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Data Doesn’t Decide!

Why You Must Understand What Keeps the Lights On

Photo by Charles Deluvio via Unsplash
Photo by Charles Deluvio via Unsplash

‘We’re very data driven!’ and ‘What do the numbers say we should do?’ are great examples of mindsets that have the possibility of getting an organization into some hot water. A business is more than numbers and KPI’s and data analysts and data scientists must always remember this.

Best Case Scenario: Someone Tells You You’re Wrong

Let’s run through a scenario that you might encounter. A fire alarm goes off. Someone has just noticed that a FR-KPI (For Real Key Performance Indicator) has not performed well for the end of the year. In fact, looking at the drastic change has some concern that the company might be in a downward spiral. Let’s take a look:

Photo by Author
Photo by Author

Eeeeekkk! This is our average profit per unit KPI. It’s slightly more important than the other 374 KPI’s we have: top 5-ish. To get this KPI we simply divide the $ of profit / the # of units sold.

After sifting through all sorts of SQL tables, Excel files, Jupyter Notebooks, and friendly colleague tips, you start to get an idea of what’s going on. You start to see that your product is now being offered up through a third party website and that’s costing your company profit for each item sold!

You realize that this super important KPI has the potential to go even lower! It’s very important for this KPI to go up. You rush to a decision maker and you tell them that your company should no longer offer your product through the third party website. You should stick to avenues that your company controls, which allow for more profit per unit sold. Pop the champagne bottle!

You Did What You Were Told To Do

Someone came to you with a concern that a KPI was going down. They asked you to figure out why it was going down. You did just that. What’s the problem here?

This scenario is lacking context. It’s missing other KPI’s that could tell a different story. It’s absolutely needing a better understanding of the business as a whole and how it functions in the selling environment. The scope is too narrow.

When we look at a bigger picture, we note that since the start of working with the third party vendor that the quantity of items sold each month has increased significantly. This vendor has a great online presence and is actually helping lower our own advertising expenses. Yes, they require money in exchange for what they do for us, but they make things work out for the better in the end.

Photo by Author
Photo by Author

In fact, the bottom line has really started to grow like crazy since this new venture. A whole digit has been added to both Sales $ and Profit $! That’s not usually something that just happens overnight. This move might be the best thing that has happened to the organization!

DON’T walk into a meeting without consulting other data friends or business acquaintances to check that this ‘stop the presses’ type suggestion will fit in with what’s currently going on in the business.

Worst Case Scenario: They Follow Your Suggestion

A business is complex. There are a lot of moving parts. There are a lot of people working to meet or exceed KPI’s that they are given. A business should define what’s really important. At a point, new KPI’s might even start to contradict another KPI. Customers are not blank checks. Figure out what keeps the lights on.

Data is very important and very useful. Always remember that a ‘nose to the ground’ type approach might be the reason something major is missed. Data suggests that the shortest distance between two points is a straight line. That only works if part of that line consists of a bridge over the canyon with sheer cliffs on both sides.

Photo by João Cordeiro via Unsplash
Photo by João Cordeiro via Unsplash

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