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Secret to success? Crunching the numbers

Posted By: Bill Sheridan on April 09, 2010 in Leadership / Management

Ayres You've got loads of education, years of experience and faith that no one knows your clients as well as you.

And your business is in trouble because of it.

What you don't have, says Ian Ayres, is an understanding of how your data should be shaping your strategy.

Ayres, a Yale School of Management professor and author of the best-selling book The Super Crunchers, is so committed to the concept of numbers-based strategy that he offered those attending the 2010 DigitalNow conference in Orlando a blunt assessment of their organizations: If you're not mining your data and using it to make decisions, you're screwing up.

"I would bet that applies to 90 percent of the folks in this room," he said.

Ayres advocates using statistical analyses -- particularly regressions (the relationships between dependent and independent variables) and randomized tests -- to make organizational decisions. Want to know which of your members will renew? Which clients will buy a particular product or service? Who is most likely to attend an event? The answers are in your data.

What about experience and intuition? Forget about them. Ayres said statistical analysis is a much better predictor of future success than the expert opinions of humans.

"Use your intuition to develop hypotheses," Ayres said, "but in age of 'super crunching,' we have to put our intuition to the test."

It's a concept that's sure to irritate business folks (like CPAs) who emphasize the importance of personal relationships and knowing their clients.

But Ayres said he's not trying to diminish the importance of such relationships. Rather, he said, organizations that succeed going forward will be those that use raw data to take those relationships a step further into a world of statistical predictors.

"This is a way of adding more transparency so you know what's going on in the relationships," Ayres said. The numbers, he said, could convince business people to change their behaviors "not in a way that degrades the relationships but helps, through transparency, to improve them."

And for those who don't have the staff, time or experience to crunch the numbers effectively? Ayres said the first step might be as simple as brainstorming some ideas for randomized studies. "What are some disagreements that we have and what's the randomized study that could resolve it?" he said.

It's not terribly touchy-feely ... but maybe we've come to a point where cold, hard cash is dependent on cold, hard numbers.

Check out some of the DigitalNow content, then tell us what you think: Is data the new secret to our success?

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