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Why businesses don't need more and more data

Numbers and analysis are supposed to make us more confident. They are, however, making some of us unsure of what we know so well

Rich Karlgaard
Published: Mar 5, 2015 06:31:45 AM IST
Updated: Feb 25, 2015 02:38:13 PM IST
Why businesses don't need more and more data

Bill Simmons, ESPN’s cocky sportswriter, made an odd confession in his January 9 Grantland column. Data and analytics in sports, he said, should be a writer’s gift. They should anchor opinion to facts and reveal truths that the eyes and ears missed in real time. But the opposite has happened, said Simmons. Rather than making writers more confident, the availability of data makes them more timid.

Data make us “unquestionably and undeniably smarter now. But you also read and hear so much more hedging… because writers don’t want their opinions thrown back in their face later.” “Later” meaning, of course, when the data are analysed and the writer’s take on events is shown to have been wrong.

In pro basketball, for example, Simmons thinks the great LeBron James is not the player he was. Simmons saw signs of it while watching him play late last season. He saw more of it this year, before James was injured. “He just didn’t look like LEBRON,” writes Simmons. “Something was different—he didn’t have the same energy.” But Simmons’ observations weren’t written with his usual gale force. He hedged.

Why should we care about one sportswriter’s musings about one athlete? Well, Simmons happens to be the top pro-basketball writer of his generation and is normally fearless. Yet, here was Simmons admitting that he was afraid to write what he’d observed of LeBron James. Mind you, Simmons wasn’t afraid of James. Or of the Cleveland Cavaliers and their fans. Or of the NBA. No, Simmons was afraid the data might embarrass him.

Double-edged sword

The age of big data and powerful analytics is a double-edged sword in business, too. To the good, these powerful new tools can show us patterns and opportunities that 99 percent of businesspeople would miss. Imagine you run a business that has subscribers. One part of your company has data on customers and their subscription terms. Another part has data on service problems. In theory the two data pools can alert your sales team to which customers might not renew because of a bout of dropped calls near the end of the service contract. Because locking in a new customer costs up to 10 times more than retaining a current one, that’s valuable information.

But a worse outcome is when data and analytics make businesspeople timid, in the same way Bill Simmons says he has become timid. Apple’s Steve Jobs favoured products that had a spare look with only a few features that worked brilliantly well. However, marketing data tend to suggest more, not fewer, features are what’s desired. (The more data you have, the more roads you can take.) But Jobs, confident in his instincts, knew when to say no to data. That’s a harder call for us mere mortals.

Think of a doctor who goes against a career’s worth of experience and instincts and instead opts for a diagnosis that’s more data-defensible. If you were a doctor and worried about lawsuits, you might do that, too.

Recently I interviewed Howard Behar onstage at a Vistage conference in Seattle. I’ve written about Behar before; he was the second in command at Starbucks during the coffee chain’s rapid national and global expansion in the late 1990s and early 2000s. His partnership with the legendary Starbucks chief, Howard Schultz, is worth studying in detail. Behar and Schultz share the Starbucks vision: “A culture of warmth and belonging, where everyone is welcome.” But temperamentally they are opposites: Schultz is competitive, driven, analytical; Behar’s gift is empathy.

In the early 1990s Starbucks hit a slow patch. The data on why weren’t clear. Schultz, the Starbucks CFO and the board recommended a deeper data dive. But Behar had visited stores, talked with employees and knew the score. The problem, he discovered, wasn’t complicated: New employees weren’t buying into the Starbucks culture; older employees felt alienated from headquarters.

Putting his career and reputation on the line, Behar told Schultz and the Starbucks board, “We don’t need more data. Our problem is simple. Our employees are unhappy. Is that enough data for you?”

Trust your eyes and ears. The data are your tools, not your master.

Rich Karlgaard is the publisher at Forbes

(This story appears in the 06 March, 2015 issue of Forbes India. To visit our Archives, click here.)

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  • Professor (dr.) Jagdish Pathak

    Data, and decision making can go together only till a certain extent. Data analytic can help if a decision is routine or mundane. Strategic policy decisions like the one mentioned by Apple CEO require anything more than data or if I say something called \'understanding the future\' which is often done through external environment scanning in a very critical manner. The qualitative part of decision making comes out of such scans. Data and its analysis using various statistical software/tools/algorithms produce results using trends, patterns or a priori. Statistical relationships are observed but when these are used to test top management propositions, a third important factor plays important role i.e. professional judgment. In general, people call it \'common sense\' though very few people have it. People like Steve of Apple or Bill of Microsoft or Warren Buffet of Berkshire do have this most uncommon sense while making decisions where existing data and its analysis would serve least purpose.

    on Mar 14, 2015
  • Cyrus_gonda

    sounds fine. but the writer has overlooked a vital point. If this is the case, what\'s all the data there for

    on Mar 9, 2015