Strategy

We’ve Got Data, Yes We Do. We’ve Got Data, How About You?

For those of you who had a quick flashback to high school sports complete with cheerleaders, sorry about that. But, in the age of POS systems, big data, analytics and visualizations, it’s hard to believe we’re still asking this question.

Most of our businesses, even small businesses, are awash in data – transactional data from our ERP systems, customer sentiment from our marketing management systems and financial data from our accounting systems. Long gone are the days when we polled subsets of customers to predict the behavior and preferences of the population at large. We can easy pull together and analyze the actions of every one of our customers and the financial impacts of those actions in our organization. We know what they bought, when they bought it, what they paid for it and how they liked it after the fact.

So why do we still struggle to make data-driven decisions? The short answer is cognitive biases – a mistake in reasoning, evaluating, remembering or other cognitive process, often occurring as a result of holding onto one’s preferences and beliefs regardless of contrary information (Chegg). As Anais Nin said, “We do not see things as they are, we see them as we are.” In my work, I’ve observed 4 specific obstacles to data-driven decision making. I want to offer some suggestions on how we can deconstruct them and replace them with something better. As futurist and philosopher Alvin Toffler said, “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.”

We believe all smart people think the way we think. It’s not surprising that we interact with people who think differently than we do. The variety in our nature, nurture, experience and education guarantees that no two of us are exactly alike. However, the remarkable thing is, we think those people who do think differently from us are not nearly as smart as we are. We believe, that presented with the same set of facts, all smart people will draw the same conclusion, make the same selection or opt for the same methodology. That’s not the case. Different isn’t dumber. Different is just different. When we examine data and discover findings that don’t square with us intellectually, I see a couple of choices – make a decision that aligns with the data and entertain the option that the data’s disagreement with your own opinion might not be an indictment of your intellect or, if you just can’t get over it, dig deeper and find the why behind the findings. Sometimes the data presents customer choices that have a root that you’ve yet to discover. Whichever option you choose, you’d probably best judge your intellectual horsepower with this quote from F. Scott Fitzgerald, “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”

We believe that the way things worked in the past will be the way they will continue to work in the future. We all seem to have an affinity for systems and processes that we know and have experienced. The line at the grocery store is more comfortable than the Blue Apron box delivered to our home. However, when we see data moving towards a new sales channel or towards an emerging product and away from an existing product, we must muster the courage to follow the data. If we, personally, are an early adopter, it might seem easy. But, if we’re part of the late majority in adopting a new product or service, it borders on the painful. Battling this bias requires more academic rigor than the others. I’d encourage you to examine the histories of formerly successful companies who assumed that the business model they had ridden for, in many cases, decades would continue to return stellar revenues for them going forward. Think about Digital Equipment Corporation (DEC), Kodak, Blockbuster and Toys-R-Us. When well-vetted data says it’s time to make a change, it’s time to follow the data.

We tie our own personal worth and identity to our tastes or work product. Maybe I should leave this point to Dr. Phil, but I’ll take a shot at it. Over the course of a long career, we will all come up with some great ideas. We’ll also come up with others that could use some work. Unfortunately, we’ll probably love both types just the same. When the data shows that the widget we designed isn’t gaining traction in the widget-buying community, we take it personally. Sometimes even more painful is watching customers lose interest in a product or service in which we have an intense personal investment. Maybe it’s been the staple of the organization for a very long time. The customer’s decision to purchase something else feels like personal attack on us. Make no mistake – you are not what you do. Your worth is not the number of times your product is rung up at the register, sold online or positively reviewed on Google or Facebook. Living that way will drive you crazy. Data is just data. It reflects the collective sentiment of the population who provided it regarding a single item or interaction. It is not a measurement of the worth of the person who created it. Get your worth from something that cannot be taken away. I personally find it in my Christian faith.

When the data creates this situation – and it inevitably will – separate your personal tastes and most-prized creations from your personal worth. To paraphrase Rudyard Kipling, “treat the two impostors of customer love and customer rejection just the same.” Make decisions consistent with the data and move on.

We believe that experimenting with something new is expensive and risky. As we examine the data and the tide seems to be turning to new products or delivery methods, we assemble, in our heads, an entirely new manufacturing facility, a complicated new delivery infrastructure and sophisticated, new customer service capabilities. Each of these carries an excessively high price tag. Before we know it, in our heads, we’ve retreated to the comfort of the status quo before we even start. If the data indicates movement towards a new product or service, it’s a good time to employ a methodology from Jim Collins’ book, Great by ChoiceFire bullets, then cannonballs. Before creating an expensive, new infrastructure for a new product or service, construct a low-risk, low-cost, low-distraction experiment to prove the new direction indicated by the data. The ability to calibrate the offering by taking small, measured shots (bullets) and evaluating their appeal and effectiveness can be followed by crafting full-blown products (cannonballs) with the benefit of the empirical evidence you’ve gathered during the test. Some concrete ways to implement bullets then cannonballs – create a 3-D printed version of a new product instead of a full-featured version from an assembly line, roll out a service to a small test segment of your customer base, outsource the support of a test item to a third-party who could rapidly ramp up the support function and quick shutter it when the test is over.

Making the move to data-driven decision making isn’t easy. It often flies in the face of our “gut” and it often has a higher emotional price tag. But, when it’s all said and done, it’s the right thing to do for the organization. The findings from data analysis force us to have discussions we need to have. Implementing data-driven decisions reduces unnecessary risk and position us for success. The new decisions will create more data that we can examine and use to further refine our work.

Five Strategic Things I Wish I Could Force You to Do in 2018

There’s not a better job in the world than being a consultant. I have the opportunity to see the inner workings of multiple industries and competitive companies inside those industries. And, I get to work with great, smart people all the time. The one thing I can’t do, however, is make decisions for clients. I supply informed opinions, actionable recommendations, a framework for execution and accountability to get it done, but I can’t pull the trigger.

But, if just for a moment, I had free reign in every client organization in 2018, here are five things I would do.

Ratchet Up the Employee Engagement – According to a Gallup survey, unengaged employees comprise 70% of the workforce. These unengaged employees collectively cost business owners $550 billion annually in lost productivity. The mechanics of creating, increasing and retaining engagement are not mystical, but they do require a specific set of attitudes and behaviors from employers. To get started, download Employees As, a primer for Employee Engagement.

Innovate Using Jobs Theory – Of all the big thoughts devoted to innovation over they past 20 years, I find those of Clayton Christensen in his excellent book Competing Against Luck to be the most practical, most easily grasped by an organization and most likely to yield a viable new product or service. Jobs Theory positions innovation as supplying the best alternative for the progress a potential customer wants to make in resolving a problem.

Implement a Plan for Focused Execution – Most organizations either throw up their collective hands and run from crisis to crisis OR undertake strategic initiatives that have too many moving parts. To effect real change in an organization, only work on one or two initiatives at a time. When those are done, move to the next one or two. Successful execution requires a laser-like focus, shared vision, education, identifying the correct leading indicators, overcoming the obstacles that surface in the course of the project, great teamwork and accountability.

Clarify Your Messaging – Great marketing and subsequent sales all hinge on an easily understood message. Make sure potential customers know exactly what you do. The message from salespeople, your company website, your social media channels and your sales collateral should be simple and unified. The value proposition should be communicated in language that correctly identifies the client’s problem, positions your organization as a capable resource that can guide them to resolution and describes a desirable future state.

Set Aside Time for Deep Work – I can’t say enough good things about Cal Newport’s book Deep Work. I was challenged by the empirical and anecdotal evidence he presented to regularly and methodically step away from our distraction-fueled world to do work that requires complex, contemplative and deep thought. It’s changed the way I approach my preparation for consulting engagements and the engagements themselves. It’s the best defense I’ve ever seen again distraction and the always present “tyranny of the urgent”. Make time to do this no matter what else is going on in your organization.

There are very few guarantees in this world, but if you take these five things into your organization, I can almost promise that 2018 will look markedly different from 2017.

Again, I encourage you to download the Employees As guide to Employee Engagement. I also have resources available for the other strategic initiatives discussed in this post.

 

Is a Strategic Plan Really Necessary?

You’re making money, customers are buying your products or services and your employees seem happy? Do you really need a strategic plan?  Isn’t strategic planning for big companies with lots of money and lots of employees?  Or maybe for companies that are struggling?  If things are going great, why mess with it?

Read the ten statements below, answer TRUE or FALSE, and we’ll chat at the end.

 

I know exactly what I want the business to look like 1 year, 3 years and 5 years from now.

  • I don’t mean you want to be making more money, I mean –
    • you have a clear picture of new product and service offerings
    • you’ve identified new markets or new target clients for growth
    • you have a plan for hiring and/or developing employees that can get you where you want to go
    • you’re already putting together the production, service and technical infrastructure to support the new products and market
    • you know how you’re going to finance your plans

 

When my leadership team meets, we talk regularly about long term plans.

  • Current operational problems are extraordinarily demanding and will consume all your time.  It’s good and right to talk about and solve them, but to borrow from Jim Collins, this is a perfect time for the “genius of the and”.  To remain viable in the long-term, we must effectively manage the organization today AND successfully position it for tomorrow.

 

The employees in my organization share my passion for the business.

  • You’re the boss, no one will care more than you – right?  You might be surprised.  Social scientists assure us that engaged, empowered employees will go far beyond just punching the clock.  Clear, concise communication and commitment to an overarching purpose are the starting place.

 

I know where we are vulnerable to competition.

  • A correct assessment of the competitive environment is much more than examining the companies that do the exact same thing you do for the exact same set of customers.  It also involves examining companies that compete for the same disposable dollars.  It involves surveying replacements for your good or service.

 

My employees know what success looks like in our business.

  • This might seem apparent, but unless you’ve assembled an easy-to-understand scorecard with hard and soft metrics, employees with very narrow job responsibilities might not know if the enterprise at large is succeeding or failing.

 

If I was gone tomorrow, the business would continue to function.

  • At the risk of sounding harsh, if the organization can’t run without you, you’ve built a cult, not a business.  Skilled execution of a strategic plan will force you systematize the business, building it around principle instead of personality.

 

I have a steady stream of new clients coming into the business and they are the clients I want.

  • New revenue streams, both from new products and from new customers are the lifeblood of any organization.  But as organizations mature and are better able to identify and serve the customers to whom they deliver the greatest value surplus, they can narrow their focus.  This focus allows them to build relationships with customers who are willing to not only grow the relationship, but also act as an advocate for the brand.

 

I have a process for identifying changes in the organization that would allow us to deliver our product better, faster or cheaper.

  • The inward-looking part of a strategic planning exercise focuses on the component parts of the value creation process.  How does the organization transform inputs into desirable outputs deriving the greatest amount of utility from the resources available?  The strategic planning process is about challenging the status quo, asking probing questions about procurement, people, processes, money and more.

 

I have a reliable feedback mechanism for customer sentiment.

  • Sam Walton observed that customers have the ability to fire everyone in the company from the CEO down.  That being the case, it’s critical to understand their perception of your products, people and processes.  A reliable feedback loop is the lifeline to these important stakeholders.

 

I have a plan of action to break and rebuild my business model to keep it fresh and safe from new, innovative entrants.

  • If you’re making money and satisfying an important customer demand, there are competitors who would love to take those customers and their money away from you.  If they can satisfy those demands better or more economically, your business is in jeopardy.  With an existing business relationship, you have an enormous advantage.  However, an unwillingness to innovate or even re-invent your business, product or service can be a shortcut to irrelevance.

 

If you answered FALSE to any of these, I believe you should very seriously contemplate a strategic planning exercise. It’s incredibly easy to cling to the status quo and not deliberately create and execute a plan to build a healthier organization going forward.

Convinced and ready to go or still have some questions?  Either way is fine.  Click here to schedule a free, no-obligation thirty-minute conversation with me.  I look forward to learning about you and your business.