04 Feb 2016 20:51 IST

From information to insight: How numbers lie

Sometimes, averages do not reveal the entire story and context can help while making a decision

John Godfrey Saxe immortalised the six blind men and the elephant in his poem. Each blind man feels a different part of the elephant and comes up with a different answer for what it could be, with the answers ranging from the elephant is like a wall, to the elephant is like a rope. He ends the poem with the words: “Though each was partly in the right, all were in the wrong”. It is the same conundrum that today’s business leaders face. Business managers spend a lot of time and resources gathering data, processing it into information and analysing it. One of the defining traits of a business leader is the ability to draw valuable insights from loads of information to drive strategy, and create superior results.

In a world that has moved from measuring data in megabytes to petabytes (1000 terabytes) and exabytes (1000 petabytes, which is a billion gigabytes), the overload of information creates the need for this special leadership skill. How does one harvest the right insights from the enormous crop of information we are confronted with? (Exabytes is not the final term by the way, there’s a zettabyte, and then a yottabyte, and other terms that will soon become commonplace)

As decision making theorists will tell you, more information does not always lead to better decision-making. Sometimes, the overload of information can lead to the exact opposite — decision paralysis or defective decision-making. In this information-intense environment, the leader has to play an important role of sifting the wheat from the chaff, to help the organisation and team separate the important from the insignificant. They can then draw the right insights to drive better results.

How can one do this better?

Microscope and Telescope

Very often, we are so caught up in the nitty-gritty of studying and analysing information that we lose sight of the big picture. It is important to pause peering through the microscope and also look through the telescope, to zoom out and get the complete context of the information given.

Imagine if you had to pick one batsman for your institute or company cricket team. My neighbour and I are in your choice set. We both present our scores in the last five matches we’ve played. My scores read 90, 110, 85, 180 and 77. His read 45, 63, 30, 80 and 70. Who would you pick? Before you pick me, if you did some digging for context, you’d discover that my scores came while batting against the bowling of my son and daughter, while my neighbours’ were against a district-level team. Immediately, the context makes it clear that you must ditch me in favour of my neighbour. The example may be simplistic, but the parallel is played out often across boardrooms and conference calls where information without context leads to the wrong conclusions and bad decisions.

So whether it’s a case study we’re analysing today or a merger and acquisition we’re exploring tomorrow, how can we use the telescope to uncover the right insights with incisive questions? Do the ‘averages’ we read conceal staggering inconsistencies? How was the information measured? Is there a bias in the way it is presented? As Ronald Coase is credited with saying, “If you torture the data long enough, it will confess to anything”. The skilled leader uses ‘telescope’ questions, to make parts of the big picture clearer. That allows information to be converted into insights.

Simplification

With ‘analytics’ being the new buzzword, the danger of organisations being tangled in spreadsheets, trend charts, and algorithms is very real. The leader can help the team by pushing for simplification. They can ask - what are the simple examples that make this approach clear? What simple analogies would help us all understand what is really going on here?

RBI Governor Raghuram Rajan provided a great example of such simplification when he cautioned about the way we measure our GDP. He used the analogy of two mothers acting as baby-sitters for each other’s children. There is a rise in economic activity as each pays the other, but the net effect on the economy is questionable. Complex issue, simple analogy. It allows for a better understanding and insight.

Picking pearls from the pebbles

Very often from all the information available, the pearls of insights shine through to the patient and open leader.

It was bang in the middle of the economic downturn; all the information and data about consumption and demand was gloomy and pessimistic. Mayank Pareek, who was then COO at Maruti, when brain-storming with his team for demand insights, came up with ‘temple priests’ as a group that was bound to be doing well in the middle of a bad economy. Bad times; people pray more and make more temple offerings. They rolled out special packages for temple priests in response to that insight.

Very often, such pearls lie at the intersections of value versus cost for the customer, long term versus short term, standard versus innovative, hi-tech versus hi-touch. Even at business school, as we trawl through case studies, research papers and business theory, we must keep honing the skill of looking for these important insights. This will help not just personally, but also the leadership growth.

Apple and Sony

In December 2000, Sony had a market capitalisation of $63 billion and Apple was a relative dwarf at less than $5 billion. Today, Apple towers over Sony with a market capitalisation of over $500 billion compared to Sony’s $30 billion-odd. In 2000, Sony and Apple both had access to pretty much the same information about customers, technology and trends, but while Sony continued to keep its business in silos; Apple drew the right insights about an integrated approach and charged ahead. The leap from information to insight paid off. Let’s follow their lead.

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