Evaluating Change

When you are considering changing the way you operate your business apply the same critical assessment of the change you are considering to the status quo and you should quickly conclude that change is the correct course.

Incomplete improvements to the current process are always better than no improvement at all. Achieving all possible improvements is perfection and this is not possible.

Overcome the fear of change by lowering your expectation of perfection. I believe expectation of perfection is a natural human psychological barrier we put up to avoid change and stepping into what we perceive to be the unknown.

I experience this resistance from most of the clients and companies I work with when they are considering adding analytics to core operational processes. It is quite simple and true that better information leads to better decisions ... period.

Perfection does not exist so move on and step into change ... you can experience incredible business results in as little as a few weeks. Your willingness to change is the only barrier.

Money, Money, Money

Is $1 worth $1 dollar in all situations... is money linear?

I believe that money is highly non-linear and our 1000's of years old concept of money needs an overhaul.

Some questions ....

If I am a millionaire how do I value an incremental dollar offered to me versus a homeless person?

If I am a millionaire and I need to get out of a parking garage and my bill is $10 but I only have $9 in cash, what is $1 worth?

If I want to spend $100 million on televisions will the cost per TV be the same as if I spent $3,000 on TV's?

If I love books and hate music would spending $1000 on books be the same as spending $1000 on CDs to paying a $1000 tax bill?

Is earning $1000 at work equivalent to winning a $1000 lottery?

Are 100,000 loyalty program points which I can buy a $1000 TV with worth $1000 in cash? Are 100,000 loyalty program points which I can buy a $1000 plane ticket with worth a different amount of cash than the 100,000 points I can buy the TV with?

Is a $10 million offer to buy TVs from a $10 billion dollar retailer worth the same as a $10 million offer to buy the same TVs from the $100 million dollar manufacturer of the TVs?

Why do rich celebrities get a $40,000 gift bag at the academy awards for free? Are those gifts actually worth $40,000 to the giver(s) or the receiver?

Why is there an adage which says "It is much hard to make your first million than your second"?

Why is it that the more money you have the more you get for free?

Is paying $100,000 for products/services to a large corporation with cultural beliefs about salary, compensation, worth the same as paying a different consulting firm with different beliefs $100,000 for the same products/services?

The value of money is a function many things... incremental utility of the buyer, incremental utility of the seller, the marketplace, time, the situational utility, quality, belief systems, what the economic value of your currency is plus many other variables...

I don't believe that supply, demand, price or traditional macro/micro economic concepts can accurately account for the situations described above.

Big questions ... how much inefficiency exists in our economic, political and social systems because we have such a simple concept of money? Can we create new value out of this inefficiency that would increase GDP, reduce unemployment etc.? Can we change macroeconomic properties by optimizing the micro-utility of trillions of transactions.

Can we create a new concept of money that allows us to maximize our utility better than we currently do? or can we broaden the definition of a transaction that recognizes more than just our current system of money that will impact our utility and on aggregate will impact macroeconomic properties like GDP.


Yes, Yes, Yes ... we can use information technology and analytics and the willingness to change to do so.

Better use of information can create value out of seemingly nothing. It is there for the taking by any individual, corporation or organization.

Change is Everything

Technology implementations, statistical analysis, discovering actionable insights, changing business processes, developing information use cases, measuring financial results, modeling business performance... All easy things to accomplish. I have been involved in dozens of projects where we have delivered some or all of these things. Clients have been on the precipice of dramatic business gains... yet many analytic projects do not deliver as promised.

Getting organizations and people to change is very difficult and is the real challenge when delivering strategic analytic solutions. By strategic analytic solutions, I mean solutions which could double a company's bottom-line performance.

Overlooking change management issues will doom projects to the dustbin.

The types of analytic solutions in the marketplace, fraud detection for insurance and banking, pricing optimization and assortment planning for retail, forecasting for retail and manufacturing, retail customer loyalty require organizations to be able to create, assess and act upon the output of sophisticated analytics and reporting and to be able to measure the impact of your actions, learn from those actions and adjust your operating plan.

There are two types of change required: surgical change to business processes that are impacted by information and strategic change which requires an organization to be change its management style and mindset to become analytically driven and willing to experiment.

Surgical change while narrow in scope can be painful. Employees who execute business processes may not have the skills to assess, review and take action based on analytic insight and business intelligence reporting. Employees who were otherwise well regarded and successful in their positions may find themselves floundering to adapt to the changes. With information based business execution comes transparency and accountability, further compounding employees willingness to accept change.

Changing the management mindset in an organization is even more difficult. When decision making has been largely based on intuition, or "how we've always done it" and the impact of decisions has not been measured, it becomes a monumental task to get employees, middle managers and executives to change the way they make decisions and learn how to make better decisions. I don't know many companies who track their decision performance!

Recognizing these issues before embarking on strategic analytic initiatives will improve the likelihood for success. Setting appropriate expectations for time to results should be set. Implementing a change management program and plan is mandatory. Crawl, walk and run is highly recommended. Expect the change management issues to long outlive the technology implementations.

Seek outside help as change from within is very difficult. Select a change management method that accomodates both surgical change and organization paradigm shift.

Analytic technology implementations take 2 to 4 months. If you can overcome the change issues, I think every organization is 12 to 18 months away from doubling and more their bottom-line profits. Start now...


Comments welcome

Living in the Moment

Short blog this morning .... something a little different

I have had a life long love affair with the game of tennis, having played competitively and recreationally. After many years of practice I have finally begun to understand the game. Over the last 5 years my game has improved significantly, and even out of shape as I am now, I am playing better than I ever have at my competitive peak. The key learning is to live in the moment, and forget about outcomes. When I was younger, I focused so much on the score, worrying about what people would think if I won or lost. What I learned was that you cannot achieve an outcome if you don't love executing the moments and actions you need to get there.

I have learned to not worry about scores and outcomes. I focus on executing each shot, enjoying a well placed forehand, a good volley, a backhand slice. I can now reach a level of calmness, not having external thoughts and worries, when I play that allows me to perform to my potential which then achieves the outcomes I have so desired.

The learning also applies to the work world. Focusing on your day to day activities, learning to love those and doing the best you can in the moment, is the sure fire way to success. I have been working hard to bring lessons learned from recreation to my day to day business life. I'll keep you posted.

Appliance as a Business Solution

We've been working on developing applianced based business solutions.... (keyword business)

what is an appliance according to me (the first list is technology focused, if you're a business person read-on beyond this list...)

1. Hardware
2. Database Software
3. ETL Software
4. Reporting Software
5. Advanced Statistical Analysis Software
6. Systems Integration Assets (Data Models, ETL Code, Standard Reports, Automated Statistical Modeling)
7. Business Process Workflow
8. Financial Model
9. Remote Operational Management

What does the business appliance do ... according to me

1. It improves a specific business process (i.e. increase revenue or reduces cost) by using advanced analytics.
2. the output of the appliance is integrated into a business process with defined user workflows that generate operational business activity
3. The output of the appliance also generates a P&L and Balance Sheet actuals & forecast which resulted or will result from the operational business activity executed by using the appliance

What type of business processes are amenable to an appliance model ... according to me again

1. Processes where a small set of decision metrics are obvious to act upon
2. Processes that generate operational data

Some Examples

1. fraud detection... output metric is a scored claim where the score value indicates whether or not the claim should be investigated. The result of claims investigation is less claims paid out. 10 to 15% of claims are typically fraudulent, eliminating 50% of fraud will more than double bottom-line results
2. Price optimization for retail ... output is a recommended price on a product ... when executed price optimization can deliver up to 5% sales and margin increase which for a typical retailer will double bottom line profits...
3. Forecasting for retail and manufacturing ... output is recommended inventory levels ... when executed for rertail will reduce stockouts and markdowns ... when executed for manufacturing will increase inventory turns or capital tied up in inventory... both can double bottom-line results.
4. Customer Loyalty ... output is recommended marketing campaigns to specific customer sets ... when executed will increase frequency, transaction revenue, transaction gross margin, and customer lifetime which can add 5% to top line or gross margin which again would double a typical retailers bottom line results...
5. A huge list of other business opportunities which achieve dramatic results

from a technology perspective what distinguishes a business appliance from software which could deliver the above 4 examples ... according to me

1. The appliance is pre-built and avoids a 12-18 months systems integration project. Most large integration projects fail
2. The appliance has business workflow which integrates output of the appliance into existing operational business process which ensures that output is acted upon.
3. The appliance has financial model output which integrates into P&L and Balance Sheet tracking and forecasting to ensure the top-line and bottom-line results are achieved.
4. The appliance is a black-box to customers ... it has a data interface to receive data and output windows (workflow, reporting and financial output) requiring no administration except a power and network cable.
5. the appliance's day to day function is remotely administered to ensure data is loaded properly, data is backed up, statistic models are tuned, financial results are achieved...
6. The appliance can be delivered as a hosted or SaaS model...
7. The appliance can be virtualized...
8. The appliance can be deployed in 20-30 days from order
9. The client will achieve business results in 21-31 days from order

Why would a company consider an appliance .... according to me

1. Avoids risky system integration projects
2. Delivers results quickly
3. Is business focused with clear integration point to business process and shareholder/public financial reporting
4. The appliance deliverable is a business result ... not a technology system ...the appliance is a means to an end.
5. Corporate Information Technology departments are not good at delivering strategic results... The appliance requires minimal IT involvement
6. Corporate IT departments can learn to "appliance-ize" solutions
7. Technology vendors (hardware and software) do not deliver on the sales proposition... the appliance does.

My company plans to roll-out many appliance solutions in the coming months ....

What do you think? Sound interesting? Feedback welcome ....

Five thoughts ... one blog

Long time no blog ... been very busy, which is great!

Just wanted to put down some short statements that I always use with clients, colleagues, friends related to the power of information.

1) You can't sell pink basketballs... The fundamental driver of business growth is the quality of your company's value proposition and how authentically (see http://www.ted.com/index.php/talks/joseph_pine_on_what_consumers_want.html) you execute it. You can build great management methods, execute your operational processes to perfection, use advanced analytics in all parts of your business and do it all for nothing if your customers don't like your value proposition. Great companies deliver great value to their customers. Facing the facts on this one is a hard thing to do.

2) If you want to increase revenue/profit ... start right now... in the words if Nike Corporation "Just Do It". Integrate advanced analytics and your operational processes... you could be a matter of weeks away from top-line/bottom-line growth. Change is scary but the results are worth it. You have a 100% chance of success applying analytic insight. Read the books "Freakonomics, Supercrunchers, Competing on Analytics, Smart Enough systems,....".

3) Companies don't have relationships with their customers. I don't know anyone at the bank, telco, insurance company, retailers I do business with. We don't trade family pictures, vacation... Getting hung up on the terminology of relationship I believe is dangerous. Again, customers seek value propositions. Offering an authentic value proposition is the secret sauce, understanding what customers value and informing them of the value propositions you offer is key. Doing this in a profitable manner is critical. Customer insight ... yes! Creating a great value proposition(s)... yes! Executing brilliantly ... yes! Marketing, promoting and operationally executing your value propositions ... yes! Track the results of your operational processes ... yes! Analyzing your processes to create insight and execute better ... yes! If all these are the definition of a "relationship" then yes! .... but not the dictionary definition of relationship.

4) Stop seeking the silver bullet. Execute your business model. It's boring... you have to work harder... if you're a bank, be a bank (not some high risk investment house), I find it hard to imagine that you could ever lose money being a bank or insurance company. I think executives seek the silver bullet and end up straying from the core business and lose the ability to execute the core business model well. The hamster on the treadmill wins. Always has, always will ...

5) Test and learn ... conduct experiments every day ... measure the results of those experiments and improve your operational processes. The current business paradigm makes operational changes once every decade and rides the process until it fails. Continuous tweaking is the right way... approve 1000 loans randomly, underwrite 1000 policies randomly and see what happens. Build a new loan approval or underwriting model from the results and see if it significantly different than your current model.

That's it for now. Would love your comments...

A rant

Something completely different...

Does anyone else think it is a huge conflict of interest to allow police to use the proceeds of applying the traffic act, that is they get to keep the monies collected from handing out traffic tickets? Isn't this the violation of some basic legal prinicple?

Police are incented to hand out more tickets so they can stay employed and hire more policemen to hand out tickets. It is human nature to want to stay employed and delude yourself into thinking you are serving the greater good when you're not necessarily doing so ...

For example, in my neighbourhood their is a school where the speed limit is 50km/h. The police hand out tickets like crazy all weekend long. They are not there when the kids are in school or just before or after school and at lunch. How is this a benefit to society?

Police should hand out traffice tickets. The money should be collected by the government and put into the big pot. The government should propose levels of policing and funding for police as their platform based on the consensus of policy makers and citizens and we should elect the government which represents our beliefs...

Police using the proceeds of the Traffic Act is undemocratic, a conflict of interest and does not necessarily lead to safer roads (if that is the objective of traffic laws).

I'll probably get ticketed like crazy from here on in ....