September 2023
There are two types of operators in eCommerce - those who think they understand their data, and those who actually do.
Those who think they understand their data tend to blindly trust the output of an analyst, or a plug and play tool like a Northbeam, or a TripleWhale. They jump straight to these solutions without first taking the time to dive deep into the mechanics of their numbers.
Those who actually understand their data can at least generally tell you where the data is stored (hint: it’s in a real database, not just a SaaS dashboard). And they know how to query the data to answer simple questions using SQL. And they know how to stand up a basic data visualization. And they might still use a plug and play tool, but they truly understand how to read the output in a systematic way. Better yet, they can immediately spot errors or differences in the data models that these tools utilize to get to a one size fits all output.
Those in the first group might say that these skills are a waste of time to develop. They’ll say that you can get “close enough” by just relying on the 3rd party resources. And they’re basically right, if all you’re looking for is a set of superficial numbers without true understanding. But I would argue that possessing these skills and knowing your numbers intimately (at the database level) is not just a nice to have skill. It is the most potent professional advantage available in eCommerce.
Simplicity is a Comfortable Lie
Plug and play analytics tools currently dominate the landscape. Everyone wants a solution that easily integrates with just a single click, and immediately tells them all the answers. They want to be able to ask a GPT-powered chat bot “what changes should I make to sell my business for 9-figures?” - and have an answer that is actually valuable on the other side.
This is… not smart.
Plug and play tools are simple and fast, sure. But every business has nuances that a one size fits all tool cannot possibly account for. And when it comes to data-driven insights, the most valuable nuggets are often hidden behind that nuance. This becomes clear when you begin to understand your data on a more fundamental level. And in many cases, you’ll actually find that not only do the plug and play tools provide an overly simplified view of your business, but often the conclusions that the tool leads you to are occasionally (and critically) just flat out wrong.
A simple but surprisingly common example of this is discovering that the “total orders” metric in your plug and play dashboard is skewed because it’s including something like influencer sends as actual customer orders. And then you’ll realize that your CAC has been off this whole time. But wait, that also means your cohort LTV is higher… and the list goes on.
Consider what kind of implications these oversimplifications could have on your decision-making, and thus, your business as a whole. Like a compass that is 1 degree off, these nuances that go undetected can derail your long term trajectory in rapid fashion. The simplicity that these tools offer is comfortable and easy, but it’s also probably a lie.
By taking the time to understand the underlying structures of your data - how to construct your database, the metrics that matter, and how to visualize them in meaningful ways - you garner insights that are unparalleled in depth and clarity.
Become a Data Generalist Instead
In light of these reflections, I would urge operators not to blindly accept the word of an analytics tool (or an analyst for that matter) as infallible. Instead, embrace these simple steps to ensure a genuine understanding of your business's data:
- Learn what a relational database is
- Learn how to use SQL to query it
- Learn how your different data sources work together, and how your data is collected and defined
- Learn how to use (and I mean really use) Excel and/or Google Sheets
- Learn the basics of a visualization tool like Tableau
- Benefit from your new found ability to quickly and accurately answer any reasonable business question that comes to mind
If you apply yourself to this effort, it should take at least a few months, especially if you are operating a business during most of your working hours. This is not an insignificant amount of time.
But on the other side of the effort, you’ll have a true eCommerce superpower that shockingly few possess.
The result will be clarity and understanding that money simply can’t pay for. And who knows - you might even get the answers to your 9-figure exit question.