Staying on Course in the Analytics Revolution: How Lessons from Sailing Can Make Business Metrics Better

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I have journeyed on a boat and consider myself a sailor and I am always impressed at the data around me onboard and how it serves as a good example of applying predictive analytics to your business metrics.  They are both real-time and actionable and use analytics to provide a forward-looking view of where you are headed.  Many business metrics lack this capability and the analytics revolution can only make this better.

OnCourseBusinessMetrics

The Past Does Predict the Future

If we have a good understanding of how things work (data insights) that grow from our understanding of things in the past (descriptive analytics) we can develop models for understanding probable future outcomes (predictive analytics).  For example, it was widely noted in the controversial NFL playoff game, if New Orleans had the opportunity to kick a field goal from the 22-yard line they had a 96% probability of success and would have won the game.  These simple predictive analytics are based on an understanding of past data on field goal attempts, various game situations (4th quarter, no wind/in a dome) and field distance.  Simple, right?

FieldGoal

Similarly, when you plot a course on a boat you use the same type of data tools.  There is an electronic chart plotter, a fancy digital map, showing where you are and where you want to go.  It tracks your compass heading angle and speed, along with wind speed.  And of course, as wind and water current gradually push you off-course, it also provides corrections (prescriptive analytics) to return to your course and reach your destination at the desired time and place.  It is a brilliant example of metrics and analytics all wrapped up into one.  How could this be applied to business?  Let’s explore…

Setting a Course

Like sailing, you always start with a destination.  In business, we know where we want to go and when we want to be there.  These are the outcomes of our strategy.  Perhaps this is achieving a certain level of sales, customers, products sold, reducing a defect rate or increasing market share.  Whatever the goals of the business those are the “destinations”.   Analytics can actually help set those destinations, but more on that another time.  Perhaps your business destination is to improve sales by 12% by the end of next year or decrease the customer attrition rate of 3% by the second quarter.  Whatever the goal, it likely is quantifiable and a good candidate for predictive analytics.

“We can’t direct the wind, but we can always adjust the sails”

Steering to Success

What if, along your journey towards your business goals, you realize you are underperforming?  How do you get back on course and in what direction do you make changes?  With good descriptive analytics, you will have an understanding from past data and events of what influences your business.  For example, if sales are down, does your descriptive analytics let you know it is a result of price, or competition, or simply the influence of the weather.

A company named Planalytics has a whole business applying weather analytics to optimize sales, inventory management and supply chain.  You are not the only one that goes out to buy milk and bread when a storm comes, and that repeatable pattern, when understood through analytics, can help a business run better.  Whether it is a storm or a change in the stock market, knowing the factors keeping you from reaching your goals helps you know how to adjust.

StormMilkBread

“When your descriptive analytics informs you of the influences of the past, your predictive analytics can guide you to your destination.” -Derek Gibson

Predictive analytics applies the past data with a tacit view of the future.  In sailing, the influence of wind and strong water currents and the difference between where we started and our destination allow for a prediction of if and when we will reach our destination.  Further, the ‘correction course’ recommendation lets us know the most optimal way to get back to our original goals.

SteeringtoSuccess

The business landscape is rapidly changing and only learning companies will survive the analytics revolution.  Companies like Amazon, with robust analytics, have the benefit of hindsight (descriptive analytics) and predictive analytics to help them find optimal paths toward their business goals. If you are wondering if your company can weather the analytics revolution ask these five questions about your business metrics. If you answer no to most of these, well its time to revisit your business metrics or maybe take up sailing.

  1. What is the ‘destination’ of your business?
  2. Where are you now relative to that destination and are you on course or drifting?
  3. What if you are going in a direction that differs from your destination, do you know how to adjust?
  4. Do you have analytics to predict your ‘likely’ destination?
  5. Can you make statements about the probability of reaching your business goals?

 

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BONUS:  Predictive analytics in action.  Hopper is a great and fun example of predictive analytics, used to help people find the best price for travel by predicting the future price trend – buy now or wait until later, Hopper (and their Bunny logoed assistant will tell you which way to go.)Hopper-Logo-Coral-Vertical-300x256

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