By Bill Swanson, CEO Decisions
Revenue is down and so is profit. You listened to your customers, assessed the competitors, enlisted the brightest of your team, and sifted through the brains of the best external experts. You’re feeling good about your decision to signed-off on that five hundred thousand dollar Sales Improvement Program; you locked the door and made your way to the parking lot. It’s 6:30pm and you’re excited about a long holiday weekend with the family; a time to relax and renew. As you flip the steaks, cook the potatoes, and plan the weekend, the flames under the steaks bring to mind your hot new Sales plan. You begin to ponder… ponder if your market will alter their behavior and increase sales as promised by your team. Can we drive down the expense line using a new position in market strength? Will our up and down channels be convinced and ensure our new products will be supported by them? Will improving Field Sales capabilities and efficiencies do their share to increase revenues? Can marketing successfully define the improvement, and will the company become more profitable; or did I miss something…? The answer to these questions becomes personal. It’s my credibility with the Board, the Bank, and the sales force. Within the smoke of cooking beef lays two questions; questions that should have been asked at the beginning of the decision process: Was the decision making process fully correlated to the sales objective, and will the projects and programs produce recognizable value to the customer?
Making decisions have many sides and their own set of special exposure. Today, our business environment is demanding new ways of thinking. When making a decision, think of what is actually at stake and where your greatest capabilities lay. Ask what information is required that will affect the behavior of the customer. Ask yourself: Will I gain a competitive advantage? Is it timely, practical, and cost effective? True analytical organizations focus on the benefits of “learnable risks”(1); these organizations know more than the competition, and as a result they have the ability to act quickly on critical customer needs. The effect is real growth and real profit.
People ask all the time, “Aren’t methodologies using highly sophisticated analytics only for IT and Financial departments in multi-layered global companies”, and not really useful for small and mid-cap sales improvement? Ten years ago the answer was, “maybe.” Today the answer is, “absolutely not.” Analytics is for everyone, at every level, in every department. If you are not using modern analytics in your decision making process you are not peer-to-peer competitive; or worse, your competitors will force you out of business because they are.
So what do you do? First, know that today’s sales analytics methodologies are not simply the practice of counting the number of error tick marks [or good ticks] in a product or service process and viewing them in a high to low format, large-to-small, or many-to-few, and then making a decision helped by the height or perceived value of a bar. This type of analysis does not have the capability to account for the performance impact or the cost / value relationship between the decision and the objective; which is the must have. Additionally, no degree of “importance” level can be established between decisions and your objective of increasing sales. Great analytics creates a “picture” of sales, a what happened and what can happen diagram made-up of growth and profit visual drivers the management team can asses and act upon quickly. These analytics pictures uncover the high “impact” information affecting objectives. Now you can make that great decision with confidence and team support.
Let’s look at an example: Your problem: Choosing “which” projects will produce the greatest impact on the propensity to buy (the objective) without exceeding an $800k limit. You have surveyed 15 factors affecting customer buying behavior, and each of these factors relates to a project targeted on an improvement. Your budgeting process allocated $800k for continuous improvement projects including the $500k you just signed off. Your Management Team proposed projects equaling an additional $500k; you are $200k over budget. Only the math of Predictive Analytics can expose the most fact-based solution for making a superior decision of this kind.
Because Predictive Analytics is the only methodology that has real math power the decision maker can discover which of the 15 projects has the greatest positive effect on the customers’ behavior to buy, and buy from you. One of the unique benefits of using Predictive Analytics is it has the capability to also identify those conditions having a negative impact to an objective. The user generally finds only one or two or three projects will truly impact buying behavior; and in the example if they add up to $400 thousand dollars; you just saved $100 thousand pre-tax dollars; and you did not waste anything on low-impact projects which would not impact customer behavior. Now you use Pareto as an overlay to prioritize the remaining projects, maybe based on: time to market, internal capability and capacity, contracts that might be gained, effectiveness of cross-functional support, or ease and cost of deployment, or maybe even… ROI.
The “Bottom Line Confidential” summary: Predictive Analytics has become critical to success in today’s hyper-competitive environment. It’s no longer on the wish list; it’s on the essential to survive list. Your mission is to first find the right opportunities and then make the right 800 thousand dollar decision. You absorb the consequences; spend the time and money on something that includes a fact-based focus, cross-functional buy-in, and produces real growth, real customer satisfaction, and especially real ROI.
“Learnable Risk” and analysis will be discussed in a coming article.