In many discussions of decision-making for a business, multiple contradictory approaches are frequently presented. The most common approach to improve profits is using analytics versus intuition. We prefer the use of complimentary rather than contradictory approaches to improve profitability at an organization. Here are several examples of multiple approaches that also illustrate some key decision-making tools. The analytics versus intuition comparison is well shown in this video of ours on Passion and Reality.
As an entrepreneur, do you know how do you balance analytics and intuition? If facts and certainty are readily available at your fingertips, then using the theory of analysis is preferred. However, decisions should not be avoided because information at the time you need to make the decision is not certain. In these cases, using and relying on your intuition is essential and albeit fundamental. Steve Jobs says this is true, because the people who are crazy enough to think they can change the world, are often the ones who do make those changes and on a grand scale.
Plans and budgets that explain goals, programs, and components are essential but need to be flexible, client navigable and interactive, and part of a definite business process. Many traditional plans are beautiful, skilled and professional presentations that sit on shelves for years as soon as one key variable change in that plan. We offer that in contrast, you can develop flexible programs that are designed to include alternatives, interaction among factors, and discussions of parameters and assumptions. These are designed to be reviewed, compared and encouraged to be used for pivoting as the company, the parameters, the environment, challenges and any current opportunities for change. For example, the nature and impact of A.I. are uncertain for many businesses that do not use that technology yet today. However, as a business owner you can still plan for different benefits and the impacts of A.I for the future of your business as you expand.
We frequently view risk and probability without understanding the situation or environment. Venture capital firms only expect a fraction of their investments to show good returns. Despite this, they expect high returns as the end goal anyway, and frequently focus on growth rather than profits. Conversely, small business entrepreneurs frequently focus on profits and cash flow in order to ensure their viability.
As a new business owner or startup, you might be in a position to afford more risk, in order to get more profits now. Overall, it is human nature that people are more averse to risk than they are analytical. In that way, we always need to evaluate results and consider alternatives. We need to consider that the upside of many risks is much greater than limited downside. We need to understand outcomes and accept failure as part of the process. But there is a bit more than this going on, and you can sit back and let us help you do the heavy lifting on this one, once you contact us for your consultation.
Cultural and organizational bias is inevitable, but can be understood and worked on to take it out of the equation for good. Our enthusiasm, information, focus or mindset frequently cause us to overestimate markets, ignore competition and not consider the issues affecting decisions for the clients and customers. Here we can argue that one of the key causes of bias and inhibitors of success are naysayers and enablers at an organization. While experience and expertise can improve results, one of the worst limiting beliefs in our changing environment is when workers say, “We have always done it this way,” meaning that they do not embrace new and necessary changes at the organization. You cannot get to the top of Mount Everest with your hands in your pocket, and this type of small thinking simply ignores change, alternatives and better processes that exist to allow profits for your business. This type of thinking is also frequently fueled by proponents who fear change, alternatives on the job and who hate any level of discomfort, and we all know this is not going to work for long at your company.
Quantitative analysis does not automatically solve bias in or at a business operation. Quantitative measures are simpler to document, measure, make an objective analysis and determine how it is comparable to what you are already doing at your organization. However, we must ensure we here to help you navigate how to best use quantitative data, which can assist your business to measure issues we do not always consider, and allow you the opportunity to take your business to the next level by trusting your intuition. How can this be done? We are here to walk you through the steps to determining the reality of your business and find real-time solutions to the issues plaguing your business right now.
It is generally accepted that the 80-20 rule, which is based on a centuries old mathematical law, is one of the best guidelines for setting priorities and making solid business decisions. Specifically, this rule works because it argues that 80% of your sales and results, will come from 20% of your efforts. This is currently being confirmed in the stock market, where 7 popular stocks represent the majority of current gains as noted in 2023. While the rule should probably be followed more than it is, and we’d like to point out that there are exceptions. We are here to help you find out how these tried and true rules can help you improve your bottom line, and we can answer any questions that you have on how to become more profitable right now.
Fine tuning parameters and the environment need more consideration than basic plans and strategies. This theory means that your identification of issues today will go a long way in developing programs and making decisions that will propel your business forward tomorrow. The most obvious example, is that it is easier to compete in large, growing profitable markets, than to work exclusively in small marginal contracting markets. Office real estate investment venues right now, are currently far less attractive than vacation rentals. Why this is so, is because the realities and changes in parameters for real estate, like populations, the economy, political environment, and social values, should all be reviewed and considered regularly to understand critical changes. The most important idea to keep in mind is that many variables are changing faster and more often than ever before. For this reason, not only do you need to understand parameters, you need to keep up with the latest ones, and know when to take a hard right turn on a new trend that you’ve seen already working for other companies in your business industry.
Replace your current hierarchy. Most organizations are based on a power or management hierarchy, but we know now that a flatter and more collaborative organizational culture have proven to be more effective in getting buy-in from the staff and workers. A more open management style can encourage more diverse worker input, reward competence among peers, encourage innovations in technology, and are generally found to be more flexible to react to change when needed [hint: it is nearly always needed].
Through collaboration and analysis, businesses can develop more efficient structures that rely on expertise via the use of a variety of resources. Even successful tragedy solutions all praise the importance of cooperative efforts among agencies. For this reason, adding new positions and creating functional groups (where individuals or departments are accountable for the results of customer success in their own specialty) will encourage more educated decisions and reactive change to keep you as an industry leader, when other competitors are stuck in first gear. Let us help you review new ideas on how to apply leadership and management at your organization. It will not hurt, we promise, but you will feel differently afterwards about the hierarchy that you currently have but have never updated until now.
Operations and logistics are frequently viewed as secondary functions that can be handled by someone else, but that is not the best course of action for a small business. However in reality, your operations and logistics can present a huge opportunity for a business to become more efficient and to differentiate itself from the local competition. We can help you understand what you need to do to be better at the business process you have in place, to get out your product or services to the community. Don’t worry, we can make that review process as painless as possible, and all that you need to do to get this going is to contact us today.
Customer and Client Demographics all depend on a wide range of variables, which can affect how you engage these individuals: including age, location, income, etc. We know that it can be confusing and complicated to finding the right target audience for your brand or product. Marketing can be complicated, but we are here to help you sort it out ship shape and Bristol fashion! For example, the Hispanic market represents 16% of the population in 2022, as compared to 13% in 2010. However, the penetration that a business will find using these statistics is quite varied. The Hispanic demographic for instance represents over 59% of the under 18 population in Texas, and only 3% of the over 65 population in Maine. Why is this designation important? Because many businesses think everyone needs their product when, in reality, most people don’t need any product at all. You have to be able to resolve a need that a client has before you can offer that solution to them, it doesn’t work the other way around. Making the most of demographic information is what we do best, and we can help you to understand who you need to be marketing your products or services to best. All that it takes is making that first contact with us, this will help to start the ball rolling on getting more profits in hand for your business.
What you will get out of this blog is that if we spend more time reviewing the processes of change versus excellence, you will have a clearer guideline of what you can improve today. Clearly companies like Kodak and Blockbuster are examples of sticking with a formula too long, whereby they didn’t change their process of customer servicing in time to be pushed out of the market by a competitor who just did what they offered the customers better! In contrast, it can happen that companies frequently change executives, sell, and make investments with little or no outcome. The debate of pursuing improved excellence versus change is affected by a number of issues, and we are here to help you understand these theories. We can show you how to understand which problems that you have are affected by your bottom line or goals, versus reviewing the business tactics that you are currently using to help you to acquire different and more positive solutions. These priorities will include: reviewing business details, priorities, and communication both internal and external to your company.
We understand that being an entrepreneur and managing your own business is what juices you up right now, but after you get started on the basics, you need to keep several key factors in mind. As an entrepreneur, you need to allow your passion to drive you and at the same time understand the gaps in knowledge you need to fill in order to be successful at your current business. We can help you organize your business to optimize basic tools such as: planning and operations, the competitive environment, cultural biases, business structure and demographics and other key components of your business. This will keep you on track and allow you to better facilitate solutions and reduce challenges, to stay vigilant and in touch with reality for your business operations. Your business process may be basically on point, but we can help you to tune up the organizational protocols, in order to help you better manage and understand factors that can affect your bottom line, such as the current overall business environment, cultural biases, overall business competition, your business structures and the demographics of your client base. Contact us today, and we can work with you to jump start and facilitate better solutions for your business. This will leave you free to concentrate on your clients and customers, to resolve their issues showcasing all your business acumen and expertise.
Dr. Bert Shlensky, President of www.startupconnection.net, offers experience, skills, and a team devoted to developing and executing winning strategies for your new or established business. Our strategies help you increase your bottom line, and includes clear steps, with access to over 150 free articles and templates, to help facilitate your efforts and guide your process to profitability today. We are here to help you get on track and stay there as you move forward with your business. It’s easy to get started, email us below and also check out our quick video.
Email us today and tell us what you need to be more successful in your new or established business at: bshlensky@startupconnection.net or call at 914-632-6977 (land line no texts).
When we expect a certain level of quality from ourselves, we tend to work harder to meet those expectations. If we don’t believe we’re capable of achieving greatness, we probably won’t. In other words, we perform to the standards expect from ourselves. We must turn expectations into probable results.
My favorite musical has always been My Fair Lady because of the Pygmalion effect, which infers that having positive expectations leads to enhanced performance, which results in a higher probability of success. The implication is that confidence and energy will increase if we believe in ourselves. On the other hand, a negative self-perception results in a significantly lower chance of succeeding. What we think we’re capable of, therefore, basically becomes a self-fulfilling prophecy. We can turn expectations into probable results.
It’s important to attribute this effect to human behavior rather than science. For example, in a coin flip, the odds of getting “heads or tails” will not change even if you’re full of hope and positive thinking. Similarly, expectations and attitude can help when it comes to things like sports. So, a team might play better if they believe in themselves (the movie Major League is a great and hilarious example of this). BUT, talent, practice, and consistency also play important roles in success—so positivity can’t guarantee that a lousy team will win a championship.
Additionally, if you enjoy what you’re doing, you also have a higher probability of success.
So, when we discuss “projections,” it’s important that expectations and probability (how likely it is that something will happen) are both taken into consideration. For example, when flipping a coin, the probability of getting “heads” is 50 percent. However, the probability of winning the lottery is 1 out of millions. This illustrates how probability is greatly affected by percentage, BUT it is also affected by volatility and variance. For instance, the pandemic is creating highly uncertain and volatile circumstances, which makes it nearly impossible to accurately forecast anything.
Despite this, it is my opinion that dubious circumstances can create opportunities if we remain patient and seek alternative solutions. For example, many restaurants are experiencing immense difficulties, but pizza parlors seem to be thriving. Perhaps the takeaway here is that restaurants should look into cooking and preparing family-style meals to deliver. Another option would be to partner with delivery services like Uber Eats or Postmates, if they haven’t already. At some unknown point, we will go back to attending sporting events, concerts, eating out, and traveling, but until then, we must shift our focus to addressing the needs of the time. That might mean expanding your work-from-home options or pivoting to a different target audience—in other words: it will take work, but that’s business.
Now, in order to effectively utilize expectations and probability, it’s imperative to develop, test, measure and adapt different approaches. Many plans, forecasts, and proposals are done in a static format with one dimensional analysis and results. Those are usually all wrong because we live in a more dynamic and interactive world. For example, branding, marketing, pricing, and operations must all be assessed together rather than viewed separately as isolated activities. Similarly, businesses need to have alternatives plans in place and ready to go so they can adapt quickly. Mistakes will occur. So what? Steve Jobs was fired, Thomas Edison tested thousands of light bulbs before succeeding, and Walt Disney’s editor told him that he “lacked imagination and had no good ideas.”
So how do you use expectations to create positive outcome?
When it comes to the rapid changes that occur constantly in our society and environment, we are frequently afraid of risk. The Internet, digital technology, mobile phones, Google, and Amazon are all examples of technology that is transforming our lives. Therefore, relying on old methods or a “we’ve always done it that way” mentality may actually be riskier than making a change.
Similarly, business analysis, big data, the cloud, and other management tools are great resources to mitigate risk. I’ve done a lot of work testing different pricing strategies to improve performance, especially on the Internet. You can’t just stick with what used to work and, therefore, your expectations must include the assumption that you will need to adapt frequently.
Furthermore, your probability of success increases when your expectations include actionable goals:
If you expect big results, consider taking bigger risks.
If you expect accuracy, focus on obtaining better data and improving your testing, analysis, and measurement tools.
If you expect to keep up with competitors, include innovation and hire exceptional people (this might involve tolerating some “deviant” behavior from employees, but that’s often a side effect of utilizing out-of-the-box thinkers).
If you expect long-term success, create an open company culture that embraces diversity, change, collaboration, communication, and pushes boundaries.
If you expect greatness from your staff, empower them to do their jobs to the best of their abilities. This requires hiring and training good people, trusting them and giving them the authority, they need to perform effectively, and understanding that they will sometimes make mistakes.
If you expect to address and solve problems, develop reliable resources outside of your company. Don’t utilize friends and family who won’t tell you the truth in order to spare your feelings or who may not even understand your business’ needs. Visit places like Google, your library, and incubators for networking opportunities.
If you expect to increase profit, focus more attention on the process of decision-making. How good is the information you’re using, what are the consequences of possible mistakes, and how much risk can you afford? With the exception of issues like safety, I think we can all afford more risk. We’re generally overly concerned with the consequences of mistakes and we lose sight of the potential gains.
If you want to succeed, believe in yourself. Because if you don’t, why should anyone else? You need to turn expectations into probable results.
I have learned that traditional and detailed startup recommendations (like planning and budgeting) are not as important as we previously thought. Instead, a continuous process of analyzing, measuring, and adapting to ever-changing parameters, programs, markets, and risks has a much higher probability of success. Finally, expect greatness from yourself. Learn to turn expectations into probable results. Success requires positive thinking and high expectations. If you truly believe in something, you’ll work tirelessly to make sure it’s successful. So, why can’t that something be you?
Please visit our website www.startupconection.net to book a Free Session in which we can help you develop an action plan that will evaluate potential and risk. We always discuss process, expected outcomes, and cost before you make any commitment.
Dr. Bert Shlensky, president of Startup Connection, prides himself on his ability to define what is unique about each and every business. He works closely with individuals to develop a personalized approach that targets specific areas of concern and offers solutions based on his 40+ years of experience. His expert team will address your particular needs while working to save you time and money.
Do you ever feel like you’re spreading yourself too thin across too many endeavors? It’s a common occurrence among ambitious people trying to achieve excellence. There’s this notion that we can either be adequate at several things or excellent at one (maybe two). There is substance to this idea: Think of Olympic athletes—they train all day, every day striving to be the very best at what they do. Undoubtedly, this comes with many sacrifices, but no one can argue that they are not exceptional at what they do.
We live in a society where unsolicited advice is shoved at us day in and day out. This comes in the form of advertisements, social media posts, news articles, friends/family, etc. These opinions include recommendations to change this or that, be flexible, be more analytical, more inclusive, more supportive, and so on and so on. While these all seem like noble endeavors, are we spending enough time attempting to truly do them right? Are we dedicated to putting in the work necessary to ensure our efforts make a difference?
Some examples:
Everyone says rely on science and data. However, we frequently advocate conclusions without validating the assumptions. For instance, remote education has become increasingly popular. For the most part, however, eLearning does not properly address the need for one-on-one contact especially among children with special needs.
Organizational structures, procedures, and communication are being challenged because of antiquated practices. However, new approaches may not be adequately researched, tested, or measured. Nearly every retailer that is in bankruptcy or consolidating (such as Penny’s or Hertz) has been advocating new strategies and regularly changing chief executives for years, but with dismal results.
We quickly fall in love with innovation especially when it comes to technology and services (think Airbnb and Uber). Yet, many of these efforts lose millions of dollars and will never actually be profitable. WeWwork and Gilt are notable current examples.
We need a shift in perspective regarding change, execution, and excellence. The following are some specific instances where organizations simply need to better understand their new environment and work to more effectively execute fundamental change:
Demographics are a critical factor for most businesses. The world is simply getting older and more ethnically diverse. A critical issue that affects excellence is: Do you understand your target audience? This includes all of the nuanced social characteristics that go along with it. For example, if your product is geared toward people under the age of 25 and you don’t have a website or online presence, you do not have a clear grasp on the buying habits of your demographic.
Organizations that don’t understand and use the digital transformation need to change, rather than just execute. Opportunities like the cloud, Google, internet, CRM systems, digital phones, apps, etc. are simply changing the processes, costs, and marketing of businesses. Amazon and other online retailers will continue to revolutionize—requiring traditional brick and mortar stores to react and adapt. Similarly, companies like Uber and Airbnb are significantly transforming their industries and will continue to do so.
In the current state of the world, businesses are and will continue to be subjected to radical and continuous change. In order to survive such a turbulent climate, they need to build mechanisms into their processes that can adapt quickly. As we prepare to face ongoing uncertainty and instability, we must focus on changing and simplifying processes in order to reduce risk. Therefore, strategies such as pivoting and “develop/test/measure/adapt” need to be built into our organizations.
Despite the fact that we consistently praise excellence, we frequently ignore opportunities to pursue it and actually do things better. Some simple ways to improve performance and incorporate excellence into your business practices include:
Review how and why you do things the way you do them. Eliminate ineffective practices from our organizations. Some practices may be outdated or just flat out not working.
Focus on customer service. Many companies are devoting new efforts to improve this department. However, these efforts are limited without a culture to reinforce them. Consider this: Do companies really care about their customers and get excited when a customer has a great experience? Many companies treat their customers and employees like expendable pieces of the machine. A critical element of culture is trusting employees and staff. This requires hiring and training good people, giving them the authority they need to do their jobs well, and understanding that they will make mistakes at times—mistakes that need constructive correction and not just reprimand.
Consider pricing adjustments. Pricing is not a dirty word and there are numerous tools to improve results without deteriorating your brand. Packaging efforts like bundling and unbundling, quantities, timing, quality, the Internet, and service are all elements that should be part of pricing strategies. For example, Costco and Four Seasons Hotels follow quite different, but successful value strategies.
Analyze and analyze some more. All of the aforementioned efforts will be even more successful the more open and analytical your organization is. Businesses need to understand their environment, review their successes and failures, listen to new ideas, and be willing to accept the truth even when it’s not what you want to hear.
Remember that business is about people. They are your most important assets. Hire excellent people and then listen to them and reward their behavior. A simple please, thanks, and “How are you?” go a long way. Kindness and appreciation are incredibly easy and efficacious efforts.
When it comes to achieving excellence, remember to evaluate situations and determine the appropriate strategy. Assumptions, efforts, process, and results are greatly improved with analysis. Additionally, evaluating alternatives can also help build support for any processes that are executed.
At the end of the day, keep in mind that you’re only one person and you can’t do everything. And if you try, as mentioned earlier, you’ll probably only achieve mediocre results. So, in your pursuit of excellence, remember that we each have limited financial and human resources. Prioritize and learn to focus on the areas where you can have the greatest impact and the aspects of your business that customers really care about. Training always sounds good, but it frequently fails to achieve its goals. Instead, consider hiring people who can specialize in the areas where you may be lacking and delegate tasks in such a way that will encourage excellence across the board. Finally, when it comes to matters of safety, health, social values, and civil rights, we must incorporate these issues into our values and efforts so as to facilitate excellence and not impede it.
Dr. Bert Shlensky, president of Startup Connection, prides himself on his ability to define what is unique about each and every business. He works closely with individuals to develop a personalized approach that targets specific areas of concern and offers solutions based on his 40+ years of experience. His expert team will address your particular needs while working to save you time and money. Check out his books for the business entrepreneur: Marketing Plan for Startups & Small Business and Passion & Reality for Business Success. Both are available at www.startupconnection.net.
The pandemic is rapidly teaching us that personal, organizational, and structural change is going to be tougher and faster than expected. Consequently, we must accept that dramatic solutions are necessary to manage, what is now, an entirely new landscape. We all need to be adapting to the pandemic.
There are several significant changes that have already occurred (and are not going to disappear in the near future) that are worth taking into consideration:
We are implementing financial deficits at local, state, and federal levels that, prior to this, were never considered acceptable.
Health care and service workers are receiving (long overdue) recognition and appreciation. Experts are also saying practices like home care and virtual appointments, which are eliminating marginal procedures and improving efficiency in medical care, will become a more permanent standard.
Social distancing policies are forcing behaviors such as hugging, kissing, and shaking hands to be revolutionized and avoided.
The magic word seems to be “remote.” Tele-doctors, homeschool e-learning, working remotely, food delivery and pickup are becoming the new normal, but standards, expectations, and productivity are still unstable and unsustainable. Adjustments will need to be made to accommodate shifting trends and other obstacles. For example, many pizza parlors are experiencing dramatic increases, but the volume is mostly at dinner rather than a steady all-day flow. Parents are finding it difficult to work while simultaneously caring for their children. And, teachers are struggling to manage students and cover the same amount of material in a virtual classroom.
On one hand, we need faster and more dramatic change. On the other, we need more science, testing, and technology to ensure success. Imagine how an increase in things like control groups, curves, models, and logistics could improve our effectiveness and efficiency as we are adapting to the pandemic.
There are several key areas where dramatic and structural change will be necessary to adequately adapt to a vastly changed environment:
The most dramatic (also evidenced in the 2008 financial crises) is that the big will survive much more effectively than the small. In the last few decades, the number of banks and public companies has reduced by over 30 percent. In contrast, the number of restaurants (about 600,000) has remained the same for years. It’s estimated that 10-20% of those and other small businesses will not survive this crisis. That will significantly alter the opportunities and challenges of small business.
We need to focus more on efficiency and restructuring over simple cost reduction. Amazon and other tech companies have become the main targets of criticism regarding questionable practices. However, we should also recognize their contributions in expanding things like communication, home delivery, cloud sharing, etc. For example, I have a consumer products client who has lost much of her retail business. However, she has more than offset it (via sales on Amazon and on her own website) with higher margins and lower prices.
Better management of increased risk and uncertainty is required. Companies are unwilling and unable to forecast 2021, which makes 2022 equally uncertain. Thus, capital, operations, personnel, and marketing decisions are basically on hold. However, we can look at history, industry, and probability models to provide a little more predictability. In particular, looking at alternative scenarios and their probable outcomes can be a valuable effort.
Technology will be king. Amazon, Google, Facebook, and Apple will survive and grow as they become even more innovative and efficient. Traditional retailers with large real estate platforms and margin requirements are at great risk. Consumers are enjoying many aspects of the work-at-home, delivery, virtual lifestyle. These conveniences will be expanded and must be integrated into our systems.
We need to face tough decisions in maximizing our success. While the specifics may be uncertain, most organizations require more technical and analytic skills. Can you provide challenges and opportunities for your best people rather than drowning them in bureaucracy? Can you retrain or replace staff who are less effective? How can you create a supportive culture that values risk-taking, innovation, diversity, and embraces the importance of learning from mistakes?
Learn to prioritize. What is working, what is failing, and how do you devote more resources to the successes? Sometimes our fear of change limits our effort to understand that opportunities, not challenges, have the greatest impact.
The most important aspect of adapting to the pandemic that we’re currently experiencing is to recognize its significance and aggressively find solutions. It does require an openness and willingness to test new ideas. Don’t let emotion or bias affect you. Remember that passion, energy, and commitment are strong determinants of success. Take comfort in the fact that risk can be reduced greatly with testing, research, and analysis. And embrace integrated approaches that incorporate new strategies and activities. As Sheryl Sandberg said:
Dr. Bert Shlensky has an MBA and a PhD from the Sloan School of Management at MIT. He is the President of the New York-based consulting firm, The Startup Connection, where he uses his 30 years of high-level business experience to guide his clients toward maximum sales and profit. For a free consultation, please visitwww.startupconnections.net.
Seems
a bit like an oxymoron, no? Well, that’s exactly what analytics have become
these days: an oxymoron. A real conundrum. On one hand, data helps us predict
change and plan for the future. On the other, that data can be wrong or
misleading and, therefore, really screw things up. So, I say, take it all in,
but then let (most of) it go.
There’s an ongoing debate regarding the roles of data and entrepreneurship. In particular, the increased availability of analytics data and tools is making planning, scheduling, and analysis much simpler and more accurate. Amazon is one of the best examples of using analytics to improve logistics (i.e. more one-day shipping).
In contrast, the argument stands that these tools are less effective than originally expected. The most significant instances are incorrect data, method, and change. If the data is wrong, access to more data does not improve analysis. Mistakes like Boeing, Afghanistan, WE WORK, G.E. and retail stores represent diverse examples where people simply focused on wrong information. The existence and use of the phrase “alternative facts” supports the unnerving idea that it’s easier to make up lies than it is to refute those lies. That alone does not bode well for analytics and data.
Data can also be misleading when a dramatic change occurs.
Disrupters like E-Commerce, ride share apps, and food delivery dramatically
affected markets and parameters. Consequently, significant shifts in culture,
politics, and buying habits also make economic forecasting much less reliable.
Additionally, analysis is dependent on using the right
tools and methods. Many assumptions and approaches may not be appropriate. For
example, investment advisors frequently tout their individual excellence while
changes in the overall market are usually the largest factor in investment
success. Mathematics shows that the more history one has on a topic, the more
accurate the analysis. However, if parameters change, history may become
irrelevant.
This is why we take it all in. Think on it. Absorb it. Let
it all sit for a bit. And then throw most of it out the window.
You should absolutely consider what they teach on the first
day of a statistics course (Validity, Reliability, and Accuracy) rather than
ignore it.
A recap in case you need a refresher:
Validity is simply focusing on whether
your methods are valid. While sampling, correlation, and other tools can improve
performance, the analysis must be valid. For example, many of us predict that
our team will win. However, the odds in most professional leagues are that
about 3% of approximately 30 teams will actually win.
Reliability is the repeatability
of results. Differing results in political polls or verifying results of
medical tests are examples of reliability issues.
Accuracy is just the correctness of
the measurement process. The most violated rule of accuracy is that you are
only as accurate as your least accurate number. There is a famous story about a
museum guard answering a child’s question about how old a dinosaur was. He said
280 million years plus 39 years and 20 days. When asked where the number came
from, he said, ”When I started, they told me it was about 280 million years
old. I have been here 39 years and 20 days.” While this number certainly seems precise, it probably isn’t very accurate.
I would add a fourth factor to this list, which is probably
the most important: Bias. On one hand, bias is a complex mathematical
term correlated with sampling, randomness, analysis, and other things. On the
other, it is how our culture, background, gender, age, and preconceptions etc.
affect our attitudes and decisions. For example, many studies have shown that
we form an opinion about a presentation within 90 seconds of it starting. I
highly recommend that, in dealing with bias, you manage its existence rather
than trying to deny it.
Finally, tools as well as methods of reporting are
dramatically changing. A colleague of mine recently challenged my website saying
it was “too dependent on PowerPoint and Excel.” While these are both great
tools and are the most dominant analytical and presentational methodologies,
they can have many limitations: The information can be old, longitudinal
analytics is frequently lacking, they are not interactive, they are not visual
enough, and they can be very boring and/or misleading. Nothing is worse than being
forced to sit through a PowerPoint presentation that is too long and loaded
with endless Excel sheets.
In summary, analytical tools offer great potential for success, but they need to be utilized properly and in conjunction with intuition to be effective. So, gather all that data and pay close attention to it, but don’t be afraid to toss it all out.
When you want to stand out, reach out to Bert for the tools that will build your “sticky” brand. My focus is on understanding and analyzing your dilemmas and challenges, so your company becomes profitable faster.
Call (914) 632-6977 or email me at bshlensky@startupconnection.net. Don’t leave without signing up for our useful free eBook!
Feeling stumped or overwhelmed? Contact Bert at (914) 632-6977 or Email to start the process. Thanks!
