The benefits of data analytics are endless, but it’s important to understand the intricacies involved before jumping into the deep end of the data pool. This panel discussion summary gives direction on developing a strategy to ensure the greatest gains possible for the modern cannabis business plan.
(EP) Emily Paxhia, Co-Founder & Managing Director, Poseidon Asset Management
(GC) Gary Cohen, CEO, Cova Software
(CH) Christine Hodgdon, Dir of Human Resources, Native Roots
Moderated by: (KP) Keegan Peterson, Founder & CEO, Wurk
Summary of "How Data-Driven Cannabis Businesses Will Prevail" panel discussion at National Cannabis Industry Association's Seed to Sale Show in Boston, MA on February 13, 2019.
Emily (EP): As an investor, when first entering the cannabis industry, we didn't have real-time data on all aspects of how businesses were being run. We now depend heavily on data when making financial decisions.
Christine (CH): With a 200k sq ft cultivation and over 20 Colorado retail dispensary locations, we rely on data to put the best people in the most fitting roles for optimal performance.
Gary (GC): Prior to starting Cova, I ran data and analytics companies for 16 years. I'm focused on how data drives supply-chain and retail performance.
Keegan (KP): At Wurk, we enable businesses to make real-time decisions about their biggest asset: people.
(CH): Why is data about your people so important? We make emotional decisions when it comes to people, unlike analyzing grow or extraction equipment and the return on investment. People get smarter, more efficient - they learn. Through data, you can bring the emotional piece into perspective. Cannabis is new and there are a lot of emotional, family-driven decisions sometimes. Base decisions on facts. Create roles that help business thrive. Understanding the ROI of your people is so important, as training, finding, and on-boarding people is an investment. If that Intellectual Property walks out the door, it'll cost you.
(GC): Moving product and understanding what is going on at your retail location is important, but also consider what is happening even further down the supply chain. What’s the efficiency and productivity of your wholesale partners? At your cultivation? By optimizing this full-chain data you're in a better place to compete.
In cannabis, the data is hyper-geographic; what makes sense in Washington is totally different than what is being built in Oklahoma. Are you going to base your business on the initial profits, or benchmark what happens in other markets? Compare micro to macro data realms. Understand where the maturity of the market lies and study trends.
(EP): Data and analytics are at the foundation of this industry and are top of the list when building an investment portfolio. None of the mainstream industries are making decisions without big data. To bring in a sports analogy, Wayne Gretzky said, “Skate to where the puck is going.” Good data will tell you which direction the market is headed. What can we learn from these existing markets? How can we identify trends?
We hear a lot about “brands” and investing in products. Without data in the brand consumer segments, I cannot invest. I need information about cannabis consumers entering the market – who the segments are, who the modern consumer is. Every investment decision we make is based on data and it’s getting better in the industry.
It's important to also consider the people data when investing in a company. How do they attract and retain people and build culture? How data driven is the licensee's hiring plan within their cannabis business plan?
Specifics of Data
(EP): All data is not created equal. It matters how data is collected, sorted, packaged and what insights are provided. Every market takes a different approach to data and it can be detrimental to a business. For example, not maintaining consistent naming conventions for strains can be a nightmare. You might enter "OG Kush" in your point of sale, but your packaging department has linked that strain as "OG K" in the same system. Dirty data can put you on the wrong path if you aren't careful.
The best companies in the cannabis industry embrace their data.
(GC): You can measure inventory – velocity of product sales, for example. Understand what's selling, how fast it's selling, how quickly you can re-order so you can manage your inventory flow accurately. Know where your inventory is and account for discrepancies, such as employees taking a few extra grams over time.
This industry is crazy with promotions, specials, deals of the day, happy hours, "Shatterday," etc. It becomes difficult to identify trends. But you can use data to inspect patterns. For example, Jim sells the most on Friday, when everyone gets the Veteran discount, even though everyone coming through the door is not a Veteran. Inspect what you expect.
Be better about relying on your suppliers. The product we sell isn’t formulated, consistent soaps and shampoos. Marijuana crops are different - consistency and quality are important. Follow consumer behavior through loyalty programs, so you can see how important consistency is.
(CH): Cannabis is a cash intensive industry and comes at a high price. How do you handle the access your employees have to a healthy amount of cash? Ensure you have the right people in the door and are training them appropriately. Obviously, monitor employee activity through security. At Native Roots, we provide a centralized Learning Management System so people can learn on their own terms. We have a 90-day onboarding process and offer high-level plant science training after 6 months of employment. Invest in extensive training for your most important asset.
Look at your overtime data, a metric that can easily get away from you. 80% of overtime is unnecessary. Consider your employee turnover data. This is measured retroactively, not currently, so be aware of signals to help you get ahead of turnover (sick days, out of office days). Reducing attrition by 10% saves your business substantially.
69% of organizations are looking at people data this year, 50% more than last year. Understand the makeup of your workforce. Go granular: by age, sex, location, etc. Whats the propensity for someone who has a longer commute to work? What can we do to keep them? Dig into turnover and then do something about the data.
(KP): Employees can steal thousands of dollars in overtime if you are not relying on data to catch those red flags. By having a system where scheduling is tied to payroll, you're creating guardrails. You know when people come in, when breaks are, when they clock out. Think of your employees as money going out the door everyday. With the right infrastructure and data in place you have visibility into your largest cost.
In conclusion, from day one it is important to incorporate data-driven insights into your cannabis business. Investors will increasingly look for these insights in cannabis business plans and expect you to execute on these in your actual operations. To learn more about cannabis business plans and see an example of a cannabis hiring plan, check out our free template here.