Musings on Big Data, Customer Analytics, and Data Driven Business

On LinkedIn, Don Peppers is sharing his perspective on making better decisions with data.  This got me thinking and I want to share with you what showed up for me. Why listen to my speaking?  I do have a scientific background (BSc Applied Physics).  I qualified as a chartered accountant and was involved in producing all kinds of reports for managers and saw what they did or did not do with them. More recently, I was the head of a data mining and predictive analytics practice. Let’s start.

Data and data driven decision-making tools are not enough

Yes, there is a data deluge, and this deluge is becoming down faster and faster. Big enough and fast enough to be given the catchy name Big Data.  What is forgotten is the effort that it takes to get this data fit for the purpose of modelling.  This is no easy-cheap task. Yet, it can be done if you throw enough resources at it.

Yes, there are all kinds of tools for finding patterns in this data. And in the hands of the right people (statistically trained-minded, business savvy) these tools can be used to turn data into valuable (actionable) insight.  This is not as easy as it sounds. Why?  Because there is  shortage of these statistically trained and minded people: amateurs will not do, experts are necessary to distinguish between gold and fools gold – given enough data you can find just about any pattern.  It statistical savvy is not enough you have to couple it with business savvy. Nonetheless, let’s assume that we can overcome this constraint.

The real challenge in generating data driven decision-making in businesses is the cultural practices.  We do not have the cultural practices that create the space for data driven decision-making to show up and flourish.  A thinker much smarter-wiser than me has already shared his wisdom, I invite you to listen:

On the whole, scientific methods are at least as important as any other research: for it is upon the insight into the method that the scientific spirit depends: and if these methods are lost, then all the results of science could not prevent a renewed triumph of superstition and nonsense.

Clever people may learn as much as they wish of the results of science – still one will always notice in their conversation, and especially in their hypotheses, that they lack the scientific spirit; they do not have the distinctive mistrust of the aberrations of thought which through long training are deeply rooted in the soul of every scientific person.  They are content to find any hypothesis at all concerning some matter; then they are all fire and for it and think that is enough …….. If something is unexplained, the grow hot over the first notion that comes into their heads and looks like an explanation ….

– Nietzsche (Human, All Too Human)

It occurs to me that the scientific method never took route in organisational life. Put aside the rationalist ideology and take a good look at what goes in business including how decisions are made. I say you will find that Nietzsche penetrating insight into the human condition as true today as when he spoke it. The practice of making decisions in every organisation that I have ever come in contact with is not scientific: it does not follow the scientific method. On the contrary, managers make decisions that are in alignment with their intuition, their prejudices, and their self-interest.  It is so rare to come across a manager (and organisation) that makes decisions using the scientific method that when this does occur I am stopped in my tracks. It is the same kind of unexpectedness as seeing a female streaker running across the football pitch in a league match.

What are the challenges in putting data driven decision-making practices into place in organisations?

Technologists have a gift. What gift? The gift of not understanding, deeply enough, the being of human beings. Lacking this understanding they can and do (confidently) stand up and preach the virtues-benefits of technology.  If life were that simple.

Truth shows up as attractive to those of us who do not have to face the consequences of truth.  Data driven decision-making sounds great for those of us selling (making a living and hoping to get rich) data driven tools and services.

The challenge of putting in place data driven decision-making practices is that it disturbs the status quo. When you disturb the status quo you go up against the powerful who benefit from that status quo.  Remember Socrates:

The very nature of what Socrates did made him a disruptive and subversive influence. He was teaching people to question everything, and he was exposing the ignorance of individuals in power and authority. He became much loved but also much hated …. In the end the authorities arrested him for …., and not believing in the gods of the city. He was tried and condemned to die …

– Bryan Magee, Professor

Beware of being successful in putting in place a culture of data driven decision making!

With sufficient commitment and investment you can put in place a data driven decision making culture. Like the folks at Tesco did.  And by making decisions through harnessing the data on your customers, your stores, your products, you can outdo all of your competitors, grow like crazy and make bumper profits.  Again, again, and again.  Then the day of reckoning comes – when you come face to face with the flaws of making decisions solely on the basis of data.

Tesco is not doing so great.  It has not been doing so great for several years – including issuing its first ever profits alert in 2012.  What is the latest situation?  Tesco has reported a 23.5% drop in profits in the first half of this year.   What has Tesco been doing to deal with the situation? This is what the article says:

Last year, Tesco announced it would be spending £1bn on improving its stores in the UK, investing in shop upgrades, product ranges, more staff, as well as its online offering.

There are a number of flaws on data driven decision making. For one data driven decision making assumes that the future will be a continuation of the past.  Which is rather like saying all the swans that we have come across are white, so we should plan for white swans.  And then, one day you find that the black swan shows up!  The recession and the shift in consumer behaviour that resulted from this recession was the black swan for Tesco.

Furthermore, I hazard a guess that in their adoration at the pulpit of data driven decision making the folks at Tesco forgot the dimensions that matter but were not fed into the data and the predictive models. What dimensions? Like the customer’s experience of shopping at Tesco stores: not enough staff, unhappy staff, stores looking more and more dated by the day, the quality of their products ……

It looks like the folks at Tesco did not heed the sage words of one of my idols:

Not everything that counts can be counted, and not everything that can be counted counts.

– Einstein

Without Integrity, Is Talk of Customer Focus Just Cheap Talk?

Integrity is a choice – one that we fail to choose

Let me make clear that when I speak integrity I am not talking about morality nor virtue.  I am talking about integrity as honouring one’s word.

Integrity, as honouring one’s word, is a choice. It is a choice that almost all of us choose not to make. And those of us who do choose integrity, as way of being and showing up in the world, get that ‘Integrity is mountain with no top’ – that is to say that one never arrives. Put differently, integrity is always flowing out. Therefore, the challenge is to be present to this flowing out and make the necessary corrections ongoingly – this applies to individuals, teams, organisations.

It occurs to me that we live in an age given by cultural practices which allow and encourage us to have a cheap-weak relationship to our word. In our societies one expects people not to talk straight. One expects people not to mean what they say. Nor to say what they mean. It is perfectly ok to make promises and break them if it is convenient to do so. And when we do this the challenge is to find convenient reasons and excuses that allows us to ‘save face’.

What place is there for integrity when the measure is ROI?

Consider the world of business. What drives decisions and actions? If you look at it theoretically, every significant decision should be based on ROI. If honouring your promise, your word, delivers ROI then the smart course of action is to honour your word. If honouring your word does not deliver ROI then the smart course of action is not to honour your word. Doesn’t the ROI argument, in one shape or another, show up at each level of the organisation: Tops, Middles, Bottoms?

Without integrity promises to customers are just cheap talk

Why am I drawing our attention to integrity and the importance of fierce resolve to honouring one’s word? I say that work on harnessing digital technologies is useful. I say that work on changing policies and processes is necessary and useful. I say that harnessing data and using it to generate insight is useful. And I say that all of this makes no difference if fierce resolve is missing. What kind of fierce resolve? The fierce resolve to create superior value for a core set of customers. The fierce resolve to honour the organisations implicit and explicit promises to the customer. The fierce resolve to honour one’s word to colleagues within the bigger context of honouring the organisation’s word to customers.

Let me put it bluntly, the companies that excel at generating strong profitable relationships with customers create and show up from a fierce resolve to create superior value for their customers. Companies like Amazon, John Lewis, SouthWest Airlines, USAA, Zappos… Then are the rest – those that talk the talk and lack the fierce resolve to honour their word. Their words, our words, are cheap.

The real test of integrity is?

The real test of integrity, honouring one’s word, comes when the ROI of keeping one’s word is negative. For an organisation the real test of integrity shows up when the cost of honouring one’s word directly and negatively impacts the short term numbers: revenues and profits. And when the cost is a loss of face even ridicule. I think back to Warren Buffet sticking to his way of investing-doing business during the tech-internet boom.

Here’s the core point when it comes to integrity and honouring one’s word. Those who recognise the critical importance of integrity (as a positive phenomenon) would never do an ROI calculation once they have given their word.  For these people honour one’s word is  matter of principle not expediency. People with such deep relatedness to their word get that integrity is not a nice to have. No, they get that integrity is basis of workability and performance – of our lives, our relationships, our communities, our organisations, our societies, our world.

What is possible when cultural practices encourage and call forth integrity?

Enough said, now I want to share with you this article that I read  and which got me present to what is possible when cultural practices encourage and call forth a strong relationship to our word.  Here is what struck me about this real life WWI story:

  • Capt Robert Campbell had been languising in Magdeburg prisoner of war camp for two years;
  • He received word that his mother was dying of cancer;
  • He wrote to Kaiser Wilhelm II, begging to be allowed home to visit her one final time;
  • The Kaiser granted his request, allowing him two weeks leave, and did so on Capt. Campbell’s word as an Army officer;
  • Capt. Campbell returned to Kent (England) in December 1916, spent time with his mother and returned to the prison camp (keeping his word to the Kaiser), and was held there until the end of the war (1918).

I say that this is possible only in an age where cultural practices call us to be our word. When we are called to be our word, our enemy can grant us leave trusting that we will honour our word. We in return are called upon to honour our word. As the author of the article says:

“Had he not turned up there would not have been any retribution on any other prisoners. What I think is more amazing is that the British Army let him go back to Germany. The British could have said to him ‘you’re not going back, you’re going to stay here’.”

Imagine what level of performance would be possible if the people in your organisation were committed to honouring their word. Imagine what kind of relationships would be possible with customers if the people in your organisation – Tops, Middles, Bottoms – were committed to honouring the organisation’s word to customers.

If you want to explore integrity at a deeper level

If you find yourself drawn to this conversation on integrity then I encourage you to listen to this 2 hour talk on integrity by Professor Michael Jensen