Chapter 2. Choosing Your Own Adventure in Analytics
This book is different from other books.
You and YOU ALONE are in charge of what happens in this story.
There are dangers, choices, adventures, and consequences. YOU must use all of your numerous talents and much of your enormous intelligence. The wrong decision could end in disaster—even death. But, don’t despair. At anytime, YOU can go back and make another choice, alter the path of your story, and change its result.Excerpt from The Abominable Snowman,
by R.A. Montgomery
The quote above is from the first page of The Abominable Snowman, a “Choose Your Own Adventure” book written by R.A. Montgomery. For the uninitiated, after reading a few pages of one of these books, you are confronted with a new dilemma and offered an opportunity to make a decision. With your decision made, you then turn to a new page corresponding to your decision, with an adjusted plot line and consequence. After reading a few more pages of the story, you are prompted for another decision. Continue to read, make decisions, and turn to the corresponding page until you reach a unique conclusion to your reading of the book.
Next to my Rubik’s Cube, “Choose Your Own Adventure” books remain among my fondest memories of my 3rd grade class in 1980. My classmates and I loved the flexibility of the books and the control our decisions exerted over the stories. Just think of the extra reading mileage these books got, with thousands of kids each reading a book multiple times to explore the impact of their decisions made throughout the story.
So what does “Choose Your Own Adventure” have to do with analytics? Quite a bit, actually, as these books are a metaphor for how analytics should be approached in the business world.
Don’t Wait Until the End of the Book to Adjust Your Course
“Choose Your Own Adventure” plot lines were never set before you opened the cover and turned to the first page. Rather, with each unfolding event, there was a new opportunity to ask new questions, to gather additional data, to learn from mistakes, and to adjust. Stories were dynamic, and the decisions you made along the way influenced the outcome. In fact, you couldn’t simply read the book from cover to cover and let the story unfold. You had to make decisions at appropriate times and change the course of the story.
Similarly, analytics need to guide your business awareness and directly influence decisions on a regular basis. We use analytics specifically to build a stronger understanding of our business. We gather leading indicators (like new contacts and marketing qualified leads from tradeshows), lagging indicators (like company bookings in the last quarter), and coincident indicators (like our current payroll and “burn” rate). If we hope to stay in business for a long time, we’ll be sure to regularly leverage data to improve our competitive stance in the marketplace. We can’t wait until the final score is tallied; instead, we must continuously collect data, analyze, and act upon the information to improve performance.
Adjust Quickly After Making Bad Decisions
In a “Choose Your Own Adventure,” I’d use a finger to keep the place in the book where I made my last decision based on the information available. If the decision somehow ended in disaster, there was no need to start the book over from the beginning; instead, I’d just return to the point of the last decision and make a new decision. Perhaps this was cheating, but I preferred to view it as learning quickly from mistakes. The effects of the decisions were instantly evident, creating an opportunity to avoid similar mistakes as the story continued.
Similarly, let analytics guide your business decisions, but use data to also quickly shift course when the story isn’t going your way. Analytics provide a valuable framework within which to evaluate your business decisions. They provide the feedback mechanism that enables you to make decisions—both good and bad—and with the velocity to ensure that many decisions can be changed or quickly reversed so as not to threaten a successful outcome.
Iterate to Improve Performance
A “Choose Your Own Adventure” book could have numerous possible story endings. It was easy to read and re-read the book multiple times to obtain a better (or the best) outcome. Competitive classmates could even create competitions to see who could achieve the most successful story outcome in the fewest number of readings.
Analytics are also iterative—we gather data, analyze, and evaluate. Based on the evaluation, we may take action or change a behavior. Then, we repeat the analysis and compare the results with the expected outcome. This iteration and feedback loop is essential to improving performance.
Beyond just iteration, however, we need to continuously ask ourselves new questions. Toyota, for example, introduced the “5 Whys” interrogative technique. This method of problem solving involved an approach to iteratively ask and answer questions. By asking 5 questions in succession, one pushes beyond just the symptoms of the problem and makes rapid progress toward getting to the root cause of the issue. Often, the answer to the fifth question will point to the root cause or broken process that needs to be corrected.
Consider an example in the Procurement space to demonstrate how 5 Whys can work:
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“Which categories of spending should we invest in managing more effectively”: An initial analysis of ERP systems produces a ranked list of categories with the highest spend for each of a company’s five business divisions. This helps with initial prioritization of efforts across thousands of spend categories.
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“What are the largest categories of spend if we look across business units”: Several spend categories are rationalized (combined) across divisions to improve understanding of spend. This helps to prioritize further analysis according to the remaining categories with the highest spend.
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“Are we receiving the same terms from suppliers across our business units?”: Several suppliers extend varying payment terms to different business divisions. Across several rationalized spend categories, opportunities are identified to negotiate most favorable payment terms.
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“Do we have the right number of suppliers to support our spend?”: Further analysis uncovers opportunities to consolidate suppliers, increase purchasing power, and further reduce costs.
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“Of the remaining suppliers, are we diversifying our risks sufficiently?”: Third-party data from Thomson Reuters enriches supplier data within the ERP systems. A risk assessment informs decision making to “right-size"” supplier count to appropriately balance risk and spend concentration across suppliers.
It’s valuable to be able to iterate on the questions, to continuously ask deeper questions about your business or an issue, and in so doing build a more informed understanding of what processes are driving/influencing your business.
Good analytics infrastructure and tools can facilitate the iteration espoused by the 5 Whys technique. Rather than constructing a rigid, monolithic data warehouse, a flexible system is needed that can easily catalog new available data sources, connect these new sources of information with your other data sources, and then facilitate the easy consumption of the data by business intelligence and analytics tools.
As the Story Progresses, the Data Driving Your Decisions Will Change
In “Choose Your Own Adventure,” new data could be presented at any time, in any chapter. Ad hoc decisions/analysis would lead to new actionable insights.
In business, you obviously aren’t always confronted with the same questions or challenges. The economic environment will change, and competitors will surely come and go. It therefore behooves businesses to periodically gather more/new data to analyze. The faster you can access and exploit new data, the more competitive you can become in the marketplace.
For example, Custom Automated Prosthetics (CAP-US) is a manufacturer of dental prosthetics and supplier of digital dentistry manufacturing equipment. CAP-US reviewed CRM data to obtain an understanding of customer interaction—from spend analysis reports across geographies, to comparative reports that can be used to evaluate sales rep performance. This information is useful, but it’s also limited. CAP-US wanted to enrich customer data with information from new sources, enabling deeper and broader analysis of their business data.
CAP-US achieved new insights by enriching their CRM data with data from a third-party provider such as Thomson Reuters or Hoovers. This enrichment enables CAP-US to estimate wallet share—the portion of total spend a customer spends with CAP-US. Knowledge of customer size allowed them to more precisely estimate the potential for expanded business within accounts and enhance the objectivity of sales rep performance comparisons across geographies. In addition, CAP-US can easily leverage third-party information when considering how much credit to extend to new customers. This results in better control of Accounts Receivable and reduced bad debts.
A Book with a Changing Story Gets Read Multiple Times
With “Choose Your Own Adventure,” it was irresistible to read a book several times in order to see how different decisions impacted the story outcome. Today, more than 35 years after the first book was published, the “Choose Your Own Adventure” formula remains successful, with hundreds of published titles.
In order for businesses to remain successful, they must confront new challenges, competition, and world events that disrupt the economic environment every day. It’s imperative for businesses to continuously diagnose issues, predict business climate change, and exploit new opportunities. Businesses need the flexibility to regularly incorporate new sources of information into the decision-making process. They need analytics that are fluid and that support iterative exploration and exploitation of new information. When you do it well, you’ll recognize mistakes and adjust quickly, iterate continuously to improve, and use new data to improve decision making.