Data and analytics is the new religion of business
Data and analytics is the new religion of business. Executives are searching for its relevance, wondering how it can enrich their decisions, and seeking to uncover the insights and learnings that are contained within. It is rare to find a modern-day Executive lamenting – I wish I had more data. So, what does it mean practically for an Executive to embrace the age of data and analytics and how can it be used effectively to improve the speed, sophistication, and alignment in Executive decision making?
The importance of Executives knowing the right questions to ask
The challenge for Executives is not about access to data as there is ample of it around. It is more about the how to frame the right questions to use data and analytics to the best effect. Without framing the right questions, data and analytics can be a distraction, delay, and/or complication in efficient decision making – the opposite to the desired outcome. So what are the right questions Executives should be focused on?
Strategy is at the heart of Executive decision-making in three key areas
There are three broad areas of focus for data and analytics in assisting Executive decision-making which include; strategic positioning, portfolio management, and operating performance and improvement.
Strategic positioning is a relative concept and only makes sense when compared to something – whether it be competitors or target customer. Because of this comparative nature, data and analytics need to be outward facing to help guide key strategic choices such as; what markets will the company compete in, what vehicles will it use to get there, what are its points of difference, how will it make money, and what is the speed and potential sequencing of its moves.
Dynamic resource allocation is at the core of portfolio management and guides the important question of where and when constrained (human and capital) resources are directed. Counter to institutionalised internal budgeting processes that can easily incentivise similar year-on-year resource allocations, Executives should be using data and analytics to trim actively the resource allocation across the business portfolio based on both strategy and business performance.
The third key focus of data and analytics is helping Executives understand business performance and the opportunity and scale of improvement available. While the performance data is frequently presented in consolidated point-in-time comparisons (e.g., year-on-year or period-on-period), Executives should be looking beneath the consolidated surface to uncover the much more insightful variability and trends that are uncovered in time-series data analysis.
It is easy for these three Executive focus areas to get out of balance with inordinate levels of detail being absorbed in one area (most usually operating performance) at the expense of understanding the balance and interplay between the three focus areas. Equally, in a world of endless and advanced analytical techniques it is equally easy for Executives to overlook three powerful data and analytics tools at their direct disposal – that often don’t require any greater sophistication than plus, minus, divided by and multiply!
An Executives 3P’s practical data and analytics toolkit – patterns, pareto and pictures
There are three key tools that should be part of every Executive’s data and analytics toolkit and include; decoding data patterns, leveraging pareto, and using pictures to convert complexity to simplicity.
Patterns – exist in all data. Random scatter is as important a pattern as an increasing, decreasing or stable trend. Patterns in data provide an immense insight into behaviours – whether it be human, asset, customer or competitor. Uncovering patterns in data is at the core of decoding behaviours. This is because behaviours are frequently the outcome of repeated need, biases, capability, and/or strategy. Therefore, decoding behaviours through patterns in data provides an immense insight into market opportunity, the competitive environment, and capability platforms. Equally, decoding behaviours through patterns lies at the heart of strategic positioning and execution.
Pareto – did not become famous because it applied in only rare or specific circumstances – it occurs everywhere you look in data. Pareto is a representation of the endless truth that a few things tend to exert a much high leverage over outcomes than the many available influences. It is an immensely powerful data and analytics tool to filter and prioritise focus areas – i.e., separate the more important from the less important. Pareto is the best friend of the ‘five why’ analytics tool that is used frequently to uncover root cause. If you can identify and then leverage the critical few then you can have the greatest impact by leveraging scarce and limited resources. However, don’t entirely neglect the inevitable ‘tail’ of any pareto analysis as hidden inside could be future opportunity that is hiding in the ‘noise’.
Pictures – tell a thousand numbers! Albeit, drawing insightful pictures with data is not easy and often requires a deep enquiry into the data and a very strong understanding of context (business, strategic, competitive etc.). Pictures are key to visualising connectivity and causal relationships. Like pieces of a puzzle, the right sequencing of data pictures can unveil a grander perspective and help communicate data complexity with visual simplicity. Importantly, pictures are one of the most effective tools to mobilise and align a group of leaders around a common understanding and a desired future course of actions.
The prize is rich from improved speed, sophistication, and alignment in Executive decision-making.
Executives can get a long way in leveraging data and analytics by leveraging the relatively simple 3P data and analytics toolkit. Importantly, delivering their side of the bargain by asking the right questions will ensure that their efforts and those of the data analysts that work for them are well directed. The prize for getting it right is rich through improved speed, sophistication, and alignment in Executive decision-making.