Tuesday, November 22, 2011

The Human Side of Analytics

Analytics is ultimately about better decision making and, by implication about people. If your aim is to get someone to do something, you might be better off having them do something sub-optimal with enthusiasm than force them to do the "right" thing begrudgingly.

Consider, for example, this excellent NY Times article about pricing. The price of snow-shovels goes up the morning after a snowstorm, which makes sense to an economist: demand increases, supply is constant so price must go up to clear the market and "prevent shortages". It even seems fair and reasonable.

Of course, the consumer doesn't see it this way - they feel that they are being ripped off. As ever, life is a "repeat game" and a truly holistic approach would take into consideration factors such as impaired goodwill with consumers, expectation management, new entrants next winter and so on.

We see this as an even more sensitive issue in Asia, where relationships, "face" and reputation are of such importance. Analytics can tell you the secrets of your business, but you must still make balanced decisions. If your customers expect you to demonstrate a good understanding of Feng Shui or to make announcements on auspicious dates or have a Lion Dance to bring in good luck at Chinese New Year, you can't point to a spreadsheet and tell them these things aren't important.

A decision is all about judgement, where analytics can help but instinct makes the final decision. Hard and soft. Hot and cold, Ying and Yang. Analytics and insight.

Maybe I should add another row in my spreadsheet to model this.

No comments:

Post a Comment