A blog about smog (and how it affects the stock market)

Can pollution really affect the stock market? Well, before you shake your head and laugh, I read an article in Harvard Business Review in which they found a direct correlation between the pollution in New York City and the performance of the stock market. On days that had bad air pollution, the stock market performed its worst. Their data proves it.

Think about that. The authors confidently attributed negative market performance to pollution – and not the countless other factors which could have played a significant role that day. The authors noted that they were able to control for other factors, and isolate air pollution as a factor that truly affected the movements of the market.

“So what?” you say. “I don’t have asthma and I’m not looking for any hot stock tips.” That’s OK. That’s not what this article is about.

The correlation between pollution and the stock market struck me as a great example of how analytics can help small businesses better understand the factors that drive their businesses.

Often as a small business owner, you judge your growth by measures such as the increase or decrease in your annual revenues. This can be a solid gauge, but you could also be missing SO MANY other factors that could be contributing or detracting from that growth measure. (Before that article was published, how many traders do you think woke up and ran for the Air Quality Index predictions?) A positive growth number, for example, doesn’t identify which parts of your business are growing. Businesses rarely grow evenly across different product offerings, service offerings, demographics, or geographic areas. Imagine how much more valuable it would be if you had insights into precisely which areas were growing and what factors were spurring that growth.

Let’s look at an example: HVAC Company

Here’s a simplified example: An HVAC company realized they had 15% growth in sales last year. As they drilled down, looking for insights (specific data and factors that might have spurred that growth) they discovered that almost all of the growth was generated in only two of the 10 counties in which they did business. Drilling a little deeper, and controlling for other variables, they found that the growth in these two counties could be attributed to the high penetration of their website appointment scheduling. This is a great insight – and one they could leverage to repeat last year’s growth pattern – by marketing their online appointment scheduling feature more heavily in the eight counties where they showed less growth.

Use analytics to improve your business

Analytics can be a valuable tool for your business. Big businesses use it, why shouldn’t you? But to realize the full value you need to understand the best way to collect the data, analyze the data, ask the right questions, and apply the insights you gain to effectively improve your business. And if you aren’t comfortable doing it yourself, you can contract with research firms or other consultants who can also help you gain that edge.

So take a few minutes and think about some factors that might be affecting your business – both negatively and positively – and not just the obvious ones. Think outside of the box. (But around these parts, you can probably rule out pollution.) And if you want some help, give me a call or stop by and I’d be happy to brainstorm with you – because thinking about ways to improve business is what I do all day long.