Posted in Management, Research, Strategy

The problem with numbers

Australia is said to have a 2-speed economy, the mining/resources sector that is booming and the rest of business which is, to put in mildly, not booming. But that is wrong.

It is a 3-speed economy. As above, plus whatever is happening in your business; which may be booming more or less or struggling more or less.

This does highlight an issue with numbers though.

Australia’s average GDP growth indices are marginally positive (as politicians are quick to point out.)

But this hides a huge problem, as many businesses know first-hand. I have clients that are up and down by 30% or more, and sometimes it is the same client.

Averages are like that: you stand with one foot in a bucket of ice water and one foot in a bucket of boiling water, and on average you are comfortable.

Our average growth rate is the same and this no consolation for many, many businesses.). I am still to meet the marketer that knows what to actually DO with that amazing statistic of 1.7 kids per family. It sounds very accurate, and it sounds very useful. And if the neighbouring suburb has 1.36 kids per family, we know that suburb has – ahem – 20% fewer kids per family. That is a big difference – but what do you actually DO with it? (The same principle applies to demographic data of course.)

This brings us back to the 3rd speed of the ecomomy: your business.

These statistics do not change anything in your retail mix. And it does not necessarily account for the customers who visit your shop. It does not predicate your success or failure, because there may well be enough families with 1.7 kids in your area (if that is what you need) to make the business viable.

Executives can be seduced by numbers. Sometimes the wrong numbers. And it is dangerous.

By all means measure. At least measure everything that matters. I am not against numbers; just against the religion of numbers. They often provide false security, but we are sucked in by the pseudo-science.

Many decisions you have to make require instinct. Taking risk. And decisions can’t always be reduced to numbers. If it could, a monkey could be the executive, right?

 

 

 

This video illustrates some of the problems about finding your typical and your average. I am a sceptical users of research. Only some times and with great caution.

I have been precviously criticised for it – and it is possibly a strange position for someonw who is also a marketing academic to take. But the older I get the firmer I stand on this.

 

Advertisements

2 thoughts on “The problem with numbers

  1. Thank you for sharing this video. I have seen a similar project at the Custom House close to the Circular Quay in Sydney. They took a couple of thousand peoples portrait to create the typical Australian person's picture. That was great.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s