Data initiatives can lead to results with direct business benefits.
Creating a culture of data-driven operations can improve your bottom line and potentially lead to: refined operations, better project delivery, a stronger competitive advantage, and ultimately more project wins.
There are several key values of data initiatives that will continue to help your company prioritize return on investment (ROI), define its metrics, and benefit from a data-driven culture:
- Actionable information garnered from analysis of data
- Better access to data and metrics in real-time
- Improved safety methods and procedures
- Defined qualifications of financial performance
- Culture of continuous improvements
1. Actionable Information
Actionable information is the goal of every data initiative.
Data processes can lead to improved timeliness of action. This type of information is often revealed through analysis of data and works to develop a culture of metrics.
Let’s take a look at an example with a direct bottom line result. Tracking project progress in relation to expected project costs is a common measure of the construction project’s status. It provides insight to determine if enough progress is being made by the resources committed to the project.
There are two interesting and useful ratios:
- Earned value to labor spend. In many cases, the effort expended in relation to the progress made is an excellent indicator of where to focus management attention.
- Request for information (RFI). This ratio counts days of schedule variance and helps highlight areas of budget where schedule risk can escalate throughout a project.
2. Information Timing
When there’s immediate access to progress information, timely decisions can avert costly overruns. Many times it takes weeks to get a point-in-time snapshot to management. Meanwhile, costs continue to escalate before corrective action is taken.
Implementing a data solution has two benefits:
- Effort to collect, analyze, and publish information is significantly reduced. Often, data collection is a separate management function. A well-designed process will collect data during the normal course of operations which increases the timeliness and value of the information.
- Management can stay more focused, and act more quickly and effectively. Decisions and actions can lead to rapid resolutions that avoid further escalations and costly delays.
3. Safety Programs
Analyzing data across the industry helps to focus attention on internal methods and procedures. For instance, it’s a common practice to track lost work days. Safety programs should also become one of your common data initiatives.
The cost benefits of safety are well documented. Tracking, and regularly publishing, less significant safety factors and events can lead to a culture of safety and prevent a more serious incident.
For example, imagine a construction company tracks minor incidents and simple first-aid usage and discovers that a ready supply of gloves is a cost-effective way of reducing more serious injuries. It helps the company demonstrate their commitment to safety. This simple action could potentially provide huge value.
4. Financial Information
A business’s overall health is dependent on financial performance that allows for the ebbs and flows of business cycles. Financial information is the most common area of data analysis. It takes a variety of forms:
- Bottom-line focus
- Cost-component analysis
- Gross-margin segmentation
- Cash-requirements analysis
Financial data is more insightful when mixed with operational data, which tells the story behind the numbers and reveals actionable information. It often takes the form of operating ratios—such as revenue and gross margin per labor hour—or digs even deeper into metrics around project issues like change orders and schedule performance.
When you track the history of delivery performance from a financial and operational perspective, it provides important evidence of qualifications. This can have a direct influence on selection criteria in competitive bid situations.
Work isn’t always awarded to the lowest bidder. A proven track record is highly valuable. Quality operations that deliver in a cost-effective manner can leverage a documented track record and allow you to enjoy a higher profit margin, even in competitive bids.
5. Culture of Continuous Improvement
A culture of tracking performance information is also attractive to investors. Continuously tracking performance leads to a culture of continuous improvement, which leads to better investor relationships and top investor interest.
Working with top quality investors has many positive outcomes for a business, and it becomes a virtuous cycle.
Tracking operational metrics can also have team performance benefits. Invoking a healthy competitive spirit is highly motivating. This doesn’t have to be competition between teams, but rather a competition to establish metrics and a sense of self improvement.
Coupling performance information with recognition and shared rewards is known to be motivating. A vital element in this type of program is collecting and assessing feedback from participants. People respond better when they have a voice in their work environment.
Data programs of this nature are a catalyst for productive dialog between delivery teams and management. When executed in a collaborative manner with all stakeholders, this is also effective with union labor. The foundation layer underpinning all efforts of this nature is data—timely, shared, well presented data that’s discussed in an open forum.
Data collection, in many cases, is a distributed, manual effort. If that’s the case, how do you motivate people to participate effectively?
Data initiatives should be nimble, agile, and value focused with a mantra of simplicity. Data collection should fit into the natural flow of operations.
When construction workers track their time, have them identify the project area and construction group they spent time on. Also ask for an assessment of completion on a five-point scale. It’s simple and fits into the natural flow of time tracking that drives people’s pay.
You’ll find that assessments of completion are materially accurate in the majority of cases. The results can be immediately available, and an assessment of accuracy can be achieved via a simple job site inspection by management. This engages the delivery team, mid-management, and upper management with one well-designed data collection process.
Deliver a bit of cumulative information back to the team member and you have engaged them in the culture of data.
Tips to Implement Data Initiatives
A prolific amount of data is available and there are ever increasing methods and techniques to capture it. It’s important to focus on your endgame as you’re putting together your initiatives.
Prioritize Return on Investment (ROI)
Prioritizing the possibilities for the highest business benefit is vital to the success of any data initiative.
You’ll need to know how the results of your data initiative will flow to the bottom line. This can occur in a variety of ways:
- Improved visibility to project progress
- Cost-saving actions
- Insights into process patterns
- Reduced capital tied up in work-in-progress
Sometimes, the immediate results of data and information efforts aren’t the direct benefit; rather, they enable actions with concrete bottom-line results.
Define Key Metrics
A culture of data-driven metrics transforms interesting possibilities into more tangible objectives. To best use your data, it's important to define the metrics you're tracking and the language used companywide to monitor it. Once defined, these metrics can help you plan your next steps.
It’s a good idea to get an outside perspective to broaden the outlook of what’s possible. There are a variety of technologies available for collecting data, analytical processing, and publishing and sharing information. New ways of thinking about your current operations can yield impressive results, so don’t be afraid to study methods from other industries and learn how they gain business benefits.
We’re Here to Help
The value of data initiatives is real and reveals itself incrementally. Get started, publish a vision, persist, involve people more broadly, and provide strong leadership support.
To learn more about how you can develop a system of data-driven operations at your company, contact your Moss Adams professional.