Let’s imagine that there are two mid-sized companies that provide ball-bearings to the motor industry. They are in direct competition with each other with similar product ranges, fees and operational regions.
In a service such as this there are only so many variables that can be tweaked to make a profit. If both companies create great quality ball-bearings, where will the competitive advantage come from?
The answer lies in data, or more importantly, more data and of better quality than that of your competitors.
Most companies will keep data sets of past customers and prospects in the pipeline. The key is to focus on the most profitable and valuable companies to do business with and reach out to these businesses as a matter of priority. External data sets can help here considerably. Which companies are growing? Which companies have released profit warnings? Which companies are opening international operations? Which companies have announced new partnerships?
By linking your existing data to external sources of information you can gather a great deal more information on the companies you should be dealing with and the companies you need to drop like a stone.
In a similar vein, by understanding which companies are experiencing financial difficulties and are likely to struggle with payment cycles you can start to improve your risk management processes. For example, moving critical companies from 90 day payment cycles to 15 day cycles and reducing your exposure to large orders can seriously improve your own balance sheet.
In past exercises we’ve discovered that at least 10% of all agreements have effectively been “toxic” to the company. Bad debtors, horrendous invoice cycles, bankruptcy notices - all of these can damage the profitability and even viability of your organization. By leveraging external data, integrated with your own existing prospect or customer data, you can get a much clearer picture of which customers, partners and suppliers to work with.
For commodity businesses, data is probably the last bastion for competitive advantage and most have yet to scratch the surface of what is feasible.