126. Weak ROI on Analytics? Very Common! So?

ERNST YOUNG (EY) SURVEY RESULTS

A recent EY survey (11-6-18) of bigger companies (than typical distributors) revealed that:

  1. 80% of firms see big upside potential with analytics, but can’t get results. There is a gap between insights and action not taken by employees.
  2. 56% said a culture of decision-making by intuition ruled. (Any intuitive account-call planning going on at your company?)
  3. 60% cited lack of budget and organizational commitment as the biggest pain point.
  4. 67% plan to hire more analytical talent
  5. But, 80% can’t find the talent they need.

These results concur with my observations of many progressive distributors trying to pursue insights from Customer Profitability Analytics (CPA).

UNDERLYING CAUSES FOR ANALYTICS INERTIA?

New analytical insights must overcome entrenched financial-management beliefs. Distributors are obsessed with financial goals which are: downstream, aggregated, averaged-out and not totally controllable – symptoms of upstream, controllable input actions. Doing product promotions on commodity lines for more sales and illusionary economies of scale is on autopilot.

CPA creates additional information thanks to Cost-To-Serve (CTS$s) models (especially at the line-item level). In this parallel world, the findings for the average distributor are startling:

  1. 20%+ of large GP$ customers are net-profit losers due to huge totals of small-dollar picks and/or orders.
  2. 50% of all accounts are small and net-profit losers.
  3. 70% of all line-items have less GP$s than CTS$s. Ditto for 62% of orders.

C-suite veterans feel embarrassed about the losing customers and SKUs. Reps fear changing their selling habits and losing income on their net-unprofitable accounts. Siloed folks don’t want to learn new ideas, skills, and collaborative plays – and change. They fear failing at new things and to what end? “What’s in this for the rest of us?” must be answered, or no engagement!

SOLUTIONS TO THESE PROBLEMS?

Forgiveness! Everyone from the CEO down should forgive themselves for doing (with CPA hindsight) unprofitable programs. Everyone was doing the best that they could with limited financial information. Relax, smile and go seize the new opportunities.

Curiosity and vision! Ask new Strategic Business Questions (SBQs) that will lead to new KPIs that will spark and monitor new, small, safe experiments. Convert insights into wealth for all stakeholders by failing forward, learning lots, and ultimately scaling small wins into big ones.

No in-house expert CPA talent? Rent it! I’ve been accumulating Jedi Masters at: CPA plays for distributors. Let me introduce you to them! (bruce@merrifield.com)

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