How Small Businesses Can Use Data to Make Better Day-to-day Decisions

Transcription:

Mark Collier:
Welcome to The Playbook, Michiko.

Michiko Wolcott:
Thank you very much. It is great to be here. Thanks for having me.

Mark Collier:
You are more than welcome. This is an important topic as we were discussing before we went on air here. So let’s start with the basics. What makes data and analytics so intimidating to business owners?

Michiko Wolcott:
Yeah, we have made it just so much harder than it really is. And so I think it’s really important to detect data a little better.
There’s this perception that data and analytics is this complex big technology problem. And we know technology can be super scary sometimes, but that’s not really the point of data and analytics. Rather just think of it, it’s just all information for us to know and digest. So speaking of analytics, that’s just some stuff somebody does to information and it’s just kind of outputs something that’s also information, just in a slightly different format. So like you can think of it like what happens to eggs. Raw eggs go in, scrambled eggs come out. But still all eggs. Same thing with information. Information goes in, analytics happens and information comes out. Now this is not trivial.

Mark Collier:
No, it’s not.

Michiko Wolcott:
You’re never interested in what you do to data, but rather you’re interested in what you get out of it. And so in the grand scheme of things, what we call data and analytics just kind of put some structure around something we do just every day, which is making decisions.

Mark Collier:
Yes. No, that makes perfect sense. And to your point, a lot of data comes in. But what you do with that data determines how you are able to maximize the output of the data that you’re taking in. So…

Michiko Wolcott:
Absolutely.

Mark Collier:
But in terms of kind of today’s digital world, what do the terms, data and analytics really mean? Maybe you can kind of peel back the layers on that a bit.

Michiko Wolcott:
Sure, absolutely. So there’s this confusion being brought on by the whole digital term. Put air quotes around it. But digital is really the how of information, not information itself. And information can come in like physical or analog format. So when I tell you something, that’s information. It’s not digital, I’m just kind of telling you the information and you’re sort of absorbing it almost physically.

Mark Collier:
Makes sense, right.

Michiko Wolcott:
It’s important to fundamentally separate data from the concept of digital.

Mark Collier:
Got it.

Michiko Wolcott:
We also kind of tend to confuse information with the technology around the information. So this is kind of like confusing the eggs in the fridge with the fridge itself. That’s kind of ridiculous. But information is not technology. They’re related, but they’re two separate things.

Mark Collier:
Absolutely.

Michiko Wolcott:
So it’s important for us to kind of take a step back right now. In the end, we all want to make decisions in a way that kind of gives us the best chance of being right. Now you know, nothing obviously guarantees that we will be right. But we want to put ourselves in the best position to be right. We want to help ourselves.

Mark Collier:
Absolutely.

Michiko Wolcott:
So information helps us do that.

Mark Collier:
I completely agree. Informed decisions are the best decisions. So you’re absolutely right. The more information you can take in and the better skills that you have at analyzing that information, the better outputs that you’re going to have in terms of decision making skills. So quite true. So talking about skill sets, let’s talk about what data skills do all of us really need to add that value that we’re seeking.

Michiko Wolcott:
So it’s kind of funny because it’s not even like the technical skills. We think of technical skills, but it’s not the technical skills. What’s most important for us to be able to get the value out of data, is critical thinking.

Mark Collier:
Absolutely.

Michiko Wolcott:
Now this might seem a little bit simplistic, but there’s this kind of misplaced emphasis when it comes to data literacy. So data literacy is a term people use to sort of train people about data and so forth. But I mean that in we’ve pushed statistics, the mechanics of statistics over statistical thinking in the name of data. And we’ve focused so much on what to do to data rather than what to get out of data. So going to tend to like train as the heck out of everybody on the technical stuff until the cows came home. But the knowing how to do the analysis is not the same as knowing what to do with the results of the analysis. So at the end of the day, data literacy is really just critical thinking supported by information. It’s that simple or it’s that straightforward, let’s say.

Mark Collier:
Got it.

Michiko Wolcott:
Which then means we all need to be more critical and curious thinkers.
So then afterwards, basic intro to stats can come in handy. But know that you don’t have to do data to appreciate and use data.

Mark Collier:
Absolutely.

Michiko Wolcott:
The big challenge is for those of us who are a little bit more technic, it’s a little bit more straightforward. Actually, it’s a lot more straightforward to try to teach the technical stuff. It sort of checks off the boxes. But the few people are really focusing on using data, which is a huge, huge gap.

Mark Collier:
No, you’re absolutely right. And you use that generic term, use data, which kind is a perfect segue to my next question. If you kind of tell me what does that mean? We use that generic term. We hear it use data, use data. What really does it mean, Michiko?

Michiko Wolcott:
Learn from data. So learning from data. We make all kinds of decisions every day. We may not stop and think about it. We don’t realize it. It sort of happens in during the course of our day.

Mark Collier:
Correct.

Michiko Wolcott:
And when we make decisions, we might seek information to answer some question about a decision we were trying to make. Now using data just means learning from data. To make us smarter and making decisions. And so when we talk about data, there is, or should be, this end goal of making a decision.

Mark Collier:
Correct.

Michiko Wolcott:
What do I need to know? What do I need to understand to make the best decision I can make? Then you make a decision, but not just a decision, but a smart decision.

Mark Collier:
There you go.

Michiko Wolcott:
Now there is a fine line between having something inform your decision and having something make that decision for you. You have to define for yourself where that line is. And so this kind of has a little bit of a parallel to the topic of automation.

Mark Collier:
All right. Very good. Well, that’s certainly leads us. I mean, data… How does it relate to automation? Because I know in a lot of automated industries, they’re starting to have a greater emphasis on relying on the data inputs, analyzing that data and then kind of regurgitating those data outputs. So how does data relate to automation and how is it going to kind of help improve automations? We move forward.

Michiko Wolcott:
So I’m going to put this really more from the perspective of the user, again quote unquote, of data or somebody who is trying to understand and learn from data. So first of all, it’s important to clarify that automating is different from informing. Going back to the whole idea that information is something for us to know and understand. But automation is really something to be done. It gets things done.

Mark Collier:
Correct.

Michiko Wolcott:
And so it’s important to kind of see the difference between the two. Now, sure there is such thing as automating your decision making. That does happen quite a bit. Again, you have to figure out where your line of comfort is for that. So if you think of any process as a series of tiny decisions, which may be really straightforward, it’s just as easy to automate a smart process as it is to automate a dumb process. A lot of what’s being called AI or machine learning today, you hear this term all the time. Are really just automation that’s intended to be a little bit smarter.

Mark Collier:
Got it.

Michiko Wolcott:
That doesn’t really necessarily mean that actually is smart. So just keep that in mind. But in any case automation fundamentally takes you out of the process. You can look at as… You are really hiring a contractor who happens to be a machine. So whether or not you automate something really depends on your comfort level with contracting it out.

Mark Collier:
That makes sense.

Michiko Wolcott:
Different ways of looking.

Mark Collier:
No, that makes perfect sense. So let’s talk about what are some of the most underrated or overlooked things in data and analytics that you’ve kind of seen from some of your clients?

Michiko Wolcott:
The hardest and the most important part of data, it’s not the technical stuff. Instead, it’s asking good questions. The answer, the information, is going to be only as good as your question. So your first action in data should never be about the technical understanding. So case in point, the main competency of data scientists, people who do data all day long and for a living, their main competency is using data to answer questions. Not ask questions. So if you hire a data scientist before you know what questions you need them to answer, then you are not going to get the results you expect. You’re not going to go very far. So that’s a huge one. And another thing that’s often overlooked is that data is almost always extremely context dependent.

Mark Collier:
True.

Michiko Wolcott:
And the same data can actually lead to different conclusions depending on what questions you ask.

Mark Collier:
That’s a good point.

Michiko Wolcott:
It’s super counterintuitive but no one talks about it. It’s a truth, but not necessarily the truth you are after. So these are a couple things I think that are just critically underappreciated in the data world.

Mark Collier:
No, that makes a perfect sense, Michiko. And I guess getting a little bit more granular and I think the end result of what most people need. So what are some of your tips and tricks that people can use to make better day to day decisions with data?

Michiko Wolcott:
So first of all there are lots of things, people talk about like, “How effective is my campaign ads spend?” Or, “What is the profile of my customers?” And, “How can I target them more effectively?” But there are also a whole bunch of other low hanging fruits that we don’t even think about. So there’s a supply chain problem is we have to be smarter about how we manage our inventory. The inflow and outflow, you need to optimize, you’ve got decisions to make. Or what’s keeping your business from scaling? Where you’re spending your money and time, et cetera. These aren’t sexy in terms of that decisions, but they’re super important decisions.

Mark Collier:
Yeah, they are.

Michiko Wolcott:
Ironically some of the smarter decisions can be really, really hard to accept. But we are putting ourselves in a better position to make good decisions make smarter decisions. So here’s the thing, again. You make decisions every day. Some are trivial, others are important. Each decision is a data opportunity.

Mark Collier:
That’s right.

Michiko Wolcott:
Then what information do you need to know to put yourself in a better position to make a good decision? A decision that you’re comfortable with. So then focus on formulating a good question around that. This clarifies what you need to understand, you can quantify the problem and you can do that as simple as accounting things. But we need to simplify and focus on impact. There’s just so much data out there. And so much information about information out there.

Mark Collier:
Absolutely.

Michiko Wolcott:
So we need to simplify and get comfortable with making informed decisions. And you know it’s just a technical detail that just happens to involve data.

Mark Collier:
Absolutely. Michiko Wolcott, partner and principle consultant with Msight Analytics, a management consulting firm, specializing in data and analytics effectiveness. Just want to thank you for taking the time out of your busy day. To come in and just sharing the importance of businesses and business owners using data in the most effective and efficient manner to make the best decisions that they can. Thanks so much, Michiko.

Michiko Wolcott:
Thank you for having me.