1. Introduction
The goal of most companies, whether a startup or a large multinational corporation, is to grow net income by increasing revenues. It is logical to think that in order to grow, a company should pursue revenue opportunities from any source possible. However, most successful companies focus their growth efforts in areas where they have built their distinctive capabilities; strengths that set them apart from everyone else (Leinwand & Mainardi, 2016). To make sound strategic growth decisions, companies must establish a coherent performance management system that includes critical metrics that support a company’s value proposition. To do so, companies must find ways to select, validate, and prioritize performance measures. This project gives you hands-on experience with analytics and performance management in an e-commerce venture. This project also challenges you to think of ways to incorporate financial and non-financial data to guide the venture at a critical time in its evolution as it attempts to thrive and grow. This case is unique as it highlights the interdisciplinary nature of running a company where analytics help creates a performance management system that informs strategic growth decisions.
1.1. Background: data and analytics
Data and analytics are critical components of successful performance measurement and management for growth. A com- pany’s operations and interactions with customers are constant generators of data that are often rich with information. How- ever, the abundance of data and plethora of data sources are also responsible for many challenges faced by companies trying to drive decisions based on data. For example, some data are structured – stored in rows and columns in spreadsheets or in relational databases – and are easy to retrieve and analyze. Other data – such as email data or website traffic data – are referred to as semi-structured and require more effort to process and summarize in useful ways. Finally, there is often a wealth of unstructured data associated with a company – customer comments, reviews, testimonials; social media discus- sions and references; customer service call transcripts. Storing, retrieving, and managing all different types of data, as well as prioritizing performance measures based on these data to help a company grow are complex problems faced by many companies today.
Tracking performance via performance measures is an example of descriptive and diagnostic analytics; one can obtain information about how the company is doing and diagnose potential issues. Many companies have grown to appreciate the importance of employing various types of analytical techniques to move from the descriptive and diagnostic to predictive and prescriptive (see, for example, Kiron, Prentice, & Ferguson, 2014; Parr-Rud, 2012). Predictive analytics involve employing complex analysis based on statistical, data mining, and machine learning techniques to detect relationships and make pre- dictions about the future or about categories of data that are not available (such as what type of customer would find a pro- duct appealing). Prescriptive analytics go a step beyond and use modeling to make recommendations about the best course of action given the predictions made; such as how to schedule sales representatives given predicted demand for goods and/or services.
Accountants often play central roles in supplying senior management with timely and reliable information to inform cru- cial strategic decision-making activities. Accountants, therefore, have the opportunity to be at the forefront of analytics implementation in their companies. A necessary step toward accomplishing this goal is for accountants to achieve competency in the analytical techniques that take advantage of data from multiple sources and of multiple types – structured, semi-structured, unstructured, big and small.
1.2. The business life cycle
Bombas, the startup in this case, is an early stage company that is in need of the advice from an ‘‘analytics-savvy” accoun- tant. It is just a couple of years old and has been quite successful to date. Bombas has survived the difficult first stages of development and now has a handful of products that it has sold to over one hundred thousand customers in just the two-and-a-half years it has been in business. Fig. 1 contains the classic life cycle depiction which can be used to illustrate either the life cycle of an individual product or the life cycle of a business. During the introduction stage, companies are focused on trying to acquire the resources needed to get started and develop the necessary technical capabilities to get into the marketplace. Next, as companies begin to grow, they have to overcome issues related to commercialization: the produc- tion and scaling of their products and the business as a whole. As growth accelerates and the venture begins to move toward maturity and stability, companies struggle with issues such as sales volumes, market share, profitability, internal controls, and where their future growth will come from.
While the success Bombas has enjoyed is admirable, it now faces the challenge of stabilizing and growing the company. The company is currently in the growth phase and is managing the myriad issues that come as a startup attempts to scale. Top management relies on you as their accountant to assist in the analysis of data and to provide advice. Data and analytics can be used to prioritize activities and manage the growth the company has experienced to date. This case provides you with actual revenue data to develop and deploy analytical techniques to guide the continued success of a new venture in order to avoid the natural progression toward decline.
2. Scenario
After graduating from the top entrepreneurship college in the US, brothers Andrew and David were eager to begin their journeys as entrepreneurs. Their goal was to establish a company that would be both profitable and help those in need. After learning that socks were the most requested item in homeless shelters across the US, their idea for an online athletic and leisure sock company with a social mission was born. Along with their two other co-founders, they named their company Bombas and spent two years on research and development to engineer a sock that was built for both athletic performance and extreme comfort; a sock that looked and felt better than any other sock on the market. The Bombas business model is similar to the business models of companies like Toms and Warby Parker – for each pair of socks sold, one pair is donated to homeless shelters across the country.
After finalizing the design, the co-founders launched a crowdfunding campaign on indiegogo.com in August of 2013. Bombas remains the #1 most funded apparel campaign on the platform to date, with $142,488 raised in purchase commit- ments by 2751 people in one month.1
Bombas’ original and primary product has seven unique features: long staple, combed pima cotton, performance footbed, stay-up technology, blister tab, y-stiched heel, honeycomb support system, and invisitoe. Since its initial product launch, Bombas has continued to innovate, design and offer a number of different styles, colors and materials. Socks are Bombas’ only product, and they are sold exclusively online at bombas.com. Most pairs of socks currently retail for $12, with specialty products reaching $18 per pair. To date, Bombas has donated more than one million pairs of socks to those in need.
Bombas has enjoyed great success with its products; it has seen a consistent increase in new customers and has an exten- sive social media following. The founders are seeking the advice of management accountants. The Bombas leadership needs help understanding revenue and order data, increasing repeat customer rates, optimizing website use, and spending on marketing.
3. Software and data
You will use Excel and Tableau to develop analytics solutions for Bombas’ revenue data. Your instructor will provide you with an Excel workbook titled ‘‘BombasRevenueData.xlsx” containing a random sample of 1100 customer orders. You will use this dataset to complete the case requirements.
Visualization software Tableau’s website, http://tableausoftware.com, has a number of training resources. As part of the preparation for the case, you can watch the first few videos at http://www.tableau.com/learn/training. (For example, the first lesson in each of the groups of videos Getting Started, Connecting to Data, Visual Analytics, Dashboards and Stories, and Mapping are a good place to start.) These videos demonstrate how to create a time-series graph, a geographic visualization, as well as a performance dashboard which will be useful as you complete this project.
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