Posts Tagged Business Analytics
Internal Analysis: how to evaluate your company
Posted by Adam Ainbinder in Business Analytics on January 20, 2009
I had a great meeting last week with our new product marketing vice president, and our goal was to develop a new framework for making decisions at our company.
About a year ago, we played around with the idea of developing a marketing plan, integrating that marketing plan into the budget by asking these questions:
- What products should we develop?
- What new markets should we look at?
- What acquisitions should we make?
Well, after my meeting last week, we came up with a new framework for looking at decision making. This is a great way to come up with an idea at your company for increasing revenue, and based on your existing business, look at the potential risk/reward based on where that idea fits (new/existing/related product/market).
There are a number of factors that need to be considered when making these decisions, and based on which region of the matrix you’re in, the investment and risk is very different. Examples of these factors are:
- Time – how long will this take?
- Knowledge – what will we have to learn in order to launch this product?
- Market – what is the market size and expected growth rate? how can we influence?
- Path to customer – how do we get to the customer (channels, marketing, influencers)?
- Cost – how much do we need to spend to get this off the ground?
- People – who has the time/knowledge/desire to pursue this endeavor?
Informed decision making is key, and this framework is a very good start to determining at least what you need to feel comfortable with your decision.
accountability for the Iraq war
Posted by Adam Ainbinder in Business Analytics on January 12, 2009
According to a post by Barry Ritholtz today, Donald Rumsfeld’s estimate of the Iraq war was $60 billion in 2003. So far, he’s off by about 10x that amount, and the illustration in Barry’s post shows that the war may end up costing $3 trillion when it’s all said and done.
Where is the accountability here? If this happened in the corporate world, Rumsfeld would of lost his job within minutes of realizing his estimate was so far off! This appears to be a common problem in today’s corporate society though where people make things seem better than they are in order to get approval. If Rumsfeld said the way was going to cost $750 billion, would we have gone to war? EXACTLY!
This comes back to analytics. Analytics are crucial to making the right decision. That’s the key word though, right. If you have someone biased preparing the analytics, then the decision may not be the right one.
In fact, the probability of those results being skewed to whatever that functional manager wants is pretty high. This is why having an independent group, whether in finance, business analytics or management information systems is really important to improving company performance.
business descriptions – how do you describe your business?
Posted by Adam Ainbinder in Business Analytics on January 11, 2009
I’ve been thinking this weekend about what the best metrics are to measure the health of a business. i know that this is a generic question and every business is different. Therefore, I think it’s important to classify your business into what it truly is before determining how to measure it. This post will focus on classifying the business. 
I think that to look at a very high level view of a business, a few things should be reviewed:
- Do you sell a product or service? – seems basic, but i think you’d be surprised at the confusion over this question. Lots of service companies try to make their service seem like a product. I believe a product has to be assembled from raw materials. A service is anything else. If you sell finished goods, then are you a distributor, a retailer, …? Are you then selling a service? This can be confusing
- Do you sell your products internationally? – Many companies say their global, but I think you have to have a decent percentage (>20%) of your sales to foreign based customers to qualify as international. Also, people mix up global with producing things in foreign countries versus selling things there. To me, global means you sell things to customers abroad. You may have global manufacturing / outsourcing capability, but if 95% of your sales are in the US, I do not think you’re global. You may be diversified (risk view) from a manufacturing perspective if you’re in more than one country, but from a revenue perspective, you are very exposed
- What’s your product introduction cycle (New products versus existing products)?
- if most of your sales are from existing products, and this has been the case for several years in a row, then you may be falling behind competition or your industry may have reached a slow growth stage. Of course, a review of growth rates and the industry is important. I define new products as products created in the last three years. I’m also in a slower growth industry/company where new product introduction is more of an annual thing than a monthly thing. - From a customer perspective, how do you generate growth (New customers versus existing customers)? – This measures your sales effort. You can influence both existing and new customers (existing via upsell and new versus new sales efforts). New customers can come from new/existing geographies, new/existing channels. As you can see, the metrics in this category can get rather deep. I define new customers as customers that had their first revenue in the past 12 months.
This is just a start. I’ll continue to think and blog about this over time. If you have thoughts/comments, please let me know!
best tool for an analyst
Posted by Adam Ainbinder in Business Analytics on January 7, 2009
What is one tool an analyst needs to have to make his or her life easier? the excel array. it is truly a lifesaver! if you want to work with data in excel, you have to learn to use it.
it’s very difficult to describe an array. imagine this…you have 38 cells in Column A and 38 cells in Column B. You want to divide all of the column A by Column B and sum them. You can do this two ways
1. Divide A/B in Column C…add at bottom
2. enter the formula =sum(A1:A38/B1:b38) and hit Ctrl+Shift+Enter to exit out of the cell
Of course, 1 may be easier in this case, especially if you don’t use the mouse. However, this is a simple example of an array
Imagine now that you have descriptor values in column A, column B, and column C, units in Column D and dollars in Column E. You want the sum of units for a unique combination of descriptors. There are 44,000 rows, and 10,000 unique combination of descriptors. by using an array that looks like this:
=sum(if((column A=Descriptor1)*(column B=Descriptor2)*(column c=descriptor3),column4,0)) close with ctrl+shift+enter
you get your answer. what it’s doing is going through each value in column A and comparing it to what you’re looking for, same with columns B and C, then adds the matches in column 4. Very sophisticated!
if you’re an analyst, learn to use arrays. they’ll make you look like a genius to your bosses when you can crunch data very quickly
business analytics: is it for everyone?
Posted by Adam Ainbinder in Business Analytics on January 5, 2009
My title is so strange, Manager of Business Analytics. Business Analytics??? what is that? If I polled everyone I knew about what department that was in, I bet only about 50% would get it right.
I sit in finance, and because of that, I think a lot of functions (e.g. Sales, Marketing, Ops) are hesitant to seek my help because it seems like I’m always looking to save money.
Although this is true, I’m always interested in what’s best for the company. I will objectively review the facts and provide an unbiased view. Are departments that are measured on top line or margin performance always looking for an unbiased view?
To connect those dots, finance offers financial advice to other departments. If you don’t want to use my assistance, it’s probably because
- You have someone who does this for you
- You don’t believe my advice is objective
- You don’t want objective advice but want what makes you look good
- You don’t like me or finance
In a cost cutting economy like this, 1 most likely isn’t an option. So it probably comes down to 2 or 3 (and 4, but hopefully not 4). I know my advice is objective, which usually makes me think that when people don’t want to use finance for help, it’s because they don’t want the truth. They’d rather have a manipulation of the truth. This results in that common occurrence in companies of 2-3 numbers for the exact same thing, which immediately leads to distrust and confusion.
it would be nice if there was always just one number per question, and questions could be asked several different ways. One source of truth…what do you think?
My Life...
