In this new world of big data and the Internet of Things (IoT), there’s certainly no shortage of data to be analysed in order to identify opportunities for business improvement. That said, organisations need to be clear about two things:
- What analysis approach they will use
- What outcomes they’d like to achieve
Trend analysis is an approach based on the concept that past data can be used to help predict the future. As such, the process involves comparing business data over time with the goal to identify certain patterns, otherwise known as trends.
But why are trends important?
Trend analysis can improve your business by helping you identify areas with your organisation that are doing well, as well as areas that are not doing well. In this way it provides valuable evidence to help inform better decision making around your longer-term strategy as well as ways to futureproof your business.
The trends most organisations normally zone in on are focused around:
- Key performance indicators (KPIs):
Tracking against what you as a company has identified as your own measures of success. This could be anything from increased sales, to a reduction in manufacturing costs or even improved market share.
There is a definite need to track the total amount of money being transferred into and out of your organisation month-to-month and year-to-year in order to spot cashflow and liquidity issues well in advance.
As with any other type of prediction (otherwise known as a calculated guess), the success of trend analysis hinges on the basic principle of “what you put in is what you get out”. Key considerations here are the accuracy and completeness of the data, the frequency of data collection and having the data in an easily accessible and usable format.
It is also important to have something to compare against. Benchmarking should be used to create the ideal gold standard to serve as your reference point. Benchmarks can be created by looking both internally and externally. If there are similar-sized organisations within your industry that are performing well, those could be used as your benchmark. Similarly, if there are particular departments within your organisation that are performing well, they too can become benchmarks. Even a particular period (i.e. a particular financial year) can be used as a baseline for tracking purposes.
The final two pieces of the trend analysis puzzle are:
- Defining at which point a downward or upward change is worth looking into.
– Is a 10% increase in sales significant? Would it warrant a closer look?
- And identifying what caused it.
– What were the contributing factors that lead to this change? Can it be replicated?
Once you have a good process in place for collecting, comparing and analysing data, trend analysis becomes a very powerful tool over time.
Our expertise within the analysis field makes Analyze the ideal partner to assist with trend analysis within your organisation. Want to find out more?
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