Editor’s note: Hear more on this topic from Bates as he leads a session, “Benchmarking Profitability: The Analytics That Really Matter,” at MDM’s upcoming conference, MDM Analytics Summit 2018 on Wed. Sept. 19 in Denver.
I founded the largest financial benchmarking service in distribution. I ran it for many years, sometimes even successfully. We provided comparative information for almost every ratio known to mankind.
Managing the operation provided me with one invaluable insight: Most folks really didn’t want to know what we were telling them. However, since they paid their bills and I had three kids in college, I kept telling them. A classic, if perverse, symbiotic relationship.
The problem wasn’t that the information did not have value. It was that there was a serious disconnect between what we provided and what they were able to use in their business.
My experience has some major implications for structuring analytical systems for management today. To understand those implications, it is useful to understand the four categories of individuals receiving analytical support.
1. Masters of the Universe. (Apologies to Tom Wolfe for appropriating the term.) Individuals who already know everything and don’t need no stinking information on how to do better. These are largely older individuals, typically running smaller firms. They represent about 25 percent of the firms, but are a dying breed. The key to working with this group is to not work with this group.
2. Dazed and Confused. This is the largest group by far, representing close to 50 percent of all managers. They appreciate that analytical information should lead to improved performance. However, they are bombarded with more than they can comprehend. They also operate in world where everything seems to be important. These folks will generate reports on a regular basis but have no idea about how to put them to use.
This is the group where analytics can provide the most help. The key is to generate information in small usable, action-oriented packets. Simplify, structure and prioritize all information output. When in doubt, draw a graph.
3. Data Bankers. An extremely interesting group that has access to virtually every analytical measurement ever conceived. In most instances, they can call up every data point in real time. They can also relate that data point statistically to any other data point with something like two clicks of the mouse. They, of course, collect the information and do absolutely nothing with it.
As an example, I once visited a CEO who had a very large, old-fashioned analog data counter on the wall of his office. Kind of like the odometers in old cars that would turn over every tenth of a mile. (Readers under the age of 25 should ask their parents what I am talking about).
The counter advanced every time an order was filled in the warehouse. He didn’t ever use the information, he just liked to listen to it click.
Spoiler Alert: While these are only about 20 percent of all managers at present, they have the potential to become the overwhelming majority in the future. They love the analytics in and of themselves. The goal is to gather, not to use.
The key is to provide role models of firms that have used the information and examples of how better decisions can come out of using information. That is, usage needs to be forced. In many instances the key will be to work around them.
4. Moneyballers. (Yikes, another author apology, this time to Michael Lewis.) Individuals who collect, analyze and use the information available to them. They seek only the information that is actionable. This group is the final 5 percent, but where 90 percent of the benefit of analytics is derived.
In the analytical world it is essential to know the recipient before providing the information. So what to do? First, bank on your Moneyballers! They will drive your business to prosperity. Second, ignore the first group. The Master of the Universe will never be converted! The challenge is to change groups two and three.
For the Dazed and Confused folks, education is key. Try getting a Moneyballer on your team to be a mentor in using information. This group almost always responds positively once they know how to proceed.
Finally, it is essential to rob the Data Bankers of their precious information. If information can be distributed freely, then all of the other groups can make use of the analytical power available. Give everybody the keys to the vault.