89. Get an Outrageous ROI from Analytics

Most distributors have analytics software, but few get needle-moving results. So, what’s missing?

A case study’s best practices

A recent Harvard Business Review blog reported on a company that took their analytics seriously. Here’s what they did:

  • Created a separate analytics business unit that reported to the C-suite
  • Staffed the new business unit with young, ambitious people from outside the industry
  • Charged the team with achieving at least a 10X ROI for the unit’s budget cost
  • Targeted customer-centric results for the operating companies
  • Trained the operating companies to take over and improve upon the new initiatives
  • Incented both the analytics and operating folks with the same profit increases

The first year the new unit hit 46X their budget. Now, with all the operating companies begging for the no-charge analytics help, the unit hit 106X in year two and 200X in year three.

Put the practices into a 9-step, total-solution linear process

Talking about a software solution is an oversell. Software — in in the narrowest sense — is only a tool. Using building construction as a metaphor, where do tools fit in in the process of constructing a building?

First, you must know (1) the architect who will co-create and help fit (2) the vision into the existing context (site). You must also know where the (3) strategic blueprints are from which the (4) general contractor can lead construction. You must ensure all the support (4) systems are in place to enable the project. Are there (5) skilled workers? Do they need any (6) supplemental education? Now, give the best workers the best (7) tools (analytics software in this case). Next, co-create with the team (8) the innovation metrics to track (these could be controllable input activities, progress of experiments you have underway, and outcome results). Finally, ensure there are (9) incentives in place that will align with the interests and energy of all the players.

Analytical insights are insufficient

Customer (and SKU) Profitability Analytics (CPA) can reveal huge profit cross-subsidies between the winners and the losers, along with the root causes for the extreme examples. These actionable insights conflict with data-free, dated channel beliefs ingrained in most distributors. The psychological challenge for change is overwhelming. And, few distributors can invent an in-house total-solution for putting CPA insights to work.

But, why fly solo? Cloud-service, CPA analytics can be easily rented by the month, and CPA-insight action plays are well documented. I’ve woven the plays, best practices, and the nine steps mentioned above into an execution roadmap. The roadmap document is free upon request. Email me with “Roadmap” in the subject at bruce@merrifield.com

 

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