174. Doctors Prescribe: “Evidenced-Based Management”

AmazonBusiness, Big Data, Distribution Strategy, Index, Line Item Profit Analytics, LIPA, Profit Analytics, WayPoint Analytics

“Data-Driven Decision-Making” vs. HiPPO Wisdom

When decisions are made at Amazon, “the best data and innovation metrics” win. No hearsay, golden-gut, follow the herd, or political self-interest beliefs. The HiPPO (Highest Paid Person Opinion) in the room doesn’t win with suck-ups bobbling in agreement.

Most businesses are run, too much, on data-free beliefs pontificated by HiPPOS: with what historic results? And, will HiPPOs see and lead to the digital future effectively?

Consider:                                                 

  • 90% of (the same) distributors who participate in annual associations’ financial surveys have remained rutted for years in the 6-8% ROTA (Return On Total Assets) range. But, the same, top-5% participants consistently score over 20%. Why? How?    
  • 20-60% of a typical distributor’s customers are net-unprofitable, (some hugely), regardless of the cost-to-serve model. But, key employees – incented on maintaining gross sales or margin dollars – fight for the status quo. Customers’ average margin-dollars per order and dollar-fulfillment-costs per order are ignored data.
  • Less than 25% of “digital transformations” efforts (by companies in all industries) are winning against the slowpoke 75%. Laggards may digitize existing beliefs and processes, but they are not innovating new customer-centric service-value.

What are the odds for HiPPOs to win with weak returns, losing-customer activity costs, and digitizing-the-past investments? Data-free beliefs and myopic incentives squelch fact-driven, wealth-growing solutions. Can HiPPOs change and investigate “Evidenced-Based Management”?      

“Data-Driven” Is a New Term for “Evidence-Based (medical) Practice” (EBP)

The term, EBP (for medicine), first appeared in 1992. Because killing patients increased mal-practice lawsuits, insurance-premiums, and the value of reputations – the medical world started embracing a formal, rigorous decision process.

EBP has not easily transferred to business which has more changing variables and constant innovation. But, academics have been working on “Evidence-Based Management” (EBM) for years. Find a great progress summary of this in the book – “Evidenced-Based Management” – by Barends and Rousseau. (A worthwhile slog!)

Is EBM another business fad? Some folks buy new ideas – like EBM – unquestioned. Others ignore them unquestioned. For both extremes, the “zero curiosity to question” is lazy, and non-thinking.

An EBM, Curiosity-Test Offer:

I’ve written and continue to tweak a big document: “Core Renewal Roadmap”. It is a how-to guide for distributors to get big results from new evidence/insights revealed by Customer Net-Profitability Analytics. Download it HERE.

Will your HiPPOs be curious enough to check it out, share, and discuss, and try some simple, new analytical inquiries?