Companies that fail exceptionally have the potential for greatness.
Finance is complex, and whenever you have complication and uncertainty, it is a given that things will go wrong at some point. When they do, the best way to deal with those mistakes is to use them to learn and grow. And the only way an organisation can be aware of issues while they’re still small-scale is to create an environment in which employees and managers at all levels feel safe voicing their concerns and thoughts.
“The reality is human beings will make mistakes,” said Amy C. Edmondson, Novartis professor of leadership and management at Harvard Business School and author of The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth. “When we’re in novel settings, beyond just mistakes, we’ll also have failures that aren’t, strictly speaking, mistakes because no one’s ever been in that situation before. The most important thing is that you hear about what went wrong in a timely way because that’s how you can jump on it and avoid larger-scale problems.”
Companies that foster a culture of blameless problem-solving have the potential to learn from what goes wrong, and also to innovate, through smart experimentation, while companies that habitually blame individuals are in danger of running into large-scale disasters without a hint of impending doom, according to Edmondson.
Here are some tips for creating a workplace environment in which people feel they can speak up about what’s happening and collectively work hard to improve and avoid big problems:
Promote smart experimentation. Experimentation is how companies innovate and develop tomorrow’s new offerings, but you want to make sure that the experimentation strategy is a smart one. Organisations should never experiment on a grand scale in uncertain domains. Experiments need to be big enough to get valid data about their viability, but not so big that the potential failure will be devastating to the business.
“For organisations to create a culture that doesn’t blame or punish mistakes, they must embrace entrepreneurship culture,” said Ebrima Sawaneh, a Lagos-based accountant and finance blogger. “Every employee should be trained and empowered to innovate solutions without fear of being punished if they make genuine mistakes. Employees should be encouraged to report any mistake, and organisations have to clearly set what is acceptable and create a line of sight.”
Once you have a clear experiment strategy of an appropriate scale, you must make sure that everyone’s expectations are aligned.
“Everyone (high and low) must know that this is an experiment, and the nature of an experiment is we don’t yet know what will happen,” Edmondson said. “Make sure everyone is aware of the fact that this may or may not work, and in both cases, what happens will provide great data.”
Invite input. Leaders need to make it clear to people that their voice is not only expected but also welcomed.
“A lot of times, especially when they are nervous that there might be layoffs, people have the tendency to hold back,” Edmondson said. “There’s an implicit belief that no one ever got fired for silence. I think the job of leaders is to flip that around. In the complex, uncertain industry in which we operate, the people that we’re not hearing from are not of much value.”
Because the tendency for employees is to remain silent about issues, leaders need to be proactive in inviting input. It’s one thing to say, “I’d love to hear from all of you,” but it’s another to turn to a specific employee and ask, “What do you think of this situation? I’d love your thoughts.”
“After painting the situation we find ourselves in in such a way that it becomes clear that voice is necessary, leaders must be proactive in asking ‘What are you seeing out there? Is there anything not going well? What are you excited about?’” Edmondson said.
Foster psychological safety. In her latest book, Edmondson discusses why it matters for company performance that people feel psychologically safe to speak up and what leaders can do to help bring it about.
“I don’t mean to say we have to get rid of all fear,” Edmondson said. “I think it’s fine to be afraid of missing a deadline or afraid of the competition. It’s not fine to be afraid of one another or the boss.”
Edmondson explained that while managers have an outsized influence on the climate at work, any employee can make a more psychologically safe space for colleagues simply by showing up with a spirit of openness, asking questions, and truly listening.
“When you listen thoughtfully to a colleague or a subordinate, you are making a difference. You are making work life that much more safe and enriching,” she said. “In addition to asking questions, when you say things to colleagues, subordinates, or managers such as ‘I made a mistake’ or ‘That didn’t work out the way I thought,’ it sets a shining example of a learning orientation. If you model a learning orientation and interest in others, you will make that small difference, in your vicinity, in helping create a learning organisation.”
Sawaneh agrees that fostering psychological safety can help create a high-performing financial organisation.
“When people fear that they will be blamed for mistakes, it can affect their active participation and sometimes result in their being too careful,” he said. “The key resource of accounting firms are their people, and when individuals are less concerned about mistakes, they will be willing to delegate, create a learning culture, become team players, and embrace change.”
Avoid stretched goals and closed ears. While there are several examples of organisations doing a good job of creating a culture of blameless problem-solving, there are also examples of companies that have faced the consequences of squelching safe and open communication.
Wells Fargo’s recent failure, in which millions of accounts were created without consumers’ consent, is one such example. According to Edmondson, the bank’s initial cross-selling strategy wasn’t fully in touch with the reality of customers’ limited wallets, which created immense pressure to have more and more products per customer, leading employees to activities that became fraudulent and problematic in other ways. Had employees felt able to speak up, push back, and say what they were learning, the strategy might have been tweaked.
“A recipe for failure is stretch goals and closed ears,” Edmondson said. “When managers, getting the messages from on high, are saying, ‘You better deliver on this,’ the implied rest of that sentence is, or else. People will deliver, at least on the illusion of creating the desired results, so then what you will often see is the illusion of good performance rather than good performance itself.”
Develop a productive response to bad news. Psychological safety in the workplace can be shattered the second a boss erupts in anger over a reported failure.
“Leaders need to train themselves not to overreact emotionally to bad news,” Edmondson said. “They need to pause, breathe, and disrupt what might be the natural, instantaneous reaction of emotion or disapproval, and say, ‘Thank you for that clear line of sight. Now what should we do next? What are your ideas? Here are my ideas.’ It’s what I call a productive response to bad news, as opposed to a natural, in many ways normal, response to bad news.”
At a recent accounting conference in Malaysia, the chief executive of the Malaysian Institute of Accountants opened the first panel discussion by presenting statistics from a World Economic Forum report on the future of jobs. In the report, accountants and auditors are classified under “redundant roles” that will see steep decline in demand over the next few years due to automation. Minutes later, one of the most popular questions from the audience was “How accurate are those statistics?” It reflects a sense of incredulity amongst professionals in the accounting and finance industry. Change can’t be that soon, can it?
You may share the same sentiment. You may have heard buzzwords like automation and artificial intelligence generate chatter in the office or at networking events. They have become ubiquitous in our business vocabulary, yet they are minimally understood. Perhaps you can’t help wondering, “How many of these new technologies are truly ‘disruptive’ and not passing fads?” (History tells us: Whatever is practically useful and reaches a tipping point in adoption survives).
Experts are saying that these new tools are not an evolution of current technology. Rather, it’s a revolution. Klaus Schwab, executive chairman of the World Economic Forum, wrote that the scale, scope, and complexity of this revolution is “unlike anything humankind has experienced before”. And these changes are not limited to technology. Climate change is also affecting the availability of natural resources like water and arable land. It is forcing businesses to rethink the sustainability of their practices.
There’s a silver lining amidst these changes: We are only at the beginning, and there’s still some time to learn about them. Management accountants are needed now more than ever to help navigate this tumultuous time. We dug deeper into six must-know topics from a recently published watchlist by the Association of International Certified Professional Accountants and listed resources to help you learn more. Here’s to future-proofing your career.
1. BLOCKCHAIN
Invented as the technology behind bitcoin ten years ago, blockchain has garnered greater attention in recent years as a technology with the potential to transform financial transactions, supply chain management, and even large portions of the internet. A blockchain report by the American Institute of CPAs defines it as a distributed public ledger that makes a record of every transaction and adds it to a chain of all the transactions that have come before. In accounting and finance, blockchain may enable firms to create immutable and continually updated financial records that are difficult to tamper with. In other industries, companies such as Walmart and Pfizer have completed blockchain pilots to improve food safety and track medicine.
Large and consistent investments into blockchain startups are an indication of interest in the technology. In 2017, venture-capital funding for blockchain startups was up to $1 billion, according to a McKinsey report. In the same report, the consultancy identified some sectors that are inherently more suited for blockchain implementation; namely, financial services, government, and healthcare. In the short term, blockchain’s value lies in cost reduction, but meaningful scale is still three to five years away, according to the report. Some cite its instability, high cost, and complexity as causes for its stuttering path toward mainstream adoption.
Bottom line: Experiments with and implementation of blockchain will continue in 2019 as more applications are identified. But meaningful scale of blockchain implementation to realise its full value in reducing costs and generating revenue is still a few years away.
2. ARTIFICIAL INTELLIGENCE
Artificial intelligence (AI) refers to a branch of computer science that strives to create software that mimics human intelligence. AI-related applications already have been implemented in operations and finance to automate repetitive processes. In 2019, 20% of US organisations plan to implement AI enterprise-wide, according to a PwC survey.
Far from a single technology, AI is an umbrella term that covers a number of areas, among them machine learning, natural language processing, and deep learning. Banks are using AI surveillance tools to prevent financial crime, and insurers use automated underwriting tools in decision-making. In an FM magazine interview, UBS wealth managers spoke about building robo-advisers and using AI and natural language processing to conduct due diligence on the bank’s clients.
The software the bank built can conduct quicker and more convenient know your client (KYC) and anti-money laundering (AML) checks compared to a human worker. It parses hundreds of pages of search engine results for negative news and conducts checks on a potential client’s criminal history — a task that would have demanded a significant amount of a human employee’s time.
Technology expert Amy Vetter, CPA/CITP, CGMA, CEO of The B3 Method Institute, said in a series of video interviews with the Journal of Accountancy that “there are many who look at the technology that’s coming … that we’re going to be disrupted and accountants will go away. And I do not believe that is the case at all.” Instead, new technologies will free up time for finance professionals to provide analysis of financial data, she said. For that to happen, finance professionals will have to train on new technologies, whether through courses or hands-on experience. Communications skills will also be pivotal to help accounting and finance professionals explain their analyses effectively.
Bottom line: AI technology is already implemented in various finance functions and industries. The first step is to learn more about AI — its opportunities and limitations. Its potential is in freeing up human workers to provide more value-added services. Great opportunities await the eager student.
3. ROBOTICS
The inconsistent use of vocabulary to describe robotics, sometimes called automation, has created much confusion. Some may even imagine a physical robot sitting in an office. Robotics here refers to robotic process automation (RPA), and quite simply it’s a class of software used to process transactions, manipulate data, trigger responses, and communicate with other digital systems.
Although not an entirely new phenomenon, RPA’s capabilities have improved remarkably over time. Rob King, author of Digital Workforce and vice-president of education at RPA Academy, said in an Association podcast that “RPA has definitely arrived”.
Last year, FM magazine got an inside look at how a Koch Industries subsidiary successfully implemented RPA, freeing up almost 50,000 employee-hours after less than two years of implementation. At the company, RPA was used to automate invoice transactions and track third-party labour.
In 2019, companies will continue to explore RPA implementation and reskill employees to adopt the technology. Research firm Gartner estimates that global spending on RPA will reach $2.4 billion in 2022, compared to $680 million in 2018.
Bottom line: Robotics’ capabilities have matured over time. More companies will want to use RPA to automate repetitive tasks, increase efficiency, and reduce costs. Most large enterprises will embrace RPA in the next few years. For smaller firms, the cost barrier to implement RPA will gradually diminish.
4. NATURAL CAPITAL CONCERNS
The only nontechnology trend on this list, but no less significant, is natural capital concerns or environmental risks, which have been brewing in the background for years. We would need 1.7 planets to sustain our current global levels of consumption, according to the World Wildlife Fund (WWF) Living Planet Report 2018. The study estimated that at our current rate, we are using up natural resources faster than they are replenishing themselves. In relation to the Financial Times WWF Water Summit last year, Margaret Kuhlow, WWF’s finance practice leader, wrote that businesses need to get serious about water risks and disclose greater asset-specific location data to identify water investment opportunities.
Former New York City mayor Michael Bloomberg has led the establishment of the Task Force on Climate-related Financial Disclosures (TCFD), encouraging organisations to provide voluntary financial disclosures related to climate that can paint a fuller picture of their businesses. Momentum has also been gathering on nonfinancial reporting. FM magazine reported on a recent debate organised by Oxford Saïd Business School where speakers posed arguments on whether standardised nonfinancial reporting should be mandated for it to be useful to investors. “We need to make sure that climate change, biodiversity, and inequality are dealt with in the future. … There is an urgency,” said Paul Druckman, former CEO of the International Integrated Reporting Council, an organisation that advocates for natural capital and other nonfinancial information to be included in corporate reporting.
Bottom line: Businesses are realising that environmental sustainability must be given greater consideration in business decisions. In 2019, there may be greater support and practice of disclosing climate-related information in corporate reporting.
5. BANKING EVOLUTION
Last year in an issue of the IMF magazine Finance and Development, Stefan Ingves, the governor of the world’s oldest central bank, Sweden’s Riksbank, pondered the question, “In a cashless society, what would legal tender mean?” The question is not far-fetched because Swedish society has almost stopped using paper money, preferring transactions through cards and digital platforms.
Other than changing consumer preferences, banking is also evolving because of the rise of bitcoin and other cryptocurrencies. Although many do not consider cryptocurrency a reliable substitute for cash due to its price volatility, consumers and businesses are already performing transactions using these virtual currencies. Among many are Microsoft, Subway sandwich shops, and e-commerce site Shopify.
In 2019, Sweden’s central bank is expected to issue its first cryptocurrency, e-krona. In the UK, the Bank of England published a working paper last year to understand the implications of a central bank-issued digital currency. In this banking evolution, traditional functions of banks as clearing houses will also change, causing banks to rethink their business models. According to Deloitte, 2019 will see retail banks race to be digital leaders in embracing a mobile-centric customer experience, while fintechs attempt to devour a larger piece of the market share by providing faster payments that work seamlessly across borders.
Bottom line: Debates on whether cryptocurrency can be money will continue in 2019. But consumer preference for hassle-free banking introduced by fintechs is already the standard baseline. What happens in fintech doesn’t stay in fintech — “Why can’t I pay with my e-wallet?”
6. QUANTUM COMPUTING
IBM kicked off 2019 by launching the world’s first stand-alone quantum computer, the Q System One, for commercial applications. Quantum computers are radically different from today’s computers. Instead of running on bits, they run on quantum bits or qubits, and promise to surpass even the fastest supercomputers of today. But don’t run off to get a quantum computer just yet. IBM is not producing quantum computers for sale, and the quantum computer’s processing powers are only accessible through IBM’s computing cloud, similar to what the US’s Rigetti Computing and Canada’s D-Wave are offering. More importantly, the Q System One is still an experimental device used to figure out how quantum computers might work.
Winfried Hensinger, professor of quantum technologies at the University of Sussex, told The Verge that “it’s more like a stepping stone than a practical quantum computer. … Think of it as a prototype machine that allows you to test and further develop some of the programming that might be useful in the future.”
That said, banks like Barclays and JP Morgan Chase are already experimenting with quantum computing. IBM, as quoted in the American Banker, said that organisations are interested in using quantum computing to develop a competitive advantage. Financial institutions are testing it to help minimise risk and maximise gains from their portfolios.
In the US, a law was signed in December to provide $1.2 billion over five years to boost US quantum technology. In China, quantum technology was deployed in the Micius satellite to develop new forms of secure communications.
Bottom line: Albeit in its infancy, quantum computing will have huge political and economic implications once the technology matures. It will be enterprise-ready when it can deliver reliable performance. IBM expects revenue from its quantum computers in two years.
The No. 1 job billionaires and multimillionaires held before they got filthy rich
And why it’s important for all of us to do that job, too
Many now-uberwealthy people held sales jobs before they made their millions.
There are billions of reasons to do this job.
Many of today’s self-made billionaires and multimillionaires held a sales job, or jobs, when they were younger — a fact they consider crucial to their current success, according to research conducted by sociologist and historian Rainer Zitelmann and published in his recent book “The Wealth Elite.”
Zitelmann interviewed 45 individuals, whose net worth ranged, on the low end, from 10 million to 30 million euros (roughly $11.4 to $34.2 million) to, on the upper end, several billion euros (more than $3 billion), and whose wealth was either entirely self-made or built on inheritances that were later multiplied.
“To date, researchers have either underestimated or totally ignored the critical role of sales skills in self-made, ultra-high-net-worth individuals,” Zitelmann tells Marketwatch. “Among those in our study, it was the factor they themselves considered [to have] played the most important role in their success.”
Indeed, roughly two in three said that their talents as sales people had been a “significant” factor in their financial success. More than one in three said they owed 70% or more of their success to their sales talents.
So what sales jobs did they have early on? They sold everything from costume jewelry and cosmetics to used car radios and wheel rims — and even old egg cartons that could be used as noise insulation.
Plenty of wealthy celebrities and CEOs say they did sales work before becoming rich, too. Kanye West was a salesperson at the Gap; both Johnny Depp and Jennifer Aniston were telemarketers; and Netflix CEO Reed Hastings was a door-to-door vacuum-cleaner salesman. “I loved it, strange as that might sound,” Hastings told his former college newspaper. “You get to meet a lot of different people.”
And a separate study of thousands of CEOs from LinkedIn found that sales manager was one of the five most common first jobs for CEOs (consultant was No. 1 on that list — and it, too, is a role that typically requires sales skills).
Experts say it’s no coincidence that successful people have strong sales skills. “Sales skills are very valuable,” says Cheryl Palmer, founder of career coaching firm Call to Career. “Every company runs on sales.”
Even if you don’t plan to run a company, sales experience is essential, experts say. “Everyone needs a basic understanding of their strengths and how to sell them, because no one else is going to sell them for you,” says Randalyn Hill, a relationship-development specialist with career coaching firm Ama La Vida. “Throughout your entire life and career, you need to advocate for yourself and sell your worth. This will help you get clients, negotiate salaries, secure promotions. The ability to sell yourself is crucial in many aspects of your career journey.”
So how do you get sales experience if you have none? Palmer suggests applying for positions that are commission-only, as they may be easier to get. “This is a no-risk proposition for the company. If you do well, they make money. If you don’t, they don’t lose anything,” she explains.
You can also learn to excel at sales in a side gig. Hill says you could consider looking for a weekend shift as a barista (upselling customers on drinks, for example) or at retail stores, especially those with unusual offerings, as “you learn how to give convincing advice and sell them on a product they aren’t sure about.”
There are also plenty of classes that can teach sales skills. Look online for courses (Cornell’s online education offerings include the subject, for example) and at your local university, or consider grabbing a book on the topic.
And don’t worry if you aren’t instantly good at it, says Hill: “Almost all selling is uncomfortable at first, but, the more and more you do it, the stronger you get.”
Employers seek loyalty and dedication from their employees
but sometimes fail to return their half of the equation, leaving millennial
workers feeling left behind and unsupported. Professional relationships are
built on trust and commitment, and working for a boss that supports you is
vital to professional and company success.
Employees
who believe their company cares for them perform better. What value does an
employer place on you as an employee? Are you there to get the job done and go
home? Are you paid fairly, well-trained and confident in your job security? Do
you work under good job conditions? Do you receive constructive feedback, or do
you feel demeaned or invisible?
When
millennial employees feel supported by their boss, their happiness on the job
soars — and so does company success. Building a healthy relationship involves
the efforts of both parties — boss and employee — and the result not only
improves company success, but also the quality of policies, feedback and work
culture.
Investing
In A Relationship With Your Boss
When
you’re first hired, you should get to know your company’s culture and closely
watch your boss as you learn the ropes. It’s best to clarify any questions you
have instead of going rogue on a project and ending up with a failed proposal
for a valuable client.
Regardless
of your boss’s communication style, speaking up on timely matters before
consequences are out of your control builds trust and establishes healthy
communication. Getting to know your boss begins with knowing how they move
through the business day, including their moods, how they prefer to communicate
and their style of leadership:
Mood: Perhaps your boss needs their cup of coffee to
start the day. If you see other employees scurry away before the boss drains
that cup of coffee, bide your time, too.
Communication: The boss’s communication style is also influenced
by their mood. Don’t wait too late to break important news. In-depth topics may
be scheduled for a meeting through a phone call or email to check in and show
you respect your boss’s time. In return, your time will be respected, too.
Some
professionals are more emotionally reinforcing that others. Some might appear cold, but
in reality, prefer to use hard data to solidify the endpoint as
an analytical style. If you’re more focused on interpersonal relationships,
that’s your strength, but you must also learn and respect your boss’s
communication style.
Leadership: What kind of leader is the boss? Various
communication styles best fit an organization depending on its goals and
culture, but provide both advantages and disadvantages. Autocratic
leaders assume total authority on decision-making without input
or challenge from others. Participative leaders value the democratic input of
team members, but final decisions remain with the boss.
Autocratic
leaders may be best equipped to handle emergency decisions over participative
leaders, depending on the situation and information received.
While
the boss wields a position of power over employees, it’s important that leaders
don’t hold that over their employees’ heads. In the case of dissatisfaction at
work, millennial employees don’t carry the sole blame. Respect is mutually
earned, and ultimately a healthy relationship between leaders and employees
betters the company and the budding careers of millennials.
A Healthy Relationship With Leaders Betters The Company
A
Gallup report reveals that millennial career happiness is down while
disengagement at work climbs — 71% of
millennials aren’t engaged on the job and half of all employed
plan on leaving within a year. What is the cause? Bosses carry the
responsibility for 70% of employee engagement variances. Meanwhile, engaged
bosses are 59% more prone to having and retaining engaged employees.
The
supportive behaviors of these managers to engage their employees included being
accessible for discussion, motivating by strengths over weaknesses and helping
to set goals. According to the Gallup report, the primary determiner of
employee retention and engagement are those in leadership positions. The boss
is poised to affect employee happiness, satisfaction, productivity and
performance directly.
The
same report reveals that only 21% of millennial employees meet weekly with
their boss and 17% receive meaningful feedback. The most positive engagement
booster was in managers who focused on employee strengths. In the end, one out
of every two employees will leave a job to get away from their boss when
unsupported.
Millennials
are taking the workforce by storm — one-third of
those employed are millennials, and soon those numbers will take the
lead. Millennials are important to companies as technology continues to shift
and grow, and they are passionate about offering their talents to their
employers. It’s vital that millennials have access to bosses who offer support
and engage their staff through meaningful feedback, accessibility and help with
goal-setting.
In
return, millennial happiness and job satisfaction soar, positively impacting
productivity, performance, policy and work culture. A healthy relationship
between boss and employee is vital to company success and the growth of
millennial careers as the workforce continues to age. Bosses shouldn’t be the
reason that millennial employees leave. They should be the reason millennials
stay and thrive in the workplace, pushing it toward greater success.
How managers can develop the ability and confidence to ask the right questions, spot patterns, and process that information in parallel with an understanding of the wider business situation.
At the heart of good decision making in today’s fast and complex environment is the ability to see how things fit together—and perhaps more crucially, spot when things do not have a good or logical fit—quickly and effectively, and leverage these connections to derive insights and make prompt data-driven decisions.
Together with my colleagues, Chris Frank, a senior executive at American Express, and Paul Magnone, at Google’s cloud platform, (see also Chris and Paul’s book, Drinking from the Firehose) we have noticed that managers and executives are often fearful of relying on quantitative data in making business decisions. There seems to be a misconception that in order to be able to effectively make data-driven decisions, you have to be a ‘quant’ or a ‘math wiz’. We believe that this misconception generates a lot of unnecessary stress and, more importantly, a lot of good business decisions are not being taken.
What sets apart better leaders is the ability to see the same data as others (and everyone sees lots of similar data these days) but make some different conclusions and derive different insights from it. The key to doing so is to learn to quickly and effectively synthesize, rather than merely summarize, the information presented. We believe and show that this does not require you to be able to solve logarithms or square roots in your head, but rather develop the ability and confidence to ask the right questions, spot patterns, and process that information in parallel with your understanding of the wider business situation.
To help managers build these skills, we have developed a concept, a framework, and a set of tools which we term Quantitative IntuitionTM. Formally, we define this as the ability to make decisions with incomplete information via precision questioning and business acumen driven by pattern recognition. This requires a parallel view of the issues that matter rather than just a logical sequence of thoughts to see the situation as a whole.
Asking the Right Questions
One of the key elements to acquiring this acumen lies in ‘precision questioning’. This is the element that we see as being least prevalent in data analysis and where the real work needs to be sweated to achieve improved performance. In today’s world, the smartest person in the room is no longer the person who has the answers, but the one who asks the right questions to get the desired outcomes. With data drowning us on all sides, the usual “Can we look at the data and see what it tells us?” is likely to lead to a long journey with little results and insights.
We offer some techniques to approach data differently, beginning with IWIK, a method from Paul and Chris’s book, which stands for what is it that “I wish I knew.” We found that starting a group meeting around data-driven decision making with this deceptively simple question is extremely effective in quickly directing the data-driven discussion on the important issues and honing in on the fundamental issue that needs to be answered. It also has the benefit of often unearthing the data required as having already been acquired and being used elsewhere, when group members say “hey, we have that already, we got it when we…”.
Driving Backwards to Move Forward
A second approach is backward data-driven decision making, where you start the data-driven journey with the decision you would be making and then extrapolate backwards to see what analysis and data you would have needed to be able to make the decision. This approach requires the manager to put in a lot of thought and energy at the outset of the data-driven process to determine what the proposed decision and analyses might be. Executives are often reluctant to spend so much time early on in the process, thinking about the problem, decision and analyses to be done, but it is a well spent effort as it almost guarantees that the data-driven process will result in actionable outcomes.
In order for Quantitative Intuition to become second nature—that is, intuitive—a series of learning steps need to be climbed. Initially, we do not know what we do not know, we are ‘unconsciously incompetent. We then become aware of what we do not know and become ‘consciously incompetent’. We can then learn it, so we become ‘consciously competent’. And finally, we use it so often that we cease to be aware of using it consciously, becoming ‘unconsciously competent’. This is the stage of intuition that we strive for in our Quantitative Intuition program.
This is one of a series of articles published in a new eBook from Columbia Business School.
It is rare these days, as digital transformation sweeps the business landscape, to meet a business leader who hasn’t either recently led or been part of a transformation. Once a one-off event in response to an urgent need—a dire competitive threat, sagging performance, an overdue process overhaul, or a post-merger integration—transformation is now the new normal. In fact, it has become so commonplace that we have dubbed this the era of “always-on” transformation.
Yet from experience we know that transformation continues to be very difficult, and the evidence shows that it often fails or falls short of expectations. Moreover, it can exact an enormous toll on leaders and employees, who are constantly being asked to step up, reach further, move faster, and adapt to change, with no end in sight. For leaders and employees alike, it’s less a marathon and more a triathlon; no sooner does one leg finish than another is under way, giving participants no chance to catch their breath before giving their all once again. Still, many organizations overcome the odds; some even achieve lasting results. How do these companies succeed where others fail?
A REIMAGINED APPROACH TO TRANSFORMATION
While there is no one-size-fits-all method, our extensive client work, along with our study of more than 100 companies that have undergone transformations (three or more for 85% of them), points to an approach that combines three interconnected elements. It involves thinking expansively and creatively about the future that the organization aspires to and focusing on the right strategic priorities to get there. It addresses the unrelenting, ever-shifting, ever-growing demands on employees by elevating the importance of actions that will inspire and empower people at all levels of the organization. And at a time of rapid change and disruption, it calls for more than just applying the appropriate means and tools to execute; it calls for companies to innovate while they execute—and do both with agility.
“Transformation in the new digital era requires a holistic, human-centric approach.”
In other words, transformation in the new digital era requires a holistic, human-centric approach, one we call the Head, Heart, and Hands of Transformation. The heart has received the least consideration, but it is attention to all three elements that enables organizations to succeed today and thrive tomorrow.
THREE CHALLENGES IN THE ALWAYS-ON ERA
Transformation today takes place from a variety of starting positions. Some organizations need to move quickly to improve the bottom line. Others enjoy respectable performance but lack a clear path to enduring success. Many companies are simply in need of rejuvenation, ready to imagine a new destiny and perhaps even to increase their contribution to society.
Transforming not merely to survive but to thrive entails addressing three broad challenges, crystallized in these questions:
How do we create our vision for the future and identify the priorities to get there? Many companies face an even bigger challenge than overcoming short-term performance pressures: How to reconcile multiple strategic options to envision a different future amid shifting customer needs, evolving technologies, and increasing competition.
How do we inspire and empower people? The relentless pace of always-on transformation can demoralize even the most engaged employees. Sustaining it while offering employees meaningful opportunity and fulfillment—intrinsic rewards that millennials and “digital natives” seek—adds substantial complexity to the challenge.
How do we execute amid constant change? Changing the business once meant executing from a playbook of primarily short-term, discrete actions. But transforming to thrive in the future often requires disrupting existing business models and value chains to solve customer needs—and doing so at digital speed. Today, when changing the business means simultaneously executing and innovating with agility, a conventional approach to execution is no longer enough.
Taken together, these three challenges can seem overwhelming. But they need not be.
Consider Microsoft. In February 2014, when Satya Nadella took the helm, the company was by no means broken, yet there were strong headwinds: Windows’ market share had declined, Microsoft had missed the mobile wave, and competitors—and customers—were moving aggressively to the cloud. The company’s inhospitable culture was depicted in a now-famous meme showing managers in different corners of the organization chart shooting guns at one another.
Since then, Microsoft’s performance hasn’t just improved; it has flourished. Revenues (particularly cloud-based revenues) have soared, the company’s stock price has more than tripled, market capitalization is approaching $1 trillion, and annualized TSR, at 26.5%, is twice that of the S&P 500. Perhaps most important, the company now boasts a visibly new culture of cooperation and a renewed commitment to innovation.
“Microsoft’s wholesale transformation has been the result not of a single move but of many changes orchestrated in parallel”
Microsoft’s wholesale transformation has been the result not of a single move but of many changes orchestrated in parallel that have touched every part of the organization. Nadella honed a mobile-first, cloud-first vision, aligning leaders around it and shifting resources toward the relevant businesses to accelerate innovation. In other words, he addressed the head of transformation. He articulated a new purpose—“to empower every person and organization on the planet to achieve more”—and fostered a new culture and leadership model, thus tending to the heart of transformation. He also unleashed new ways of working that have not only enabled execution but also have spurred innovation and agility; that is, he equipped the hands of transformation.
Microsoft’s transformation has reinvigorated a maturing company, positioning it to define and embrace its future with the strength and agility needed to thrive in a fast-changing, tumultuous business landscape.
THE POWER OF HEAD, HEART, AND HANDS
What actions constitute this fresh take on transformation? And what sets it apart from more traditional approaches?
The Head: Envision the future and focus on the big rocks. In the digital era, constant change makes it harder to commit to a view of the future; yet providing direction to the organization remains essential. That means companies and their leaders must draw on their strategic thinking, their imagination, their knowledge of customer needs and desires, and their pool of expertise, experience, and wisdom to forge an aspirational vision of a digitally enabled, growth-oriented future. They set priorities, focusing on the “big rocks” that will deliver results and create enduring value.1 They secure the alignment and commitment of the leadership team. And they establish and communicate a compelling case for change, internally and externally. In the past, these actions might have been one-and-done moves, distinct from the daily rhythms of business. But today, because the environment is constantly shifting and these strategic actions generally affect the whole enterprise, they must be revisited and updated on an ongoing basis (ideally, annually) and be integrated into the operating model of the organization.
The Heart: Inspire and empower your people. When transformations were viewed as one-off, short-term programs, inspiring and empowering people wasn’t seen as being essential to them; in fact, people were often treated as a means to an end or, worse, as collateral damage. But successful transformation today depends on people who are engaged and motivated to go above and beyond. Organizations can create this condition through a set of heart “practices.” What does this mean? Leaders invest time and energy in articulating, activating, and embedding the organization’s purpose. Companies create an empowering culture, shaped by leaders, that allows people to do their best work. They also demonstrate care for those whose lives are disrupted by the change—not only departing employees but those who remain to carry out the new vision. Finally, senior managers exercise a more holistic form of leadership: they clarify and navigate, they include and empower, and they delegate and enable their people and teams.
The Hands: Execute and innovate with agility. Executing a prescribed set of actions used to be enough to generate short-term bottom-line improvements. In this new era, when the future is unclear and the present is constantly changing, organizations need to innovate as they execute, and do both with agility. Consider this: Rather than delegate responsibility for execution to a transformation program owner (who occasionally updates leaders), companies give joint ownership of the ongoing transformation agenda to senior leaders. They ensure disciplined execution by equipping teams with the resources they need to make sound, prompt decisions. Companies also apply innovative methods and digital tools, and institute agile ways of working, to accelerate output, remove impediments, and enable end-to-end focus on the customer. Whereas building organizational capabilities was often an afterthought, today companies build capabilities while carrying out the transformation.
The head, heart, and hands approach to transformation is most powerful when each element is fully deployed. For this reason, the three elements should not be viewed as sequential actions but as three vital sets of activities that should happen in parallel—a holistic system.
Evidence of the impact of this approach is striking. In our study, which included in-depth interviews of leaders involved in these efforts, we asked whether the companies had addressed the actions consistent with the three elements. We then correlated the response with their subsequent performance. Ninety-six percent of the companies that fully engaged the three elements achieved sustained performance improvement, a rate nearly three times that of companies that did not engage the elements. (See Exhibit 1.)
When we asked survey respondents about the relative attention given to each of the three elements during transformation, the head consistently got the highest rating, followed by the hands. The heart came last. (See Exhibit 2.)
It’s thus only fitting that the heart—as the metaphorical center and source of inspiration and power—is at the center of this holistic approach.
THE HEART OF TRANSFORMATION: INSPIRE AND EMPOWER YOUR PEOPLE
People—individuals and teams—are the lifeblood of successful transformation. Transformation requires their effort, engagement, alignment, and willingness to go the extra mile. But in practice, the importance of people in transformation is often neglected; people often end up being treated as expedient or even dispensable. In the always-on era, the consequences of this neglect can be great, as people grow exhausted from keeping up with the latest technologies and adapting to relentless change.
Successful transformation takes heart. The heart serves as an apt metaphor, capturing the essence of the vital, life-giving source of power that people need to effect change.
So how can organizations develop a strong, healthy heart to inspire and empower people? In the context of transformation, we see four imperatives. Each of them, like the atria and ventricles of the heart, works in concert to perform the heart’s complete job: empowering and enabling people to give life to the transformation. (See “Healthy Heart, Strong Performance.”)
Increasingly, employees seek much more than a paycheck or tangible rewards; they want meaning, connection, and joy. They want to contribute, develop, and achieve. Organizations with purpose tap into these needs, producing a virtuous circle of benefits.
“In the always-on era, purpose is more important than ever.”
Purpose is an organization’s “why”—its existential reason for being. In the always-on era, it is more important than ever; it fuels transformation by fostering an emotional connection that inspires greater commitment and the willingness to go the extra mile. Purpose illuminates a direction as it links various transformation efforts in a way that is logical and accessible to everyone. But it can do so only when the organization translates it effectively into action.
Create an Empowering Culture
Culture is the lifeblood of the organization. It comprises a clear articulation of the values and behaviors that define how things get done in an organization. Activated by leaders, culture is reinforced by the organizational environment, or context, through such levers as customer service rituals, performance management systems, and informal interactions. A healthy culture serves as a tacit code of conduct that steers individuals to make choices that advance the organization’s goals and strategy. In the digital era, when self-direction and team autonomy are emphasized, a strong culture is particularly important.
Demonstrate Care
Layoffs, redeployments, and reskilling are inevitable today. Even healthy companies will likely have to restructure their workforce to add talent—in particular, people with digital skills and experience that align more closely with the business’s future needs. Such workforce turbulence can be traumatic not only for those who are laid off but also for those who remain. If left unattended, it can undermine morale and progress. At the very least, transformation can dampen engagement and disrupt employee cohesion, and it almost always puts extra demands on people.
For all these reasons, leaders must demonstrate care, compassion, and empathy—and not just through their words. For example, it is critical that leaders continue to solicit the input of employees who remain (say, through pulse checks or broader two-way communications) and actively, visibly address their concerns. To help employees who are leaving, companies can offer a battery of program options beyond the standard outplacement services, such as coaches to help individuals create a personal roadmap, job-market information sessions, resources for financial advice, and even guidance on entrepreneurship.
Lead with the Head, Heart, and Hands
Nothing is more important to the success of transformation than leaders. While they play many roles, leaders embody the heart of transformation.
Leaders clarify and navigate the way forward. Beyond envisioning the future and revisiting strategic priorities regularly, leaders provide constant guidance to their reports and unit heads and ensure that priorities remain linked to purpose. They are action oriented; they set clear accountabilities; and they work tirelessly to communicate a compelling case for change internally and externally.
Leaders are inspiring, empowering, and inclusive. Leaders instill confidence and courage, and motivate and inspire people to perform. They strengthen and encourage teams and support cross-organization collaboration. They demonstrate care and empathy, actively and candidly communicate with their people, and exercise inclusiveness.
Leaders delegate and enable agile teams. Leaders delegate responsibilities to autonomous agile teams, remove obstacles, and ensure all the necessary cross-functional resources are in place. They also support capabilities building, both human and digital.
EMBRACING THE HEAD, HEART, AND HANDS OF TRANSFORMATION
In the digital era, transformation has become the default state for most organizations. But always-on transformation needn’t be debilitating, exhausting, or demoralizing. We owe it to ourselves, our organizations, and society itself to boldly transform the approach we take to transformation.
Leaders need to move beyond short-term fixes to envision a compelling future, and focus on the big rocks required to get there. They need to stop treating people as a means to an end or, worse, as collateral damage, and instead inspire and empower them. They need to change how work gets done, moving from the expedient and prescribed set of actions to an approach that enables execution and innovation to occur simultaneously, with agility.
The head, heart, and hands of transformation is not a panacea, but it is a holistic and human-centric approach that is proven to enable organizations that truly embrace it to succeed today and thrive tomorrow.
CFOs to participate on corporate boards is increasing.
Seventy-nine per cent of CFOs are experiencing increased demand for their expertise on corporate boards, according to an Ernst & Young survey of 800 global finance chiefs. CFO and Beyond: The Possibilities and Pathways Outside Finance communicated the results of the survey and a study of 347 companies worldwide with annual revenue over $5 billion.
Current or former CFOs make up 14% of board members of the companies studied, up from 8% in 2002. And 41% of audit committee chairs are current or former CFOs, up from 19% in 2002.
The desire on the part of CEOs to have finance professionals look beyond their functional silo to collaborate effectively on strategic decisions was revealed in the CGMA report Rebooting Business: Valuing the Human Dimension. Those same skills are sought by corporate boards, and CFOs are supplying them.
Jim Ladd, CPA, CGMA, senior vice president of finance and operations at the Institute for Systems Biology in Seattle, estimated that he has served on about 18 boards during his career. His current board responsibilities include an audit committee role for a New York Stock Exchange-listed company, a lead independent director position with a privately owned company in Seattle, and participation on two not-for-profit boards.
He said finance executives can contribute a lot to boards.
“They’re generally sought out initially because of finance background and a knowledge of financial reporting and audit risks and that sort of thing,” Ladd said. “But CPAs have a broader background than that. And people discover that.”
Audit committee a good fit
Finance skills make CFOs ideal candidates for audit committee positions. In many jurisdictions, regulatory requirements demand that at least one audit committee member have financial expertise to keep abreast of evolving accounting standards, risks and regulations.
Public companies listed in the United States, for example, must disclose whether they have at least one financial expert independent of management on their audit committee. The United Kingdom’s Corporate Governance Code says a board should satisfy itself that at least one audit committee member has recent, relevant financial experience.
This can be a benefit and a frustration to CFOs. Eighty-one per cent of them say finance leaders are good choices for audit committee jobs because of their finance acumen. But CFOs want to make sure their skills in strategic development and other areas are recognised, too.
“Some of them can be a little insulted that the breadth of their experience as CFO is not necessarily recognised,” Gerard Dalbosco, an E&Y managing partner, said in the report.
Opportunity to branch out
Although CFOs already have busy jobs, about two-thirds of them reported that they have taken on, or would be willing to accept, more part-time, voluntary or non-executive roles. Twenty-seven per cent said they already have taken such a role, and 40% said they haven’t yet, but would be interested in doing so.
Scott Lampe, vice president and CFO of Hendrick Motorsports in North Carolina, serves on a few community and government boards and said he is willing to consider working on boards of companies that don’t have a lot of risk and are looking to grow organically. “I want to work with companies who share my philosophy about how a business should be run and what kind of contribution it can make in improving the communities is operates in,” Lampe said.
What do CFOs reap from serving on boards? Three-quarters of survey respondents said gaining general management or board level experience is a benefit. Other top benefits included gaining exposure to another company or industry (65%) and getting a different perspective on running an organisation (62%).
“You get to look beyond the purely financial and think more strategically about a different organisation,” Qatar Foundation CFO Faisal Al-Hajri said in the report. “You can also use these roles to play a broader role in society or the community.”
Serving on charitable and community service boards also gives CFOs an opportunity to give back to the community. Mick Armstrong, CPA, CGMA, recently agreed to serve as treasurer on the board of directors of the chamber of commerce in Meridian, Idaho, where he is employed as CFO of Micro 100 Tool Corp.
“We as a company are committed to the community and realise that just our business environment, the quality of life for our employees, all is wrapped up together,” Armstrong said. “So we choose to be involved in the community.”
Protection from liability
Ladd said a key question any potential board member should ask before considering a seat on a board is whether the organisation carries liability insurance for its directors and officers. He said risk exists even at not-for-profit organisations, so board members should make sure they are protected.
In addition, Ladd said, it is important to make sure you are working for an organisation that supports your involvement on an external board. And you need to have the time and energy to fulfil your board duties in addition to your regular job.
Armstrong, for example, said his duties as chamber of commerce treasurer are made easier by Micro 100’s recent hiring of an accounting manager with a public accounting background. As Armstrong moves toward more of an executive leadership role with his company, this distancing from Micro 100’s daily accounting activity also has helped him find more time – early in the morning, at lunchtime and on weekends – to devote to his board duties.
Ladd said he does a lot of his board work during evenings and weekends.
“I sometimes joke with my wife when I come home at night that I’m starting my second job,” Ladd said. “…But most of the meetings are during the day, so you do have to have an understanding employer. That puts some strain and requires extra time in your life. There is no doubt about that.”
Strategies to use analytics for competitive advantage
Organisations are building momentum for the use of Big Data by integrating data analytics into their strategy in small projects that deliver substantial results, according a new report.
Almost all respondents – 96% – said that analytics will become more important to their organisations in the next three years, according to a Deloitte report based on a mix of 100 online surveys and 35 interviews conducted with senior executives at 35 companies in North America, the UK and Asia.
Although analytics already is an important resource for many companies, analytical technology remains immature and data under-utilised, according to the report. Getting buy-in for further projects is essential, so analytics leaders are starting small.
“Projects that demonstrate analytics’ ability to improve competitive positioning help these initiatives gain traction across the enterprise,” Deloitte Touche Tohmatsu Limited’s Global Analytics Leader Tim Phillipps wrote in the report.
Companies can prepare themselves to use analytics for competitive advantage, according to the report, by using the following strategies:
Acquire the right talent now. Talent for analytics and Big Data is in high demand. Talent shortages may become more of a barrier to analytics implementation as more companies use data to drive more processes and decisions.
Tie analytics to decision-making. Better data and analysis don’t necessarily result in better decisions. Specific initiatives to improve decision cultures and processes, along with changing the understanding and behaviours of front-line workers, lead to better decisions, the report says.
Apply analytics to marketing and customers. Finance operations are the most frequent area of analytics investment, with implementation by 79% of respondents. Marketing and sales groups, at 55%, are the second-most frequent analytics users, and the report says the best financial returns from analytics often come from marketing and customer-oriented applications.
Coordinate and align analytics. There is little consistency among companies with regard to who oversees analytics initiatives. Business units or division heads (23%), no single executive (20%), CFOs (18%) and CIOs (15%) were most commonly cited. More co-ordination may be needed to realise the full benefits of data throughout the organisation.
Create a long-term strategy for analytics. While current analytical processes are being implemented, a multi-year plan for the growth of analytical capabilities – linked to strategy development – will help organisations better use data over time, the report says.
Digital transformation is on the minds of CFOs, who expect to invest more in advanced analytics and artificial intelligence (AI) that can transform their businesses by improving customer experience.
That’s according to a recent Grant Thornton report, which shows that 69% of CFOs and senior finance executives plan to increase investment in technologies that quicken business change. CFOs themselves will need to have more technical skills, and they are divided in how to improve their overall workforce’s financial and technical expertise.
“It’s really a question of who’s more visionary as a CFO in moving forward with their products and services and reaching their customers,” said Srikant Sastry, Grant Thornton’s national managing principal for advisory services.
IMPROVEMENT TIED TO DIGITAL INITIATIVES
Companies that have figured out a way to reach customers more effectively through digital advances are reaping benefits. In one notable increase, Costco saw its second-quarter 2018 e-commerce sales grow about 29% year-over-year, to $1.5 billion, CFO Richard Galanti told analysts and reporters on a recent earnings call.
Additionally, firms that embraced digital transformation averaged a 55% increase in gross margins over a three-year period, according to a 2016 Harvard Business School study. Companies that were slow to adapt generated lower margin growth on average (37%) during the same period.
Meanwhile, International Data Corporation estimates that, by 2019, enterprises will spend $1.7 trillion on digital transformation — a 42% increase compared with 2017.
A year ago, Sastry said CFOs likened strategising on digital transformation to gazing into a crystal ball. Now, he says they are trying to gain a clearer picture of what is inside the sphere.
Accordingly, CFOs are not necessarily seeking digital transformation to improve efficiencies in their IT systems. The goals now are to enhance the customer experience, grow the business, and outperform the competition, according to the Grant Thornton report.
CHANGING THE VIEW OF ANALYTICS
CFOs have recognised that they were not thinking enough about analytics. Consequently, 24% of respondents said their finance team is currently adopting advanced analytics, another 24% will do likewise over the next year, and an additional 25% plan to adopt advanced analytics within two years. But CFOs will have to adapt, too.
CFOs have traditionally been focused on operational performance, cost reduction, and business management, but now they want to drive strategy and clear a path to digital transformation by leveraging information and technology, Sastry said.
“They have to make sure that they have the right skillset and innovation to leverage advanced analytics,” he said. “So the crystal ball is still there, but I think they’re trying to clarify the fog in the ball.”
Forty-one per cent of respondents do not believe they have good financial metrics that show the return on IT investments. And only 12% strongly agree that they possess an effective system to measure financial performance tied to newly implemented technology.
The report points out tension between companies’ current need to invest in maintenance and system updates and their desire to allocate funds to new automation technologies, such as AI. Investment in AI is projected to increase significantly: Beyond the 7% who say they have already adopted AI, an additional 47% expect to adopt it over the course of five years. A similar number of CFO respondents expect implementation of innovations such as distributed-ledger technology (also known as blockchain), machine learning, robotic-process automation, and optical-character recognition within five years.
“Ostensibly, AI will help improve quality, improve accuracy, and streamline the number of people required to perform tasks,” Sastry said. “It’ll change the face of business, including financial management.”
The top IT challenges in the survey are:
Systems complexity, including enterprise-wide systems integration;
Upkeep of legacy systems; and
IT talent.
Regarding the talent challenge, most executives — 52% — would prefer to retrain existing staff. Twenty per cent want to recruit new, technically skilled employees, and 17% aim to outsource tech hiring.
In addition to being aware of AI concepts, Sastry said, CFOs will need to know how AI systems work and how they can improve the business through a better customer experience.
“Those skillsets have, historically, resided in the technology space,” he said. “They’ve resided in the IT shop and the CIO [chief information officer] function. So CFOs need to really embrace the technology portions of their business, or the CIOs.”
A model helps organisations deal with the data deluge and provide insights that support robust decision-making.
In a world where uncertainty is the new norm, where technology is getting smarter, where robots are automating and simulating human activity, and where big data is getting bigger, the pace of winning and losing is getting even faster. The margin for error for organisations is now even smaller, meaning high-quality decisions grounded in insight have never been more important.
It’s true: Technology is capable of automating a lot of what we used to do when it comes to analysing data. It can even take this a step further and simulate some of our thought processes. That said, technology has one shortfall: It is not human, and generating insights is an inherently human process that needs human traits to interpret what is happening.
Faced with a deluge of data, finding a way to combine these human qualities with the tools on offer will provide organisations with more opportunities to make high-quality decisions grounded in great insights.
I propose a ten-step approach to accelerate the process of generating and delivering insights, which forms the basis of the Define-Determine-Deliver model. The model draws on a number of sources. First and foremost, it is based on my experiences of working with some of the largest insight-driven companies in the UK and US. (Deloitte defines an insight-driven organisation as “one which has succeeded in embedding analysis, data, and reasoning into its decision-making processes”.) I was able to observe best practice in the way these companies collected and organised huge amounts of diverse data, and I gained a profound understanding of performance and how they were able to engage their people to take the right next steps, which led to stronger performance.
Second, the model takes up the themes being debated by practitioners, experts, and authors, in terms of how to organise and interpret the huge, diverse data sets organisations are now collecting. And the more diverse and complex the data, the greater the challenge of communicating insights.
The model consists of three stages. The define stage will help you clarify what you need to do and why. The determine stage offers a set of principles to help you generate insights, and the final stage looks at how to deliver your message to achieve the level of impact and influence your insights deserve.
DEFINE: PLANNING YOUR ANALYSIS
1.Be clear on the value of your insights. The beginning of the insight process involves being clear about what you are being asked to analyse. Over the years of working for a number of insight-led companies I quickly came to appreciate that the significant first question was not “what?”, but “so what?” Understanding the value (the “so what”) that your insights will add helps you engage with what the person requesting the information is trying to do. When you are informed and engaged, you build a more relevant and more focused analysis plan.
Tip: If the person making the request hasn’t already outlined the “so what”, asking them “How will the analysis help?” is a good way to understand what they are hoping to gain from the insight.
2.Partner with an expert. In my experience, those who seek help from someone who knows the particular area of operations well deliver the best insights. They could be a call-centre agent or warehouse manager, for example. Share what you are trying to do with them and ask their opinion. Their support can come in many forms. They may share their experiences of the topic being analysed, may highlight obvious pitfalls, or simply confirm that what you are doing is on the right track.
Tip: Ask the person making the request to recommend the right contact. Once you have a partner, be curious, ask good questions, and listen well to what they have to say.
3.Create a hypothesis. It is important that when you are doing your analysis, you don’t try to analyse all the data available because this could take too long. The process of forming a hypothesis will help you think about the relationships between your data, which should end with your forming an opinion (your hypothesis) on the answer you might find once you have done your analysis. A clear hypothesis, therefore, provides you with an indicator of what to look out for when doing your analysis, helping you to stay focused, whilst reducing any wasted effort.
Always create a hypothesis statement that captures this belief before you start analysing your data (eg, “product availability has decreased because supplier “˜out of stocks’ have grown as the cost of raw materials has increased”).
Tip: Take time to run through your hypothesis with your expert (from tip 2) or any other relevant people. This will help ensure you have a reasonable and balanced hypothesis, and help to avoid confirmation bias.
4.Visualise your analysis. It is all too easy to just dive in and start analysing data. Before you begin, be specific about what you need to analyse. This involves visualising what your analysis will look like once it is finished.
Tip: Get a sheet of paper and sketch out what your data will look like once you have collected it all, listing the rows of data down the left-hand side and the column headings across the top. Then sketch out the analysis you will carry out or the techniques you will apply. For example, do you plan to create a column of data that looks at the difference between two data points or a graph of certain variables? Be as specific as you can, as this will really pressure test what you are planning to do and whether it will add value.
DETERMINE: DOING YOUR ANALYSIS
5.Collect, clean, stay connected. Developing a plan of how and when you will collect your data is important, as this will help to ensure you have everything you need when you are ready to start analysing. Before you start the analysis, you will need to clean your data to ensure it is accurate, complete, and in the right format. There is nothing worse than unclean data undermining the credibility of your insights. Finally, staying in touch with your expert partner from the previous stage will ensure you get the most out of your analysis.
Tip: It is helpful to have a few (but not too many) expert partners. Picking partners with different types of experience is a great way to get a variety of viewpoints, leading to a fuller piece of analysis.
6.Analyse well. In practice, every piece of analysis is different. Therefore, adapt your approach using these key principles:
Let the data lead you to the insight. Don’t assume you know the answer before you have done your analysis; this could really bias your analysis. Be open-minded and let the data lead you to the answer.
If there is an elephant in the room, say so. Sometimes, when it comes to analysis, we don’t want to accept the most obvious insight; we yearn for something more detailed and more profound. But sometimes the most obvious answer is the right one, and it’s OK to accept it.
Correlation doesn’t equal causality. Take care when verifying whether two variables are linked.
Focus on what the business needs. If the person asking you for insights needs them in two days to assess an opportunity, then focus on what can be done in that time frame, rather than on the ideal piece of analysis you would produce given more time.
Tip: When analysing data, it is often more useful to focus on trends rather than on single data points. Trends often give you a more reliable view of what is happening. For example, if you are trying to determine which stores are driving low product availability over the year, then focus on the stores that are experiencing consistent decline over the time period (those trending downwards) rather than focusing on one store that had a low score for a small amount of time. (It would be interesting to know why, but don’t miss the big trends contributing to your low product availability.)
7.Bring it all together with a conclusion and indicated actions. Once you have developed some good insights, the next step is explaining what is happening and how the business should respond. This can be a daunting task for finance teams, as the fear of suggesting the wrong thing can create a lot of pressure. Grounding your “indicated actions” in insights will give you confidence in your proposal.
Tip: Seek to ensure your conclusion-indicated actions are correct by writing them out using the following structure: dilemma, insight conclusion, indicated actions:
“I conclude that the reason for ‘the shortfall in sales’ (the dilemma) is because store staff are struggling to get the stock out onto the shelves as the increase in customer numbers means they do not have enough time to restock (the insight conclusion). I propose a pilot project to increase staff in the stores with the biggest declines in sales. If this is successful, I propose a wider review of resourcing in our stores (the indicated actions).”
DELIVER: COMMUNICATING YOUR INSIGHTS
8.Prepare a clear insight message for your audience. The previous step, in which you generate conclusion-indicated actions, is based on what is happening and what you need to do next. The critical difference in this step is that you need to build an insight message to convey to your audience. The insight message is often the only part of your process that the audience sees, and if you want to achieve the right impact and influence, the message needs to be clear and engaging.
Tip: Do the “elevator test” to see if you are ready to deliver your insight message. If you were in the elevator with your manager, could you convey your message (the dilemma, the insights, your recommendation) clearly and succinctly in the time it takes to reach the right floor, all in a way that will resonate and inspire the audience to act on your findings?
9.Craft an engaging message. If you want to deliver an engaging message, then logic alone will not be enough. Engagement requires you to connect to people’s emotions. Your message may well have a good structure, clear visuals, clear arguments, and recommendations grounded in your insight findings. But you also need to build an emotional connection by finding the right tone, forming a connection based on shared aspirations, or focusing on how the proposal will directly benefit the insight requestor and their teams.
Tip: Stories are a good way of helping to deliver a more engaging and memorable message. Stories grab people’s attention, bring messages to life, and help link insights to the big picture. For example, if you are trying to put new customer service metrics into context, you could use statistics. “Customer service scores are at 60%. This is a reduction of 10% versus last year, and we need to do better.” Alternatively, you could tell a story that brings your numbers to life. “Last year we were not at our best for 40,000 customers. That is two out of every five customers that came to us. Here are some of the things our customers said and how we impacted their lives by not being at our best …”
10.Build an insight-led culture. Having a framework is a good way to accelerate the insight process. In the insight-led companies that I have worked for, this framework was embedded into the beliefs of their people, which was demonstrated every day in their behaviours. This level of engagement with the principles of the framework allowed these companies to accelerate insight generation, as well as to adapt those principles to address a particular problem when required.
Tip: Always be a role model for insights, giving your teams or colleagues the confidence and the right to be curious and to always seek out the underlying truth as to what is driving performance.
