Capitalizing on Data for Rapid Margin Improvement

by Rob Steinberg

Photo by Nic McPhee

CEOs invariably recognize the importance of organizing data into an easily accessible and useable format. Particularly in companies with a large number of stores, offices, facilities, projects and product lines, the ability to compare results among segments and spot cost anomalies on a weekly or even monthly basis is key to improving margin. However, developing and/or implementing a tool to provide this data on an easy, reliable and weekly basis is frustratingly difficult.

Off-the-shelf software packages are usually extremely expensive, both in cost and implementation time, and they may not deliver the information upper management wants. In-house personnel may be able to create a “snapshot” analytic tool but not one that functions like the sophisticated software solutions that can be easily updated on a long-term basis with protected base data. Often, the best alternative is to develop an easy-to-update, Excel-based analytic tool to compare performance among segments (e.g. stores, facilities, projects and products), yet is easy to update each week and maintains secure and accurate data.

Rapid cost-savings and margin improvement almost always occur once data is organized into a reliable, useable form — i.e.  knowing how discrete business segment margins compare to targets; quickly identifying which segments are driving up costs and why; and then transferring best practices from the high-performing to the low-performing segments.

Creation of the analytic tool typically takes less than 30 days, and the cost of the tool is more than covered shortly. After the tool is developed, a consultant may then assist by meeting weekly for a few hours for a 10-week period (70 days) with key managers to assess results and ensure actions are taken based on the new information obtained. As an outsider, the consultant brings an increased sense of urgency and enhanced employee focus.

A more granular, reliable and systematized process for identifying and correcting cost anomalies in processes, projects and performance among segments of a business will yield significant margin improvement. Once simple analytics are implemented, more advanced analytics that involve applying statistics and other mathematical tools to business data can be applied to take previously isolated data sets, aggregate them, identify patterns and relationships and optimize the factors that have the greatest impact on margin. However, developing the initial analytic tool alone will have a positive impact on operating results for your portfolio companies.

Rob Steinberg is the co-founder and Managing Partner of Cornerstone Advisory Services, a management consulting, interim management and outsourced Operating Partner firm in the Twin Cities Minnesota. He was a Managing Director at CRG (now CRG Deloitte) and worked at a split-off firm from the West Coast Office of Alvarez and Marsal. He has served in 6 C-Level positions, including as CEO of several companies, and has provided consulting services for tech, manufacturing, construction and retail businesses.