Gone Fishing?

If you don’t aim how can you hit your target?

I’m amazed at how many times a week I get contacted for Data Insights assistance. Most of these requests go unanswered as they come across as bulk shotgun style emails that are quite leading. They are not aiming for anything, they are just looking for me to agree with what they’ve already decided. Well, if you already know the answer to your question, why are you asking me? “I’m a doctor, not a Captain, Jim”.

One of my clients explains this phenomenon further http://tanujparikh.com/post/26384857215/know-your-target

I’m also astounded at how many “analysts” take the same old approach to Analytics. Their approach is give me all your data and let me play to see what we find, or even worse tell me what you think the answer should be.

However when someone takes the time to craft a targeted email that demonstrates they have spent a few moments researching my background and have thoughtful questions about their business, I usually get back to them quickly. I am happy to run through some high level theory, but often its only a matter of helping them reframe their initial questions to better direct and organize their overall strategy. When they’ve got the real bulk of data in hand, we begin a long term engagement.

At Soko Creative, we don’t just toe the age old line that predates your PC. Data Insights teaches us to use a far more scientific, truly objective approach. We essentially ask the data a question, understand how the impact could drive a future decision, how it will impact your business, and then set about to prove our hypothesis right/wrong. Most importantly, we take them time to educate you and your staff on how to take the ball and run with it; implementing long-term business processes that you can count on.

Analytics is Priority #1

Studies, Surveys, and CEO’s all point to the same thing. Analytics and Data Insights are “The Top Priority” for companies.

http://blogs.sap.com/analytics/2012/01/25/bi-and-mobility-top-the-2012-priorities-for-cios/

http://thesologuide.com/2725/website-analytics-is-the-top-priority-for-marketers-in-2012/

http://practicalanalytics.wordpress.com/2011/11/02/ibm-cio-study-bi-and-analytics-are-1-priority-for-2012/

Why then do so many firms struggle to glean maximum intelligence, if any, from their data? Why are they struggling to fill the exponentially growing number of open head counts they appear to be prioritizing.

Here’s why: An individual employee actually has a “Priority #0”, which takes precedence over Priority #1. While Analytics sole purpose is predicting and improving business performance in the future, somehow employees are recognized, rewarded, and evaluated on something other than Analytics. Your product owner is responsible for making sure the product ships, not so much on how it “will do”. The engineers and designers don’t understand why proper data infrastructure is needed to make current design decisions… because its not. Its for future design decisions. However without that infrastructure in place upon launch, there is simply no way of tracking a product’s success or failure post-launch.

How does this get resolved? While there’s no silver bullet, the solution must start from the top. It’s not enough for executives to preach data driven decisions from a soap box, or for internal recruiters to post, post, and repost analytic positions which they can’t seem to fill. They must make sure that proper incentives are in place and that perverse political disincentives are eliminated (like needing a particular number to be the answer aside from the actual number). In fact, I often get asked “Scott – What do you when you have to make up the numbers”? 

Woah.

While Data Insights is what the CEO’s are calling for, CFOs, CIOs and other internal staffers know its also a bit of a whistle blower, or political “Debbie Downer” http://slashdot.org/topic/bi/big-data-top-priority-executives-mckinsey-survey/. What would you do if there were actual data on your products performance beyond marketing hype and conjecture? Your departments contribution, your online presence, customer loyalty, call center efficiency, etc… all up for mathematical analysis. Would you pass muster?

But on the upside, maybe that multi-million dollar advertising budget can be reallocated toward a far more profitable end. Analytics can help you make these crucial decisions.

If profitability of your company is truly Priority 0, then fill these open Analytic head counts with true problem solvers. Don’t hire the politician, hire the mathematician. 

 

Keep your friends close

How much value do your friends bring to you? Silly as this question may be, its one being asked in offices and boardrooms across the country. Companies are trying to understand how much a “fan”, a “follower”, or a “like” is worth.  The most common response is, “I don’t know, but more is better.” However, in this case more isn’t always better.

Social media sites leverage something called EdgeRank to determine what content is shown to people when they log in. On Facebook, it’s believed that only less than 2% of eligible content has the potential to show up in the news feed.  So, the question shouldn’t be how do I get more fans, the question should be how do I get my posts to show up more than 2% of the time. The simple answer is engagement.

When people interact with your content it’s more likely to show up again in the future in their feed and the feed of those that are “close” to them. When companies attempt to gain just any followers via contests and other means, adding them could in fact be decreasing the total value of all their fans.

So how much value do your friends bring to you? Within social media, just like the real world, in some cases less may in fact be more.

Decisions, decisions….

We make decisions everyday. Some big ones, some not so big, and most without really giving it much thought. Should I wear the white shirt or the blue one? What route do I take on my way to work? Do I want fries with my lunch?

Answers: The blue one, last time I wore it with this outfit I received several compliments. I’m taking the backroads, the traffic on the main road is unbearable this time of day. I’ll should pass on the fries, fried foods upset my stomach.

What do all these decisions have in common? While there is no wrong answer, they all rely on past knowledge, or historical information, to make a determination. When we make a decision we take to sum of our previous experiences into consideration to determine what to do next.

Why then do so many expensive decisions in the business world rely on only a small window of data? It’s still typical for companies that have been around for decades to base day to day decisions on only the last 13 months.

Firms that have successful data management strategies in place make data driven decisions based on years, and in many cases decades of learnings. If you can learn from the past you won’t be doomed to repeat it’s mistakes. By choosing to shortcut valuable historical data, you’re only fooling yourself into thinking your actions are supported by the numbers.

Equations that predict the future are among us.

“How accurate does my model need to be?”

This is a question that I get asked all the time. The universal answer: It depends. Virtually any decision that a human makes can be modeled by the computer. IBM’s WATSON proved that playing Jeopardy. Was the WATSON always right? NO. Did IBM prove WATSON able to simulate human decision making? YES.

The question is how accurate did WATSON need to be in order to compete? It depends. It depends on the type of questions asked. It depends on the quality of opponents. It depends on the score and questions left in the game.

In the business world the same type of questions need to be asked. All too often I run into vendors promising models where they lack a full understanding of all the circumstance surrounding the question I need answered. They then pledge all sorts of fancy accuracy metrics that speak to questions they figure I would want answers to, but fail to answer the one question I’ve asked: How accurate do I need to be in order to make better decisions and what is the cost of increasing that accuracy?

I realize I may be biased. I help companies build internal analytics practices, often by decreasing long term costs. Teach a man to fish; it costs less than buying a fish for him every evening.

Just Go to www…..

“Honey! Can you please Google again…. “

“But I just…”

 

“I know, I know…. but now try!!

Coffee brewing, bacon frying…. this is what my house sounds like around 10:00 am as my wife and I are keystroking the day away. Each generation has its familiar sounds. My grandparents had “Breakfast!!”, my parents “Can you hear me now?”, and finally my wife and I are at “How many page views”.

Remember when building a web page cost an arm and a leg? Or even being found on the web was considered a monumental step? That kind of thinking held true in 1998. You could get away with it until around 2008. As of 2009, more than a quarter of the globe made use of the internet. That’s a lot of content. Today’s virtual world is quite a crowded one, and if people can’t find your webpage then it might as well not exist. However, as the adage goes the three most important things in business are location, location, location.

Use someone else’s computer and Google your business name. Ideally you should be number one on the search, at the very least top three. If your website can’t be found then it will not help generate business for you. In all seriousness, the mere fact that you can’t be found in this day and age will actually hurt your bottom line.

If a tree falls in the forest and no one is around to hear it, did it actually make a sound? If your services can’t be found by Google then its akin to opening a store in the middle of the forest. Your ranking on their search engine is equivalent to the number of blocks your store is from Main Street. Venture too far and no one will find out.

How much effort have you put into building your online presence? How much dough have you shelled out in advertising? Google can find you for free, and their ranking is priceless.

Why spend on advertising when I’ve got the world’s best search engine working for me? Besides, my wife’s got this whole blog thing down to a science.

Pricing to stay in business

How much does a single donut at Dunkin Donuts cost?  Calling around to a few stores I received the following 4 answers: $0.50, $0.69, $0.99, or $1.29? Are the stores charging $1.29 overpriced? Are the stores offering it at $0.50 discounting too much? The answer is “yes, it depends”. This same question applies across the QSR spectrum.

A thorough analysis of all transactions and an understanding of the locations is required to best answer the question. Using economic principles with the results displaying graphically, a business owner can make a more informed decision.  By understanding the local demand through the use of data insights techniques, he can work to maximize marginal profits. Typically this improves bottom line profits by several percent.  In a world of compressing margins, knowing where you can and can’t pass higher commodity costs to the consumer could mean the difference between staying in and going out of business.

Flash Crash Aftermath

It’s been months since the flash crash that caused several major stocks to trade at values close to zero for a few minutes before returning to a more reasonable level. Since that time several mini flashes have occurred. And yet, no irrefutable proof exists to blame any one type of trader. Most importantly virtually no policy changes been enacted to prevent a repeat occurrence.

I contend no one type of trader is to blame, but rather all traders are to blame. When a $40+ stock is suddenly trading for less than a dollar, how does no one step up and offer 35? It’s equivalent to a company that sells 1 IPOD online every min to the highest bidder. If suddenly they started selling for $1, someone would step in and offer a “reasonable” price.

So the question is; why doesn’t this happen.

1) Black box trading programs which typically help make the market are deigned to shut down when massive swings occur to give a human the chance to override the program. Trading itself shuts down when this takes place, except that there are now secondary markets that don’t abide by these same rules.

2) Typical investors have stop losses in place. If they stock drops below a certain level they give the order to sell at any price. Usually this is the price they set but if there are no buyers in the market then they could sell for far less than intended.

3) The traditional market makers have vacated their usual roles. Black box programs have replaced them and reduced the overall cost of trading. The bid/ask spread is far smaller today than it was 10 years ago. They’ve left because they can’t make money.

Stopping these crashes from taking place doesn’t require placing blame on one of the 3 groups above. They are all to blame but each is doing what make rationale sense to them. What needs to take place is that when a listing exchange flips the breakers and halts trading all the secondary exchanges need to halt trading for at least the same amount of time, if not longer. What is needed is a chance for cooler, more logical heads to prevail.

What is the Value of Online Privacy?

Many people worry about what companies will do with all the data they are collecting on web behavior. Virtually every major website is keeping tabs your behavior through a variety of tags and various web analytics and tracking technology. Most are just tracking your actions on their site, but more and more companies are coming up with new innovative ways to track your behavior as you cross web domains, principally through the use of tracking cookies.

A recent Wall Street Journal article examining the 50 most popular US websites comments on the fact that many top internet firms aren’t even aware that 3rd party vendors are using their site to place such code on your computer. These 50 sites collectively placed over 3000 tracking files on a test computer with over 2/3rd of those files installed by 131 other companies “many of which are in the business of tracking Web users to create rich databases of consumer profiles that can be sold”.

Companies will claim that this monitoring is the price we pay for free services on the internet. Basic economics state this is not the case.

Companies have the ability to make a buck based on your work and are seizing it without even a thought towards compensating you for you data. Many don’t even ask for you permission and some have developed new flash-based cookies that redeploy themselves even after you have deleted them. At least supermarket, department and other big box stores have to ask, if you want to sign up for their “preferred customer tracking cards” and then use incentives to use them each time.

Since the data carries no value to a consumer, tremendous value to marketers and there is little harm in sharing, I say compensate consumers for their data. This practice is common place in surveys and study groups. All I’m saying is you should get your 1/10th of a penny.

$200 to Fly, $400 More to Bring Your Bag

Airline after airline is approaching bankruptcy only to be rescued by another airline. At the announcement of most of these mergers the airline proudly proclaims that they will be taking the best of both airlines and making one new better airline. In reality most of these mergers were done for two reasons. The airline wanted to buy more gates and reduce competition in its more profitable markets.

The major airlines do everything they can to manipulate the supply of seats from one city to another. Another way they accomplish this is by treating a seat on a flight differently for those flying direct than for those flying a connection. Same plane, same seat different cost. In many cases it’s pay more get less.

An example: To fly direct from LGA (New York) to DTW (Detroit) on a flight tomorrow the lowest fare on a major airline is $585. However, for flights on the same day you can fly to MCO (Orlando) for $215. What is incredibly interesting is that the $215 to MCO is a connecting flight which stops in DTW. By spending an extra $370 you get a seat on the same plane from LGA to DTW but you give up the seat from DTW to MCO and gain the right to check bags. You thought $30 to check a bag was a steep price. Keep in mind you could already be paying over $300 for that ability.

I’m a huge proponent of analytic based pricing; it’s what I do for a living. But, somewhere along the way airlines allowed computer pricing to take over and common sense went out the window. Then again if consumers want to complain they need to use the power of the purse. Next time you fly see if you can’t get less for more.