no technology backgrounds to have more intelligent conversations about analytics tools.

For McRickard, the change just makes sense. He came to Dayton Superior two years ago and has focused much of his tenure on modernizing the way the company manufactures its products and operates on the business side. Pushing for a data-driven strategy was simply an obvious extension of modernization.

"This has been on my radar screen for a while," he said. "This is something I thought the industry was ripe for."

Ed Burns is site editor of SearchBusinessAnalytics. Email him at eburns@techtarget.com and follow him on Twitter: @EdBurnsTT.

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This was last published in May 2015

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What are your tips for implementing data-driven strategies?
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Our research discovered that information-centric organizations warrant market-to-book values that are multiples of the market average. So to help our clients become more information-centric (data driven), we have developed models for innovating with information, assessing information maturity, and measuring information value (as if it were a balance sheet asset). --Doug Laney, VP Research, Gartner, @doug_laney
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Also, a recent KPMG study identified that market analysts increasingly are considering a company's information-related capabilities and data in valuing the companies themselves.

And a recent WSJ article depicted how Radioshack's and Caesars's creditors have determined that their data is their most valuable asset! http://blogs.wsj.com/cio/2015/05/20/dollar-value-of-data-radioshack-other-bankrupt-firms-auction-customer-data-to-pay-debt/
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Good points, Doug. We are in the Information Economy, after all. Makes sense that data could be seen as a valuable asset. I think a lot of businesses have a ways to go to capitalize on that asset though. 
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For implementing data driven strategy, its important to identify the right kind of data. And even more important is to identify the right business opportunity and to find how its performance can be improved and how to model the analytics accordingly. Once the data and the model is in place, the selection of tools is important. Tool used to implement data driven strategy should be simple enough for the front line managers to use and not be something that only experts understand. The tool used should be engaging enough to keep front line managers interested in it for use.
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It's self-reinforcing for us. Data influences our end-product which in turn increases our profits. It's a pretty direct correlation. While there are outliers who choose to work data-be-damned, they have enormous difficulties finding funding and, ultimately, generating profits.

On those very rare occasions when they manage to predict future trends with an unanticipated product, the market shifts, the information is updated and our business moves with the new data.

The best among us base their work on the available data but push (hard) at the edges, shifting the available data for the next product. But good data always deliver good profits.
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The “Data Driven and Digitally Savvy: The Rise of the New Marketing Organisation” report, compiled after speaking to 300 executives, revealed that almost three quarters of marketers (74 per cent) said that they were able to achieve a competitive advantage in capturing customer engagement and loyalty, while less than a quarter (24 per cent) believed they were able to do the same with strategies led through limited data. The report also discovered that marketers would be 6 times as likely to report a higher profit through the use of data-driven strategies, according to 45 per cent of those involved. Looking at these information, I think it is imperative to follow data - driven strategies - CEOs indeed need this information to make informed decisions.

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