Analytics are for cowards

Summary:

Executive decision makers who rely primarily on impersonal data have little understanding of how people and markets truly operate.

Greg Satell

Blogger and new media guru Greg Satell


“Fear is a great motivator.” Art Bell

Just like the brain has two incongruous hemispheres that somehow work together so that each of us can walk in a straight line (some of the time), two types of people operate businesses. Good organizations need both.

Without intuitive, creative visionaries, who understand what motivates and satisfies people, there are no products and no customers. Without managers, accountants and engineers, the products do not get built, delivered or serviced correctly.  Is it true that the members of the first group are generally daring and the people in the second group cautious?  Yes it is. A balance between the two is the perfect order of the business world.

Yet, as a company gets larger the chances increase that the risk-averse, fearful group will gain control, in partnership with financiers — people who have no knowledge of the customers, products, manufacturing, distribution or service.   When that happens, they sustain themselves with analytics and statistics, the business world’s universal shield for cowardice.

Greg Satell, an American who runs an Internet consulting company headquartered in the Ukraine called Digital Tonto, is great with numbers . . . and math. Greg published an excellent article, Less Numbers — More Math that explains how using analytics is a shell game (my conclusion, not his).

“Numbers drive Media and Marketing today,” Satell writes.  “This is a ridiculous situation.  Most simply find the numbers that will support the case they want to make.  As the new digital world creates ever more data, the problem is only getting worse.”

The battle between the bean counters (demanding accountability for spending) and the sizzle masters (who know there’s no accounting for human behavior) has been going on for a long time.  The tide seems to be turning because the research companies and digital marketing experts contend that they can really track and predict human behavior as precisely as Google Earth lets you see the house you lived in 25 years ago.  Don’t believe it.

The bold claims are about the new media competing against the old media to convince:

  • Big advertisers to migrate from newspaper, radio, magazines, and direct mail.
  • Medium sized advertisers that they can afford to do the same kind of advertising that the big guys do.
  • Entrepreneurs and “wanna-be” business people that they can get into the game and be just as sophisticated as the big guys.

Digital media pitchmen need Omniture, WebTrends, ClickTracks, CoreMetrics and Google Analytics the same way television needed Nielson, radio needed Arbitron and print needed SRDS.  The media have done nothing wrong by competing and companies are justified in making them as accountable as possible.

The problem has come from marketers and financial decision makers becoming emboldened by and dependent on the statistical snake oil.  In the past, executives had to be brave and spread their money around because everyone knew that Nielson and Arbitron logs were just fancy “guesstamations.”

Now, the cowards are getting the upper hand.  Because new media is so cost-effective, they can insure success (that is a good-looking report that claims fantastic ROI) by spending more on the analytics than on any other part of their campaign.  They don’t need or want brilliant, daring and risky marketing when they can precisely select the target audience, then deliver an unlimited number of campaigns costing almost nothing.  The sophisticated analytics are rigged in advance.

“When we work with numbers, we make assumptions whether we know it or not,” Satell writes.  He says that marketers with the best intentions are “generating numbers without understanding the assumptions” on which they base their statistical models. When they do that, the “numbers lie.”

Plans based on lies are the tools of cowards.  Insightful business people must be equal partners with the numbers crunchers before new mathematical analysis can deliver solid value.

Leave a Comment

Kinshuk November 18, 2009, 11:56 pm

Read the blog, it is nice. But there is a problem in being “balanced”. What is a lie is a lie.

For example, most data based analysis suffers from this problem – “given large amounts of data, whatever pattern you want to see, it will show up”. There is I believe a solid theory behind this, dont know all the details.

Then there is this problem (which you have already stated in the blog) – that users/marketers are using the tools without understanding the assumptions behind them. For example, one can use Monte Carlo to see the effects of a project plan, but “to take that as the sole basis for a decision” is madness.

Then there is data itself. You probably have no idea behind the scenes, but I have, of the amount of cleaning, re-arrangement, and sometimes plain shortcuts that are used to re-align large amounts o disparate data for an analytics study. Most often it is the incompleteness, wrong sampling, wrong seeding – and all sorts of hidden things that lay bare the lie of analytics.

It is nice to use technology, when it is mature enough, but even then, only as an assister. So excessive use of technology for things it is not yet ready for is itself an unbalanced response.

P.S : -) I just noticed you also used the word “bean counter”, I was hesitant to use it, but now feel more confident.

Cathy Iconis November 13, 2009, 5:13 pm

I found your article interesting and timely, since I recently posted an article “Is Analytics a Dirty Word?” on my blog – http://www.CathyIconis.Wordpress.com. Now, I am a bean counter, so that may bias my opinion. Maybe there are a lot of bean counters that aren’t using the number crunching the way I would.

I personally think that most of those calculations are lagging indicators. That is to say that they show the result after changes have been made. It is up to the creative people to find the vision and strategy and it is up to these calculations to see if you are still on track with what you envisioned. It should be a balance between the two. We want you to bring in the most money and create the most overall value for the company with using the least amount of resources possible.