The Sudarshana Chakra as mentioned in Hindu texts, where Lord Vishnu decapitated various evil demons. It is also considered to be a symbol of enlightenment, hence in various drawings it is depicted with a brilliant glow. Lord Vishnu is believed to be the "Protector/Provider" of this universe. He is depicted lying across the entire expanse of the Universe form. The Sudarshana Chakra in his hand depicts the control over the various stars and galaxies, as if they all orbit around him.
This analogy can be seen with the new age business leadership. The challenge for the new age leadership is to function as protector and provider and take the organization to new heights inspite of dark economic slowdown cloud staring at them. To fight this dark cloud and to come victorious, the leadership take the role of Vishnu of their enterprise and exercises insights derived through analytics that form as Sudarshana Chakra a key weapon of enlightenment that provide them directions to pass through this darkness. Thus with this Sudarshana Chakra they exercise complete control over their investments and bring in efficiency and effectiveness through which the enterprise sails through the slowdown storm. Bringing efficiency and effectiveness out of the investments/ spends will be the most key challenge that the leadership need to exercise in current context. The key challenge thus can be reiterated for a CEO/CFO is to understand the optimal way his/her key spends is exercised and to reap maximum return on investment. Looks like an easy challenge though spoken in many occasions but reality will reflect few practicing it and those aim to manage their return on investment are in a better position to handle the current crisis.
How relevant to the current times when Robert S Kaplan and David P Norton mentioned “Managers, like pilots need instrumentation about many aspects of their environment and performance to monitor the journey
toward excellent future outcomes” (Robert S Kaplan and David P Norton – The balanced score card)
In their well known work, Robert Kaplan and David Norton liken managers to pilots who need all their instruments to relay the crucial information required to do their job. Each instrument provides the CEO with a snapshot of the separate divisions of the company. This ‘dashboard’ provides a balanced view of what’s happening in all aspects of the business. The CEO needs a perspective of all the functions to make the appropriate decisions.
Each meter is providing a live update of the market and how it is affecting business. With all these feeds of information the CEO can take quick action to take the best route to improving profits.
Kaplan and Norton call this ‘The Scorecard’ and it provides a complete perspective of what’s happening in the business.
This concept can also be honed and applied to various divisions of an organization. Let’s take a case of a marketing director. The marketer’s balanced scorecard is at the centre of converting data into agile decision-making, and is return on investment (ROI) analytics in action. What is more important is that the usage of score card is not just for reporting but through analytics it helps a real guide for future decision making.
Thus a key challenge for a marketing director is not only to create a marketing score card but also to manage it on a continuous basis by deploying the efficient and effective strategy that optimizes investment and give back an accountable result. For the marketer at this juncture, four clear questions must be dealt with in the process of making ROI analytics work:
1. What works? (e.g. Media? Creative? Price? Trade schemes?)
2. Who to target and when? (e.g. Customer segment? Communication layering?)
3. How investment much is enough?
4. Is this for real?
Although these questions are simple: the big challenge is to answer them, and to keep updating and reviewing them over time. These are in effect what the leadership needs to know from the marketing department.
Here the biggest asset of the enterprise that comes of help is own data. Companies investment in its own data be it on customer, suppliers, industry, various past investment etc. form the basic foundation of this lethal weapon. Just building analytics on its own data is not adequate but what is crucial is derive meaningful insights out of this realistic analytics and use it as one of the key tools for strategic planning.
‘Analytics’ refers to the collection of statistical approaches in mining the data that decipher of the influences of key business metrics (e.g. sales, profit, brand awareness/image etc) and that all lead to an understanding of Return on Investment (ROI). It started to be put into practice in the 1960s and 70s, but grew more popular when genuine technological advancements came in and data warehousing progressed.
In recent years the leaps in technology have also meant an evolution in analytics, an evolution which turns data not only to get an insight but moving towards in gaining a foresight, and delivers it swiftly for efficient and effective decision making. Earlier getting insight was through measuring some parameters that affected a brand performance like customer response, market feedback etc. This later then evolved through analytics in relating these measures with the brand performance like sales/profit. This stage analytics was used more at a diagnostic level. The evolution is now more in a complete form thanks to the technology boom. Analytics has now allowed us to progress from simple measurement to quantifying the effect of various factors affecting business performance and predicting their impact. This is a shift from simple insights to gaining real foresight. It arms senior management with the tools to move from reactive to proactive decision making.
As business data analysis has evolved it has become easier to answer the four questions mentioned above, making it more straightforward to create a dashboard of marketing, HR, Logistics etc. that allows the impact of money spent to be analyzed. Each instrument on the dashboard is a different factor that goes to build up the overall picture of the respective function. This includes for eg. In marketing, sales and profit, market share, customer loyalty, brand equity, customer acquisition, customer experience and attrition rate and customer lifetime value, etal
This is the type of scorecard every function head should have at their fingertips, and is achievable only with the help of analytics. By looking at each element within the respective function the leadership can see exactly how each dollar spent in total on marketing is converted in to sales.
Previously data was used purely at a diagnostic level. The different aspects of the function mix were looked at in isolation so their relative importance was treated in a silo. This meant each area, such as the impact of price or how a trade promotion affected sales, was dealt with separately.
But, for example, scorecards enable the leadership to see the effect on sales of their own pricing changes in the context of competitive price changes. The scorecard makes the leadership more pro-active.
The score card thus provide utility not only in just reporting the scenario but also as guide to decision making in the following way
At diagnostic level it points the effect of each of the function driver on the enterprise success: For eg. Identify each marketing driver influence on the brand success
It provide the return on investment (ROI )of the dollar on each of the drivers
By embedding analytics it helps to optimise the dollar spent on each function. This helps a function head to minimise the risk in future investment on various drivers and be surer on the return on investment. The optimization processes take away many non lucrative factors and focuses to the one that yields maximum return. Making this optimized score card live, it can capture the dynamics of the market place in a continuous manner and provide insights to the decision maker.
Six steps to best practice
The biggest challenge for applying analytics successfully is getting the business intelligence in place to begin with. This essentially involves three stages: collecting the right information; storing it in a convenient manner; and exploiting that information. It is crucial each is undertaken so that as much understanding and learning to help the company or department run effectively can be achieved.
Analytics comes in at the third stage. How will you wisely exploit the information recorded and stored so you can manage better? It is also within this area and from our experience that we are driving the elaboration of these three stages into a formal process of corporate best practice. This involves a six step process.
Set your Key Performance Indices (KPIs)
This requires a proper definition of each target that must be set from the outset be it in sales, customer acquisition, loyalty measures, employee retention, and market share and so on.
Collect Data
Once the KPIs have been set, relevant data collection can start. This is an information library process. You can collect data on any relevant aspect including market share, customer purchase behaviours, brand measures and macro trends in the market. This might also include implementing a system to capture all the below the line input from the trade for example.
Create a datamart (data warehouse)
This is similar to the ‘store’ stage in the three step process and it is where business intelligence is important. The challenge here is to store all relevant forms of information in one place. This is the starting point to ‘correct exploitation’ of the rich data resource.
Analytics
A key issue with analytics, as outlined above, is that many organizations proceed with it without setting their KPIs. However, if done correctly, it is this stage that allows for the move from diagnostic to predictive, integrated insight. This is also where the most added-value can be achieved through optimization.
Create a dashboard
Here, all the different parameters can be looked at. Each metric covers a different area, for example metrics for financials, market share, customer loyalty and so on. This is best benefited if an optimization works at the back end. It then provides us directions in optimal allocation of all resources to be deployed to get maximum returns.
Monitor
Managing a dashboard is of crucial importance. All the parameters must be continually and constantly monitored and stitched well in to the analytic output for desired effective outcome. You can measure where you are going right and where you are wrong and put recommendations and alterations into action as a consequence.
Implementing the six steps will help build value and innovation, and it is important to work through all of the steps – each is essential to ensuring organizations get the maximum value from analytics. For example, without well thought through KPIs, the later stages become objective-empty and the whole process loses its value.
A final thought
All managers need to be continually updated to keep pace with the dynamics, and meet the challenges they are facing in the marketplace. Current economic environment demands to have a complete picture, to better predict where things are going and what course of action, as a business, you need to take.
Analytics is now a more understood and friendly valued tool for business but business need to be realistic about what it can do. The technology alone will not do the whole job and it can’t perform miracles. Each element is not mutually exclusive so storing the data without undertaking the analytics will not be beneficial. And it needs to be integrated with consumer insight and looked at from a wider angle. But if you learn to appreciate the process, and integrate into the heart of your business practice then the technological advancement is something that can help deal with the large amount of data within your organization and in the market in a foresightful and timely manner.
And this will be your Sudarshana Chakra to fight the current economic slowdown and come out with winning colors through your return on investment optimization!
- V Balu, Sept 25th 2009
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