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Getting to Analytic Decisions (Lessons from the CMO Summit #1)

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A colleague attended the Aberdeen CMO Summit last week and took some great notes. I am going to have a couple of posts this week based on her notes. First up, some lessons from Paul DePodesta (of the Padres). Paul focused on some of the challenges of moving from judgmental to more analytic decision making. While his focus is on manual decision making and how analytics can improve it, there are direct parallels when thinking about how to make your marketing systems more analytic. For instance, Paul identified some psychological barriers that come up when trying to change the way people make decisions. These are also challenges when trying to replace a manual decision with a systematic one, whether analytic or not. Here they are with some comments:

  1. Desire for acceptance
  2. Emotional attachment
    People become very emotionally attached to having people make decisions so this is particularly problematic when trying to move to systematic decision management.
  3. Tradition
    Analytic decisions are often counter-intuitive and overturn traditional views of what works and what does not.
  4. A focus on recent outcomes versus long term trends
    This partly explains why analytic decisions are counter-intuitive as the use of analytics tends to focus on trends not recent outcomes.
  5. Affirmation bias reinforce own beliefs
  6. A “too hard” pile
    His focus was that some discussions that need to happen don’t (because they are too hard) but it seemed to me that there is also an opportunity here. Perhaps some things that were thought to be “too hard” can now be figured out with analytics, like considering retention risk or long term profitability in the loyalty program.
  7. Physical appearance ( 3.9% of population over 6’2″, 30% of F500 CEO’s)
    One of the attractions of analytics is that they don’t care what you look like. This is one of the reasons they work better than judgmental decisions – they are not carried away by visual impressions unlike (say) a store clerk.

Paul recommends, as I would, asking “if we were starting again, how would we do this?” as this can often unlock some of the built in biases. He also emphasized the power of asking naive questions and of continuing to ask naïve questions for similar reasons. He suggested humility in the face of uncertainty and urged his audience to recognize the uncertainty. I would go further and suggest that uncertainty creates opportunity if you can use analytics to turn uncertainty into probability.

Paul talked about analyzing the “most valuable situations” and asking “what put us in those most valuable situations”. This is a great way to turn existing manual decision making into ideas for decision management. Take a call with a very successful cross-sell, say, and see what put you in the position to make that cross-sell. Can you replicate it systematically to maximize your chances of a similar success in other calls? He also suggested that you keep a decision diary so you can judge decisions in the time and circumstances not in 20/20 hindsight. This, of course, is fundamental when using analytic models as it is vital to consider the information available at the time a decision was made, not the information available at the time the results of the decision become apparent!

Lastly he emphasized a focus on having a winning process – as he said “Be the house” so that you win on average, even though you don’t win every time. This is exactly the attitude you need to adopt decision management. Good decision management will make you the house – your decisions will, on average, be winners. More from the CMO summit tomorrow.

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