Stop piling up data! This business analysis report is amazing

In business analysis, many reports lack depth and pertinence due to piling up data, and cannot provide valuable decision support for management. This paper proposes a high-quality business analysis method that emphasizes the shift from result indicators to process indicators, identifies key influencing factors, and establishes a clear analysis logic.

Many companies write long business analysis reports, with dozens of pages of PPT, hundreds of indicators, and dense numbers. However, once they are presented at the business analysis meeting, they will be criticized as: "The analysis is not in-depth!" "The viewpoint is not prominent!" Obviously, there are so many numbers and charts, why is it not in-depth?

1. Problem Analysis

Because these reports make the mistake of "using results to explain results". Many business analysis reports use financial indicators, such as revenue, profit, cost, expenses, etc. Even when calculating indicators such as "profitability" and "growth ability", they are still secondary processing using financial indicators.

From a business perspective, these financial indicators are all result indicators. If you only use the results to explain the results, you will come up with useless and brainless conclusions such as "profits are lower both year-on-year and month-on-month, so we need to increase them" and "low profits are because costs are high, so we need to lower them."

After hearing the result of "low profits", people want to know more about:

1. Is it because of the overall environment or because I didn’t do well enough?

2. Don’t just say that the overall environment is not good, are there any solutions?

3. What did I do wrong? Was it the wrong direction or poor execution?

When outputting the report, you should make a directional judgment on the cause of the problem. If it is really a macro-environmental problem, find a solution under the new environment. If it is not a macro-environmental problem, block the excuses of those who shirk responsibility and find a solution to the problem.

To achieve this, there are three steps:

1. Don’t just look at the result indicators, add process indicators

2. Find the factors that affect the results and identify the key factors

3. Establish analysis logic and find the key points of the problem

2. Increase process indicators

The process indicators to be added can reflect: "How the business is done". The first level of decomposition is: Performance = Number of customers * Conversion rate * Average order value. Note! From a business perspective, indicators such as number of customers, conversion rate, and average order value are still result indicators. Second and third level decomposition is also required.

On the revenue side, the second level of decomposition is to see what steps are involved from customer leads to transactions. For example, a common toB business is shown in the figure below, where leads → follow-up → demand confirmation → proofing → bargaining, and the conversion rate and dwell time of each step are the second-level process indicators.

The third level of disassembly requires displaying business details, such as in the figure above:

Different lead source channels (public domain/private domain/referral/salesman development)

Lead allocation strategy (based on ability assessment/past performance/first come first served)

Different product models/gross profits (main products/accessories)

With these detailed divisions of preferential strength (high/medium/low), we can conduct a deeper analysis on the cost side, and the processing methods are slightly different. On the cost side, the first level generally distinguishes between variable costs/fixed costs, and the second level is based on cost drivers, splitting the sales expenses/administrative expenses in the financial indicators according to the cost, so that the business can intuitively see the costs brought by their actions (as shown in the figure below).

If this step is done well, the analysis will naturally be in-depth. If it can only be broken down to the second level, or even the first level, then the analysis will be relatively rough.

3. Identify influencing factors

Do all the added process indicators need to be included in the business analysis report? Of course not. Stacking too many process indicators will make the report more lengthy and more difficult to see the results. Therefore, data analysts are needed to identify the key factors that affect business results and include indicators that represent the key factors in the report.

For external influencing factors, focus on:

1. Impact of upstream raw materials, labor, and resources on costs

2. Impact of downstream customer demand quantity, preferred types, and preferred channels on revenue

3. Are competitors launching targeted price cuts/competing for upstream and downstream resources?

For internal influencing factors, what is the current business strategy? Specifically, it includes:

1. People: What kind of customers are the core customers?

2. Product: Main features/price/service of the product

3. Field: What is the main channel and what are the quantity/quality requirements?

First understand the business strategy, then further observe whether the front-line departments have implemented it. If the business strategy is set to develop high-end customers, but the front-line departments are still flooding the market with customers without focusing on key areas, then there is a problem with the execution. If everyone is following the business strategy, but there is no effect, then you need to find time to reflect on whether the strategy needs to be adjusted.

Of course, it is also possible that the company has no strategy and just does whatever it wants. However, companies without strategy usually have the following problems:

1. Unreasonable product line layout, out-of-stock and overstock coexist

2. Revenue increases, gross profit decreases, and net profit decreases even faster

3. Sales expenses grow much faster than revenue

After discovering the problem, just remind the management to solve it one by one.

4. Establishing analysis logic

After sorting out the indicators and confirming the key factors, you need to establish the analysis logic. The analysis logic can be established using the MECE method. The basic idea is: identify the problem from both the positive and negative aspects. Use the onion peeling method to analyze layer by layer to find the answer (as shown below).

Note! There is no fixed routine for the analysis logic, which is completely oriented towards "answering leadership questions".

For example, if everyone is complaining about the "bad environment", the leader may instruct: "Find out what else can be done when the environment is bad?" Or the leader may instruct: "They just keep complaining about the environment! Shut them up!"

In these two cases, the analysis and development ideas are obviously different (as shown below). When doing the analysis logic, you must be clear: what does the leader want...

This step requires careful consideration because different companies face different problems. For the same problem, different bosses think differently. To do business analysis and serve the management, you need to understand the real needs of the management, rather than blindly looking at numbers.

V. Summary

In summary, high-quality business analysis requires efforts in many aspects:

1. The business has a certain degree of digitization and can collect process data

2. Data analysts have a full understanding of the business and a rich library of tags to describe business behaviors

3. Data analysts have good communication with leaders and can grasp the direction of analysis

Of course, not all companies have such good conditions. Many small factories have poor treatment, low wages, and a mess of data infrastructure. With only a pitiful amount of order data, the leaders still expect to analyze and come up with amazing conclusions, which is really difficult. At this time, it is recommended to adopt some affordable alternatives, train yourself to label and build analytical thinking, and then switch to a regular large factory as soon as possible.