Let me ask you a question – how many of your decisions are data based and how many are based on gut instinct?

Over the years people have argued over instinct versus analysis.  While there is merit in either approaches, I guess a combination of both is ideal.  This article will focus on why data is important and how companies can leverage data to improve efficiency and costs.

In a company lot of decisions and events are taking place.  Communication is going on, people are making decisions (good or bad).  And finally the company is bearing the consequences of these decisions.

In order to talk about data, I would like to first talk about something called “Institutional Memory” (IM). 

What is IM?

Companies are a living entity with memory – this memory resides in the processes, culture, individuals and finally the data in the company.  In fact what differentiates company A from company B is IM.  I would go to the extent of saying  that a significant part of a company’s value is derived from IM only.

IM can either be positive or negative.  I.e. good processes, or culture or people enhance value of IM while bad processes, culture etc. create a destructive IM that destroys value. The focus of any management is to create and preserve positive IM and remove the negative ones.

In fact if you think about this, it is the main objective of the management team. 

When analysing successful companies and why they are successful, it is obvious that they are very good at creating and preserving good processes and behaviour and can quickly eliminate bad IM.  i.e. processes, culture, people that are destroying value.

Let's look at each of these IM elements one by one.

Process

Process is defined as a series of actions or steps taken in order to achieve a particular end.

Companies evolve processes to ensure consistency, accountability and predictability.  While processes adds overhead, they are able to reduce risks and ensure that people with varied skills, mindsets and approaches are able to generate a consistent output.  In fact any company is a collection of processes that generates an output more than its input (hopefully).

So, what are the characteristics of a good process:

1. Should generate a predictable outcome
2. Sustainable
3. Minimal Overhead of time and effort
4. De-Skills

Processes that require high level of skill become people dependent and vulnerable. So sustaining processes is of utmost importance. In addition to that since the business needs keep changing, reviewing processes and revising them regularly is an important activity.  The key skill however is to decide when to change a process.

Culture

A Culture is intangible, yet it is the “soul” of a company and is something that everyone feels.  There is no “right” or “wrong” culture. A culture needs to be strong – i.e. it should be all pervasive and ensures that every individual no matter what their background follows it.  The culture needs to be aligned with the business needs of an organisation.  An organisation that does product development needs to have a more open and flexible culture as creativity flourishes when people are free to express their opinions and differences. While an army needs to have a more top down culture where differences and dissent could be killers in a war like situation – where you want people to follow instructions despite facing the threat of death.

People

Choosing the right people who fit your culture is critical. High performing individuals with a high need for achievement will feel miserable when paired with people with average skill and ambition. For example having a very creative person in an assembly line would be a waste of their talent. Hence understanding this and aligning people with your culture is important.

Finally, Data

I have seen companies grossly underestimate the value of data.  Data is “experience” – such experience is expensive as people have gained it over a period of time by making mistakes.  How do you ensure that this experience does not walk out of the door when an individual leaves the company? So let me ask you a few questions. 

What do you understand when someone says data?

Write it down and then see the below examples.

Examples of data that is “experience”.

1. What are the possible problems that a georgette fabric garment might have – do you have this data? Or does your quality person have it in his head.  If the data is there, is it easily accessible? How do you ensure that some new merchant who has never dealt with Georgette fabric does not repeat the same mistakes? If you don’t have this data, then you will have to pay for a much more experienced merchant who already has dealt with these issues before. So, the lack of data means you end up paying more for “experience”.
2. Let’s skip Size Sets for a particular product being done by a vendor. How is this decision taken? Is it because the merchant/quality person knows that the possibility of problem is low – or does our IM tell us that this step can be skipped?
3. Do I make CAD files for a style from scratch – and who takes the decision – is it the CAD person as does he have “memory” of a previous style he has done. Or the system already does most of the work and only small tweaks are to be done.
4. How do you know that a style is in problem? Does a merchant have to keep calling the vendor to determine there is a problem? Or can the system based on historical data make that determination.

The examples can be endless.

The point I want to make is that an organisation is spending millions of $$ in a year to give “experience” to its people -  as people make mistakes and gain experience. How does a company capture this experience and ensures that it does not have to keep paying for the same “experience” again and again.

Imagine if you had data of all the hundreds of thousands of experience in the company and every person in the organization has access to that experience. It has tremendous value! And capturing this value should be management priority.

Companies have to strive to store experience in their system.  Even if that data is not being leveraged right now – capturing this data is extremely important.  In fact investors should and will “Value” this asset.  Storing and creating correlations between different events can help eliminate processes and de-skill work.  Clerical work can be almost fully eliminated.  Brands should strive for a “Virtual Merchandising Assistant”, “Virtual Costing Specialist”, “Virtual Accounting”. Because a majority of what they are doing can either be automated or virtualized as that “experience” is already stored in the servers.

So what should you do:

1. List out the “experiences” you value and want to capture
2. Implement digital tools that capture this experience
3. Mine this data to create correlation coefficients between different events
4. Begin applying this to some portions of the working so that you begin de-skilling work and automating tasks

It's not an easy journey and people will side track you.  But it has huge value to an organization. So start on this journey today!

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