Data Solutions and the Goldilocks Principle

By Falguni Desai | 29 July 2015

Data: An Embarrassment of Riches

Businesses today are swimming in a sea of data. Research reports, financial statements, KPIs, charts and analytics, news, tweets and email messages continuously bombard our devices and desks. According to IBM, 2.5 quintillion bytes of data are created everyday.  We have no lack of data to tell us exactly what we’ve been buying, selling, where we have been and when, and who is saying what about whom.  We have, in a collective sense, become rich with data.

But, as I write this, Greek banks have shuttered their branches and the world’s economic leaders await a solution to the possible Greek debt default.  Uber, the car service app, faces violent protests in France, with its regional executives in police custody.  Clothing retailer, Gap, is closing 175 stores across the US.  According to a 2014 Gallup survey, less than one third of employees are engaged in their jobs. And each year, 8 million metric tons of plastic waste is dumped into the world’s oceans, harming marine life and ocean ecosystems.

Despite our voluminous and varied data points, visualisation tools and data technology solutions, we don’t seem to be performing much better than before. So, how should we collect, measure and interpret the data that really matters and make better decisions?

What Matters?

Data can tell us about our own businesses as well as the market context in which we operate.  Without enough data, companies will have blind spots and lack visibility on performance or emerging trends. But too much data can create an expensive burden in terms of collecting, measurement, reporting and interpretation. Companies need to streamline their data solutions and focus on key factors that affect their most important issues and stakeholders. In this article we will focus on the following 6 areas:

  • Economic Trends
  • Financial Performance
  • Competitive Threats
  • Consumer Demand
  • Employee Engagement
  • Societal and Environmental Issues

Economic Trends & Financial Performance

For example, capital intensive industries which may need to borrow money should invest in data terminal solutions which allow them to track economic indicators such as interest rates, bond yields, credit ratings and analyst sentiment on their industry.  Business leaders should be regularly monitoring changes in the capital markets and also gauging their ability to cover their debt obligations. When looking at the Greek scenario or any other fiscal struggle, the indicators of an approaching debt default or profitability issue can be seen months ahead.  It is up to the financial teams to track and share these trends with their management. Company KPIs and financial metrics dashboards can provide close to real-time reporting on cashflow and expenditures. Most tools can automate the reporting once the specific KPIs and metrics are programmed into the system.  Visualisation (charts, diagrams and color coding) can easily alert management teams to trending difficulties. The key is to pick the most important leading indicators, 3-5 metrics, and keep the measurement process simple and visual.

Competitive Threats

Competitive threats are slightly more difficult to ascertain, but proxy indicators can help in detecting competitor moves. Companies can pick the top 5 competitors that matter most and start examining open job postings, counting new office launches, or watching acquisition activity. These data points provide a level of predictive insight into where competitors are investing and planning to expand their business. For example, Uber launched its app in Paris in early 2012, but Paris government officials could have detected this launch by reading about Uber’s market entry into other cities. A competitive response by the taxi drivers could have been prepared in advance of Uber’s arrival in the market. Observing how other taxi commissions have handled Uber’s competitive threat, can provide a playbook and future options. Gathering these data points requires a more manual effort than financial and economic metrics. Offshore and outsourced research teams are an efficient resource that can be hired to analyse competitor websites, scour job postings, read news updates and prepare frequent reports for management teams. It’s important that companies frequently update and recalibrate who they are tracking, as competitors can change over the years.

Consumer Demand        

The consumer sector constantly sees shifts in styles, changing shopping behavior and new fashion trends. The last 5 years have been difficult for many retailers to adapt to changing consumer behaviors and bankruptcy filings have ensued. The Gap’s recent woes are only one example of how large companies can become misaligned. But companies can use several methods and tools to overcome these problems. Surveys and focus groups are traditional tools which can be used to understand the why and how of consumer demand. New tools, such as crowd intelligence platforms can allow retailers to engage consumers in creative campaigns regarding pricing and product design. Large players, including Walmart, have started to use these tools to determine which products to carry in their stores, and what to carry online, thereby making more informed decisions about inventory, which ultimately impact financial performance. As multi-channel retailing becomes the norm, these crowd intelligence platforms can be coupled with historical transaction, page views and ad views data to create a full picture of consumer demand, both predictive and historical. A richer, fuller picture can help companies truly build a connection with their consumers.

Employee Engagement

For all but a few companies, the employee model is broken.  Demographic shifts are creating new demands on companies.  Millenials and more progressive segments in the employee landscape want more meaningful work, in more flexible and collaborative workplaces. Freelancing has recently become more popular as younger workers explore project based arrangements. Companies that conduct employee engagement surveys are likely seeing disappointing scores and responses, but that is because measuring engagement is only half the battle. Zappos, might be the poster child for focusing on employee happiness, a factor that is measured each month by the company. But other companies are now catching on to the domino effect that employee happiness has on customer satisfaction and profits. Happiness might be an elusive concept to quantify, but it is related to the ability to impact outcomes and the perceived worthiness of goals. When companies measure the gaps between goals, actions, empowerment and outcomes, data sets can show which part of the equation needs correction. Companies can use real-time response tools, monthly surveys, demographic data, turnover metrics and compensation data to design an ecosystem which performs at its full potential.

Societal and Environmental Issues

Companies that consume natural resources are more often targeted and criticised by environmental groups.  Society expects large successful companies to do more than just create profits and shareholder returns. As companies begin to measure the cost of environmental damage and societal shifts encourage more sustainable practices, companies must be able to measure their actions and their impact. Carbon pollution and solid waste create toxicity in the environment and ultimately affect food chains and human health. The environmental impact of business is perhaps the last frontier, where data solutions are still emerging and new methodologies for measurement are being tested. Natural capital cost is not part of the vocabulary of most businesses, but putting a real price on the water, minerals, forests which are used in industrial production can help managers understand how to effectively design their supply chains, where to use recycled materials (instead of virgin or raw materials) and how to price the end product. Consultancies which focus on sustainability and natural resources are perhaps the best solution, given the complexity of such measurement.

Just the Right Amount of Data

The media hype around data analytics and big data can create the impression that all companies need to create massive budgets and invest in super-computers that will analyse every possible data point. The reality is that most companies can achieve very good results by adding a few more datasets or investing in data solutions that have been on the market for decades. A well-defined dashboard which visualises the most important metrics, coupled with regular qualitative feedback can be good enough. Precise measurement and perfect algorithms are not necessary in the majority of cases. Businesses can and should do better, by leveraging the appropriate data, involving relevant stakeholders, and making smarter, well-informed decisions.

By Falguni Desai, bobsguide contributor

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