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Surviving Global Economic Recession through Data

Enterprise-level companies have the luxury of deep resources to analyze and continuously update business risks, performance and opportunities. Most other companies rely on small finance teams with little bandwidth to accommodate unexpected planning and analysis cycles. However, over the past few years, these small teams have had to respond to unexpected and major upheavals in the business environment and adjust plans in the face of extreme uncertainty. This challenge has forced finance teams to be nimble and flexible.

It also called for a shift from collecting data to close the books to using data to make important decisions. As businesses navigate the current economic crisis, the need for high-quality data increases, and clear, easy-to-understand models become increasingly important. But to be effective, leaders must bring the entire organization together as they work to build a data-driven business. This requires the buy-in of management and all operational functions and must be reflected in the practices, culture and values of the​​  entire organization.

Surviving Global Economic Recession through Data 1

A New Reality

Many have heard warnings from the investment community calling for a shift from a growth-at-any-price model to a risk management model. During the last recession 13 years ago, not all financial industry leaders experienced the effects of the recession and lack of capital. Those who have experienced these situations know that capital can dry up overnight, and strategies based on the assumption of access to large amounts of cheap money are unwise. Transitioning to and succeeding in a challenging economic environment requires a different way of thinking about the role of the finance team and how it can add value to the organization. Indeed, the ability to adapt entire businesses to changes in the business environment is what finance teams are uniquely suited for.

Create a decision model

Operating without the safety net of easy access to additional funding means finance teams must keep a close eye on working capital. Doing so requires not only cutting costs, but also knowing how to invest more of your limited (and expensive) dollars into your business to not only ride out the recession, but grow stronger. Job freezes and cost-cutting exercises are most effective when you understand the top-line impact of different spending scenarios. Here, the model shows how capital can have a critical impact on your operation to create opportunities and ultimately revenue. In a challenging economic environment, these models are more important than ever.

Get the right data

In a data-driven enterprise, it is also important that management teams in all departments understand why a particular model is important to improve performance or reduce operational risks. Building a model that helps you succeed starts with identifying leading and lagging revenue metrics for a particular business. Once you’ve identified your key metrics, you’ll want to track those data points historically to see how you’ve influenced their development.

A robust data infrastructure is critical to obtaining and maintaining high-quality data. Some characteristics of a good data system to keep in mind are:

  1. Clear real-time data.
  2. Ability to dig into numbers.
  3. Ability to show trends, not just actual facts.
  4. Ability to link data.
  5. Build consensus on metric definitions for clear communication.
  6. Ability to change the rhythm from quarterly goals to monthly or daily goals.

Inter-organizational cooperation

Creating models and insights is empty work without partnering with every business unit in your company. I believe a good measure of success is leveraging financial insights and data, not the other way around. It’s hard for me to get the right data and create conversations instead of issuing fiat.

In most SaaS companies, you support at least five key areas of metrics, and since these metrics are likely to change in this business environment, open and ongoing dialogue is essential.

The role of financiers

The responsibility for driving the transition to a data-driven business rests with the finance team, usually the CFO. Financial management can only be successful if each operating unit is successful and each unit is optimized for cooperation. Finance offers not only metrics and patterns, but perspective on how to interpret metrics, metric levels, and trends.

Finance teams need to deliver more than just reporting numbers. Instead, data is needed to illuminate the actions they recommend, the changes they make, the increased or  decreased investment, where time is focused and how resources are directed. This data can show you how to avoid rocks below the surface and how to best navigate sharp turns – spotting and taking advantage of opportunities. Building data doesn’t guarantee survival, but it does help increase the odds. It is clear that data-driven companies will have a better chance to thrive when we finally overcome the latest challenges in the business environment.

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