I'm not afraid to ask...

I know, it seems like a ridiculous question. But there are no bad questions on this path to business literacy. And the answer to this question should provide a foundation for future topics.

1. What is a business?

A business is an operation. An operation is a series of activities or tasks that are intended to result in a specific desired outcome. For most businesses this outcome is a reasonable return for its investors (more on this in section 3).

A business is not just any operation. It is an operation that must successfully do the following:

1. Create some form of value through development of a product or service.

2. Deliver that value to a person or another business.

3. Collect payment.

These requirements hold true for every type of business, regardless of industry, legal structure, or size. In the long run, the operation must collect enough payment to at least pay the costs of operating the business, but ideally more.

2. Why do businesses need data teams?

To be honest, they don’t.

A lemonade stand, for example, meets all the requirements of our definition above. The stand can create an ice-cold refreshing beverage (an incredible value on a scorching hot day) and deliver that beverage to a customer willing to pay money for it.

Sure, there is some data involved in this operation, but most of you will probably agree that this lemonade stand doesn’t need an enterprise data warehouse. So why would a business need data?

A business is operating to provide value to its customers. The more value it provides to customers and the more customers it serves, the more money the business will receive in exchange for that value, and the more valuable the operation will be.

Over time, businesses want to improve their operations to deliver more value to more customers and receive more money. Data is an excellent resource for businesses to improve their operations.

Most businesses in the digital age have records of their business operations. These records are the data you work with.

• A customer places an order.

• An item is shipped.

• A representative responds to a message.

All of these business activities are part of an operation.

Businesses hire data professionals to clean and organize their data so that they can leverage this data to improve how they operate. When the data shows that there is an opportunity for improvement in the operations, that, my friends, is an insight.

3. Why do businesses exist?

A business can exist for many reasons. Many business owners will say they started a business to solve a specific problem, or because they were passionate about their product. Although these things can be true, the core reason businesses exist is to make someone money. In most cases, businesses serve as an investment vehicle for investors.

Investment vehicles are a way for investors to grow their money. Some investors invest in real estate, some invest in the stock market, and some start or invest in a business.

The important takeaway here is that every business has an investor. Even the lemonade stand in our earlier example. Someone bought the lemons and the sugar expecting the operations of the lemonade stand to make them more money then they initially put in.

Investors are looking for a return on their investment. They are hoping to eventually end up with more money than they initially invested into the business. The investor could be a bank, venture capital firm, or it could be the founder themselves.

How a business grows money

Businesses can grow their investors’ money by generating a positive return on the investor’s initial investment. There are two ways businesses can generate this return.

1. The first is income. When a business operates effectively, it should produce income for its investors. This comes in the form of dividends or cash flow (we’ll cover all these terms in later issues).
   

2. The second way a business can provide a return for its investors is by increasing in value (appreciation). Businesses increase in value when the value of their products or services increase, and the efficiency with which they are creating and delivering this value increases.

The outcome here will depend on how well the business operates. As a data professional, you can impact the value of your business by using data to improve how the business operates, and maximize the return for its investors. This is a simple, yet powerful principle to keep in mind.

Final thoughts

This may not be new information for many of you, but I know it can be easy to forget, especially when you’re focused on building data marts and handling stakeholder requests. Businesses (startups especially) can be chaotic, and we can lose sight of the big picture amid this chaos.

My hope is that this big picture overview puts your work into perspective. If you are a data professional working for a business, think about how you can help the investors of your business get the best return on their investment. Think about how you can help improve how the business operates. The more you can tie your work to this goal, the more you will stand out as a data professional, and as an employee at the company.

What did you think of this post? I’d love to hear from you.

1. How does your business deliver value to its customers?

2. Who are the customers? What is the market? How big is this market?

3. Who has invested in your company? What do they want from their investments?

4. How does your company operate to produce and deliver value for customers?

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Stay tuned for next week’s issue as we dive into Sales!