The data-driven organisation

As I may have mentioned before, I worked a good number of years for DHL (a multinational, wholly owned by Deutsche Post, with an annual turnover of AUD $7bn), in various European senior marketing roles. Since moving to Sydney, I’ve worked on the other side of the fence, both in research and advertising agencies, and, having worked with a number of clients, I’ve come to the view that DHL was a highly data-driven organisation.

I believe many Australian businesses would benefit from instilling a stronger culture of analysis within their organisation, by adopting some of the following practices employed by DHL:

DHL used business goals to drive decision making.

One of the common problems with analysing data is that companies look at their numbers without putting them in the context of their overall business. As a result, when they receive an analytics report (often in a crisp, new binder with colourful, attractive charts) they sift through it without knowing what it means to their bottom line. Data-driven organisations make sure that goals and metrics are defined and agreed on, and they communicate them to everyone according to role.

Data-driven organisations never rely solely on gut feelings.

For sure, data and research will never give you definitive answers. However, making educated decisions based on analytics-driven insight will help you meet your goals. This doesn’t mean you should throw your experience out the window. But you should be honest with yourself about what you really know and don’t know. I have observed many clients mistake their own personal likes and dislikes for insights in customer behaviour.

Successful data driven organisations spend money in the right places and in the right way. As a result they can justify every marketing dollar they invest and tie it to business goals and KPIs.

For example, instead of putting millions of dollars every year into a full website redesign, they target their spending according to where it will be most effective. To do this, you first need to identify which aspects of your website are most important in driving your business. Let’s say you have a lead generation site that tries to get visitors interested in you offerings so they will request a meeting with a sales rep. Every upgrade you make to the site should improve the way it converts your visitors into high quality leads. Your efforts may involve highlighting calls to action or streamlining request forms so that it’s easier to separate good prospects from bad.

Companies like DHL that are serious about data also use analytics to maximise their ROI for online and offline initiatives. If you have an underperforming marketing campaign, you should reallocate resources to areas that have a better probability of success. That way you’ll always be sure you’re investing wisely and strategically in areas that drive your business goals.

In a data-driven organisation, every team, business unit and individual operates under a unified, global set of standards.

To do this, you need to set overall business goals and metrics. Then you assign different groups in the company their own targets and metrics based on how their works impacts the top-level goals. This process continues down the chain of command until it reaches individual employees. In the end, everyone is aware of how their actions contribute to the success of the company. I’ve found that once people and departments have clear and specific metrics to define their success, they tend to have an entirely different (and often much more motivated) approach to their work.

Whenever a data-driven organisation launches an initiative or campaign, it has already put together a forecast of its potential impact on the business and bottom line. When these projects are complete, the organisation also wants to know how the outcome of the project compared to earlier estimates. For this, you need to include a full post-launch analysis in your process. You should not only focus on the outcome but also use the opportunity to look at the forecasting process. Are you making accurate predications and if not, why?

The Importance of Being Nice

In these tough economic times, I’ve been thinking about corporate reputations and I've come, I think, to a rather compelling theory: nasty companies will become extinct and nice companies will survive and thrive. The reason why nice companies will do well is that they establish attractive reputations. Companies that have reputations for being good employers find it easier to recruit and keep good people. Companies that have reputations for being good citizens are looked upon favourably by consumers. These days, companies that give to charity and are genuinely concerned about the environment tend to attract more customers. Companies that care about their customers as well as their suppliers give to their products and services an additional, and rather special kind of value. Business leaders are getting very interested in this ‘reputation’ value. They’re beginning to see it as an asset on their ‘invisible balance sheets’. Those are the balance sheets accountants can’t see, but which contain the really crucial things like brand values, intellectual property and know-how of employees.

If we agree that a company’s reputation is its most valuable asset, and if we recognise that reputation consists not of reality but of perceptions, then it is essential for a company to market a strategy. Reputation building and maintenance are going to be key management tasks going forward. It will become routine to acquire reputational assets at every opportunity. Until now, the big question for companies has been: ‘What shall we do?’ Henceforth the big question will be: ‘What am I?’

The theoretical part of the argument for how a nice company behaves is based on the theory of games. The game I think models nice businesses very well is ‘The Prisoners Dilemma’. Games theorist Robert Axelrod tried to discover the best strategy – the one that accumulated the highest score by inviting games theorists to enter their strategies in a computer tournament. To cut to the chase, the nice strategy did surprisingly well. (Axelrod defined the nice type of strategy as one that was never the first to make an aggressive move). It was a surprise because the conventional wisdom was to be first to defect (i.e. make an aggressive move). The reason why the conventional solution does badly in our game is that we are playing the repeated version. Players meet each other frequently, as they do in business, and soon establish reputations. A nasty player does well at first, but then gets a reputation for being nasty and finds that no-one wants to play with him any more.

The strategy that actually won Axlerod’s tournament he called ‘Tit for Tat’. It always cooperates on the first move and then always repeats what the other player does. Its simplicity is its strength. Other players recognise it; they know that if they’re aggressive it will be aggressive back. They also know that if they’re nice, it will be nice back, and that a long and mutually profitable relationship will begin.

It is this kind of niceness I mean when I talk about the nice strategy. It’s a clear, deliberate and disciplined kind of niceness. It’s not woolly, soft, weak niceness. Axelrod attributes Tit for Tat’s success on four qualities: it’s nice, it’s retaliatory, it’s forgiving, and it’s clear. I think all these qualities are desirable in a business strategy.

I'm convinced that the dominant business strategy of the future will be nothing other than to behave as a nice company.