Archive for October, 2013|Monthly archive page

Powerful predictive analytics

Mark Twain was foreshadowing when he said, “the past does not repeat itself, but it rhymes.” Thanks to recent advances in predictive software, Big Data and cloud services, organizations now have real tools to predict the future with some degree of certainty. These technologies can (relatively) quickly mine terabytes of data on the Internet for clues and patterns to predict major events such as drought, flooding, and disease outbreaks, enabling organizations to improve their planning and risk mitigation efforts.  Taken a step further, companies will soon be able to predict sales patterns and the likelihood of success for new products or promotions with a higher degree of confidence.

A variety of forecasting software tools have been available to help predict major events (with modest accuracy), as well as identify transactional risks and opportunities.  Many are already in use in a variety of sectors including:  retail, insurance, travel, and healthcare.  What is different now is the availability of next-generation data mining software that leverages cloud-delivered processing power to parse vast amounts of current and historical data from numerous online sites and archives (think Big Data on steroids).

A good example of this forecasting software comes in the form of a research project from Microsoft Research’s managing director Eric Horvitz and former intern, Kira Radinsky, who worked together to develop a program that analyzes public news and archival websites for patterns and clues that have preceded outbreaks of disease, riots, and deaths.  The algorithm then compares those patterns to current conditions to make predictions on the probability of those events happening again. It’s a unique and advanced form of data mining that digs deep into the Web and other data bases, enabling a sophisticated, causative analysis of seemingly unrelated incidents and seeing how and when they repeat themselves over time.

One example where their research made the right call was the occurrence of two cholera outbreaks:  one in 2012 in Cuba and the other in Bangladesh in 2011.  Given their different times and lack of proximity, one would have simply considered them random events. However, the program suggested that this was not the case. Searching 150 years of news reports and historical archives, the software identified a specific correlation in developing countries (with substandard or non-existent flood control) between a drought condition followed by major flooding, which subsequently led to a cholera outbreak — exactly what happened in both Bangladesh and Cuba.

Microsoft sees the potential.  “When we look at trends in technology like cloud services, Big Data and business intelligence, and combine those with advanced machine learning, computer scientists will able to advance the use of the data to help predict catastrophic events more accurately in the future”, says Grad Conn, senior director of marketing at Microsoft.Advertisement

Their software is far from foolproof but has demonstrated an accuracy rate of between 70% and 80%, making it better than the more modest success rate of current tools.  This improvement in accuracy is meaningful on a global level.  Combined with preemption, enhanced planning and risk mitigation measures, better forecasting means that tens of thousands of lives plus billions of dollars could be saved.

Importantly, these same systems may be used to predict important trends and events in many other areas when combined with a companies’ own Big Data programs.  For example, car companies can figure out which are the best years to introduce new convertibles by looking at weather patterns, levels of disposable income and competing vehicles over the past 50 years.  Insurance firms can adjust their coverage, services and premiums based on the likelihood of different natural disasters occurring. Finally, travel firms that put together vacation packages can readjust their destinations, prices and itineraries (especially those to Cuba) to reflect the likelihood of other cholera outbreaks or hurricanes.

“What becomes critical is how the mounds of data collected are used to drive insights and make decisions”, says Mr. Conn. “The ability to use sophisticated insights to develop innovative products and services, prioritize privacy, and reach and engage high-value customers is clearly a prized competitive advantage.”

Even so, powerful data-mining software like this will not give every organization a clear crystal ball.  All forecasting tools — no matter how sophisticated — should be used cautiously.  There are enough gaps in the data and analytics to preclude most organizations from betting the farm on one predictive tool.  You need a comprehensive approach to forecasting.   Moreover, though powerful, these instruments may not be able to provide enough detail around timing or event severity to sensibly plan or take risk-reducing measures — or even overcome management inertia.  Lastly, it is not clear how ‘Black Swan’ or unexpected events could be anticipated, especially in highly complex environments or where people’s fickle actions or attitudes can play a major role in shaping circumstances.

For more information on services and work, please visit the Quanta Consulting Inc. web site.

 

Bridging the new-old marketing divide

In many organizations, two factions within marketing are grappling over a core question:  should their role and plans fundamentally change given the emergence of digital technologies and the multi-channel universe? One team considers social networking merely as another tactic within a larger marketing mix.  The other group sees these same technologies as game changers that will redefine the marketer’s role and programs. At issue is the direction of the marketing plan and the funding & resources that enable it — and ultimately the performance of the business.  Truth be told, both viewpoints are critical for success and need to be inculcated into daily thinking, practices and planning.

For simplicity sake, we can reduce this battle for marketing’s soul down to two competing stereotypes:  Mike is an old-school marketer whose mindset emphasizes control of message and channels, and focuses on traditional research techniques and conventional metrics like customer awareness, acquisition and retention. Managers like Mike are comfortable with a “ready, aim, fire”  broadcast model that relies on studio-based agencies to develop creative and push it out through media buys. He recognizes the potential of new technologies but needs to see tangible ROI, proven success stories and strategic fit before committing a substantial amount of his tight budget and time.

At the other end of the spectrum is Lynn, a new-school” marketer in her early thirties. She fully embraces the ubiquity and power of mobile computing, social networking and rich media, because she lives it. Her Millennial-focused strategy looks to engage web-powered, trendy audiences on a 1:1 level wherever they are.  Lynn’s digitally-focused tactics look to leverage user-defined content, community-building and sharing.  A consummate experimenter, Lynn is challenged determining the ROI of new technologies and getting her programs funded in mature companies.

According to best practice research and our experience, marketing performance will be maximized when both Lynn and Mike’s thinking are part of the whole team’s DNA and practices. The key is to find the right balance between their approaches and get them to work collaboratively.

Advice for Old Schoolers

Open up the creative process: Great ideas and content can come from anywhere.  Marketers need to open up their broadcast-content model and consider more of an editorial approach to developing and managing their message in conjunction with customers and influencers.  This requires them to adopt new skills like brand story-telling, facilitating and integrating multi-channel conversations and fostering shareability, tailored to each digital platform.

Engage the customer: Millennials and other customer segments can quickly change their buying behaviour (think mobile commerce), habits and beliefs as a result of technological developments.  For example, many of these people are using new technology to skip advertisements.  Instead, many consumers look to be part of an entertaining, meaningful and authentic conversation where the brand is part of the context and not necessarily the focal point.

Embrace speed: The traditional slow and plodding approach to developing and implementing marketing programs is becoming anachronistic.  Old schoolers need to figure out ways to get their creative and programs out quicker (even it is not polished), more broadly and tightly integrated across all channels.

Experiment regularly: New technologies and methodologies give marketers an unparalleled ability to quickly and inexpensively test new ads, creative and promotions as well as refine existing programs and websites.  Marketers should prioritize continuous improvement initiatives as well as explore breakthrough innovations.

Advice for New Schoolers

Be analytically rigorous: You don’t jettison proper financial and consumer analysis because Facebook offers new functionality or Instagram suddenly takes off. As digital marketing moves beyond the novelty stage, its programs should be expected to demonstrate hurdle-rate ROI and be aligned to the consumer and marketing strategies.

Use the right metrics: Many of the popular digital metrics like re-tweets and Likes cannot be linked to real business results. New schoolers should measure the impact of social sharing by using innovative metrics like ‘positive-neutral-negative’ ratings.  These can provide a more accurate picture of program success and word-of-mouth impact and better link to strategic goals.

Consider context: Without a doubt, content is important.  Increasingly, brands will also need to take into account the digital context of where they will live and propagate. Marketers need to leverage the right context for consumer conversations and content sharing. Companies like Virgin Mobile and Coca-Cola do a great job of producing interesting content and brand stories tailored for the characteristics of the platform.

Heed the Old Schoolers: Remember that marketing was around long before the Internet. New Schoolers would be wise to study the lessons of pacesetters like Michelin Guides (original content marketers), Harley-Davidson (community cultivators) and Disney theme parks (pioneering experiential marketers).

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Better B2B selling

The axiom “It’s not what you say but how you say it,” is as relevant for B2B sales as it is for fostering strong personal relationships.  New research published in the Harvard Business Review by USC professor Steve Martin suggests salespeople should go beyond the one-dimensional brochure or e-mail for their pitches. Sales representatives who employ a variety of sensory impressions — visual, auditory and kinetic — will close more deals and generate higher revenues per sale. These learnings come from the emerging field of sales linguistics.

Sales linguistics is the study of how salespeople and customers interact within a pitching opportunity.  Studying the dynamics of a sales pitch is important for a variety of reasons.  The cost of sales has increased significantly, putting a premium on getting the biggest bang for your sales buck.  Moreover, the selling process has become much more difficult. These days, it is difficult to get face time with prospects, have them return your e-mails, or stimulate their genuine interest in your offering. Businesses that correctly heed teachings from sales linguistics will significantly improve their closing rates and financial performance.

In a typical client pitch, sales representatives use a single sensory cue, or a combination of three — visual, auditory and kinetic (i.e. touching, sampling) — to make their case.  Which approach works best at maximizing the chances of a sale at a higher price?

The research looked at responses from three groups of participants on a wide range of items — from everyday consumer products to unique sports memorabilia. The groups were asked to estimate the price of each item and rank the comfort with the answers they gave.  Group one was shown only a picture of an item accompanied by a brief description (visual cue only). The second group was shown the same item and visual information as the first group, but the description was read to them with dramatic emphasis and accentuation, creating an auditory connection. Group three was shown the same item and exposed to the same stimuli as the first two groups.  However, they were also given a kinetic connection — the opportunity to hold and inspect the item — before providing their pricing estimate.

Below are the findings and implications for B2B sales and marketing efforts:

The more, the almost merrier

On average, group two (which received visual and auditory information) was willing to pay the highest average price for all goods, especially those with the most esoteric value.  Interestingly, group three submitted the lowest average price suggesting that hands-on experience could be reducing the perceived value of some goods or that visual or auditory stimuli were negating the kinetic experience. Although price estimates varied, the level of confidence in customer decisions tended to increase as more sensory cues were added.

Expect some messaging disconnect

Saying something (even clearly) does not mean the prospect has received the message correctly.  Getting this right is critical when a product is unique.  In the study, some participants misinterpreted the features of one of the memorabilia items thereby valuing it less.

Be mindful of verbal signals

The tone, demeanor and tempo of what’s said can have more impact than the actual message. The average price given by group two was nearly seven times that of group one and close to 20 times the average price given by group three.  With the last group, the kinetic connection may be negating the power of the spoken word and the message behind it. Heeding verbal signaling is an important point for salespeople who sell primarily over the phone or rely on e-mail as their primary communication tool. Though efficient in some ways, e-mail forfeits the power of using verbal signals.

Be careful with product evaluations

The research suggests hands-on familiarity with an item actually lowers the perception of its value not to mention slowing down the sales cycle.  This is especially risky if aggressive product claims set unrealistic expectations that cannot be met; if a product does not “demonstrate” well; or, if a complex product raises the chances of confusion. Since adding kinetic stimuli increases decision confidence, managers should consider the best time to demo a product in the sales cycle.

Get the “performance” right

Too little consideration is often paid to the seller’s “performance” which accompanies presentations and samples.  This performance includes the script that supplements the pitch and the desired verbal and non-verbal (e.g., power posturing) signals. These elements will play a critical role in shaping the prospect’s perception of value.

When it comes to pitching, the more information is not always the merrier.  Sales and marketing leaders — especially those that leverage inside sales or prospect across large territories — should focus on optimizing the interaction by using multi-sensory communication tools at the right time, tailored for the audience needs and the product’s attributes and pricing.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Curbing avoidable employee absences

Avoidable employee absences are a hidden killer of corporate profitability. Many leaders don’t realize that short-term, unplanned absences can cost the average medium-sized company millions of dollars in payroll expenses not to mention lost productivity and business disruption. To get this financial sinkhole under control, HR leaders must get a handle on the problem and consider some innovative technological and business fixes.

Many types of worker absences are inevitable.  However, the unplanned and avoidable ones may be the most harmful.  Unmanaged or misunderstood, they can quickly lead to operational disruptions and cultural toxicity.  A variety of studies have estimated the aggregate costs of unplanned absences such as sick days and casual non-attendance.  A recent Conference Board of Canada study of 401 medium- to large-sized public and private firms found Canadian workers miss an average of 9.3 work days per year.  This costs employers 2.4% of their gross annual payroll (a $16.6B hit to the economy).  This number is likely understated as it does not include indirect costs like finding replacement worker costs, project delays or missed deadlines.   The absentee problem may be even bigger in the U.S.  A 2010 online survey of employees from 276 organizations conducted by Kronos/Mercer Consulting  found employee absenteeism produced 5.8% of extra payroll costs not including indirect costs.

Blind spot

Surprisingly, only 46% of employers admitted to tracking absences and exploring their causes, according to the Conference Board.  There are understandable reasons for this neglect.  Firstly, many firms cannot quantify the problem or understand its root causes because they do not have the right tracking systems, or because the data is siloed.  Bill Shapiro, CEO of Workplace Medical Corporation, says “If absence costs showed up as an expense line on the divisional P&L statement, it would it would get a lot more attention. The problem is that it is has been too difficult to get a hard number for that cost.”  Secondly, when it comes to reducing labour costs, unplanned absences play second fiddle to other priorities like headcount rationalization since these direct costs are easier to calculate.

Help is on the way

New methodologies and technologies are now available to better diagnose the problem and reverse its negative effects:

Big Data

Anecdotally, we all know that days preceding or following a long weekend or important game will tend to spike absences.  Big Data strategies — understanding what is really going on with attendance and staffing data across the organization and how it correlates to other variables like weather or sporting events — can give firms the insights and predictive tools to fix the problem and optimize practices.   To wit, theFinancial Times relayed a story about a British retailer who submitted the staffing records for thousands of its employees for an independent Big Data analysis.  This analysis discovered the retailer was paying more than 150 employees who had called in sick years earlier and had simply disappeared from the workplace.  Moreover, Big Data learnings can also help managers refine workflow design to minimize physical stress on employees.

Dedicated solutions

Traditionally, unplanned absences are handled manually or within a larger HR information management system. This approach is too primitive to address the issue in real-time, objectively, and proactively.  New, specialized systems address the problem head on by monitoring absences, aggregating the data and tracking the case, from day one.   In Workplace Medical’s solution, an absent employee would first contact a call centre. A service representative would log the absence in specialized software, provide the employee next steps and immediately notify his or her supervisor and HR department.  The rules-based software automates the management of the case including facilitating early intervention, tracking the length and cause of absence and identifying employee patterns.

Gamification

Integrating gamification strategies — a combination of game principles, behavioral psychology and enabling technologies — into attendance practices and processes could minimize the number unplanned absences.   Many firms like SAP and Microsoft have used game playing to promote long-term behavioural change around the adoption of new initiatives and the alteration of long-established practices. They have also used it to increase productivity for mundane or repetitive tasks. Gamification programs work by providing each employee or team significant intrinsic rewards — through enhanced status, feedback or recognition — when they play the game (i.e. comply with attendance policies).  Considerable research has shown  incorporating intrinsic rewards into workflows and practices is more effective than using extrinsic rewards (e.g., pay) or punishment.

Challenges

Dealing with this problem should be a corporate priority.  However, the fix should be designed and implemented with care.  The strategies mentioned above could breed mistrust and resentment; some employees may perceive management as Big Brother watching over them or manipulating them. Moreover, the HR group may be resistant to giving up control of the process to a third party that could expose HR’s dirty laundry, as was the case with the British retailer.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.