As the author of the new book Guaranteed Analytics, Jim Rushton has been working in analytics since they first became a thing. Over the past decade, he has helped guide dozens of fortune 1,000 companies toward monetizing their data. In this podcast, Jim talks about why businesses should stop focusing on data and instead, start looking at information. From there, they can develop insight into how to make shifts and changes that will lead to a higher ROI.
He also speaks to the human element that is missing from so many analytic practices today and explains how recognizing the stories behind the numbers can represent a huge competitive advantage.
Jim Rushton: My background is all math. I went into management consulting, not knowing anything about it and came across what was called database marketing in the old days–L.L Bean type of catalogs. They had insight into what people were doing. Big retail companies didn’t because you just bought stuff, but L.L. Bean knew who they’d mailed the catalog to, who had responded, what products they had bought, and which ones got returned. So, they were kind of on the forefront of what ultimately has become what Amazon and Facebook, and everybody does today with your data. They had that viewpoint.
The math really played into that, so it was a natural place for me to end up. I’ve been in analytics and especially with a retail bent for many years.
Nikki Van Noy: That’s so interesting. We think of analytics as such a digital phenomenon, but that makes perfect sense that there was more of an analog part to its roots.
Jim Rushton: Yeah, what I tell people, the only thing that digital has changed really is one, everything is tracked. It knows when you hover over an item on the Internet, which nobody really knew in the past. Which pages you looked at in the catalog, for example. Secondly, it’s as if labor is free because if I were really rich a long time ago, I could take 50 private investigators and go look at somebody and figure something out. That was exorbitantly expensive. Whereas, the Internet companies are able to do it because it’s so cheap to acquire and utilize.
Nikki Van Noy: You’ve really seen the entire rise of this from its very origins to where it is now.
Jim Rushton: Yes, I’ve watched it go from, “How do we get to that data?” To today which is, “There’s so much data, I don’t know what to do.”
Nikki Van Noy: How interesting. What has that been like from your perspective?
What To Do With the Data?
Jim Rushton: Well, it’s funny, because the first part of my career was spent so much time with, “How do we get this data?” Now it’s like, “There’s so much data coming in. Instead of us worrying about it being perfect, how do we take advantage of it before the next set of data is on top of us?”
Nikki Van Noy: Wow.
Jim Rushton: It’s really changed–how you consume it.
Nikki Van Noy: You know, one question that just popped into my mind and I don’t know if there’s even an answer for this, but with all of this data that’s available to people, have you, just from seeing so much of this over time, can you make a reasonable estimate about how much of that data is usually actually helpful to companies?
Jim Rushton: Well, it’s funny because this is where it’s important to be focused on the end result that changes actions, because normally our brains don’t put us on what’s got the best ROI, but it’s more about where our head is. FOMO is a real thing in people’s personal lives and it’s a real thing in business. For example, someone who is sitting on a ton of their internal data and they’re obsessed with what a competitor doing–they want to go to the competitor’s store and take pictures. They want to look at their ads. They want to do all kinds of things.
The truth is if you’re not taking advantage of your own data, how do you think scraping the surface of the competitor is going to really help you? It’s probably not. But it’s a fear in people’s heads of what they’re looking at. That’s where we want to go back to the action of “What are you going to do with this and how do we actuate on it to drive ROI?” Yeah, we don’t find that, in general, people are able to get the most value out of the data they have because one, they’re focused outside, and two, when they start to look at it, they over-analyze it and they get into analysis paralysis.
We know that any time you have a bunch of metrics, two or three are going to give you 80, 90% of the prediction that you need for any action. But then, people get into it like, “Yeah, but four is better than three. Five is better than four, six is better than five.” You think about like on a–what do razors have now, like five blades on them? I’m not saying that’s better, that’s just what we as humans do when we go into something and don’t know what the big picture is.
Nikki Van Noy: Talk to me a little bit about how you see businesses primarily using data and what they’re missing with the way they’re going about it now?
Jim Rushton: There’s a lot of words that sound like synonyms that I break down. It’s ‘data’, ‘information’, and ‘insights’. Those sound like the same thing but they’re really completely different. The way I think about data is, data is black and white, zeros and ones. It’s facts, you can’t change it.
Information is, what is that data telling me that I might not have known otherwise? Insight is, what do I do with that? One example I like to think of is if I have a photograph, let’s just say it’s a picture of the woods–the forest. Every pixel is a zero or a one. Is it black or is it white? Here’s the picture. That’s data.
The information would be, “Hey, let’s take that same picture now. Everywhere there’s an animal footprint, let’s make it red so you could look at it.” Now you could look at the picture and you would have information.
Insights would be, “Wow, that’s a grizzly bear’s track right next to my tent. I need to get out of here.”
What we are seeing is a lot of companies got really focused on how they go acquire all this data, and there’s nothing to do with that. Until I have information that is going to drive insights and change my behavior, I’ve really done nothing. We’re not about just collecting data, we’re about how do you use it to get to a monetizable end result.
Nikki Van Noy: Fascinating. That was such a great breakdown. I absolutely use all of those words interchangeably, but that makes sense to me now. Correct me if I’m wrong, but what I’m hearing you say is that we’re too data-focused right now and we need to shift that to focusing more on getting information and from there, being able to create insights?
Jim Rushton: Yeah, because at the end of the day, it’s about a monetizable event. If you think about it, collecting data is a cost. There’s no value in that. Putting it all together is a cost. There’s no value in making it really neat, analyzing it. All those things are costs, an expense, until you change a decision.
At that point is when you can capture new value. Everybody’s focused on that front part, which has zero ROI. That’s the only cost. That’s one of the problems, if you’re not focused on what you are going to change, then it does no good for you. You could think about this in your own personal life, if you wanted to lose weight, you can buy a hundred books, and you could read about them, but until you change what you put in your mouth or change activities you engage in, there’s not going to be a return at all. It’s very similar on the business side.
Nikki Van Noy: In your experience, what sort of information are people missing out on that they could really benefit by digging into?
Increasing Your ROI
Jim Rushton: Yeah, the main thing that most people look at is the things they already know. So, I’ll pick a retail example so it’s easier for people to relate to that. A retailer knows exactly what items are selling hot going into the Christmas holiday that they can’t get more inventory of it.
They already know those items, what we call stars. They also know the ones that they have marked down five times, they have put out coupons, and they can’t get rid of them. They’re sitting on too much inventory. Those are the dogs. Everybody already knows those. There’s really no reason to go analyze that because you already know it and there’s nothing you can do with either of those, but there’s all that information in the middle that are not your outliers, probably the 80% of your products, which if you had the time and effort to analyze that imagine the gold you could uncover within that.
That’s a really big story. In a sense, if you’re looking at reports, you pull up your iPad on the weekend over coffee, and you look at all the things and you’re looking at stars and dogs. You already know that. There’s no action to be done with that. That’s either an expense or just entertainment for you. There is no return.
We’re going to really help you focus on the things and move the needle.
Nikki Van Noy: As we begin to think about moving away from the stars and the dogs, keeping in mind that there is just this wash of information for companies to go through, how can they start to think about identifying that information that can actually begin to increase their ROI?
Jim Rushton: That’s a really good question. What a lot of people do is they want to start with the data. Now, that is one thing you can do is you can start with data and then look at it and say, “What insights could I derive from this?” But you probably would rather start with, “What are the problems or opportunities in my business that I could be better at?” and then, “What data could I get to be better at those?”
We’d rather start with that action, than with the data and that’s one of the big differences about the approach. If you just have data and say, “How do I monetize that?” We can go in and look at that, but normally, if you don’t know where to go, we would say, “Let’s talk about the big transformations in your business. Let’s go see what kind of data could make you better at those.”
So, really starting what you’re trying to do, not with collecting data. That’s what a lot of people do is they go out and say, “I want to collect as much data as possible. I want to put in the fanciest tools. I want to have more data than anyone else.” And that doesn’t have a hard return.
Nikki Van Noy: That makes so much sense and it’s interesting, like what we were talking about before this interview started. On this podcast, there is such a diverse array of topics. They’re all over the place but one of the things that I’ve heard coming out of various sectors is that we have all of this technology at our disposal for various reasons but one of the keys that people are really missing to unlock that technology is the human element. We’ve sort of forgotten that that still comes into play and technology is just here to help us amplify that.
Jim Rushton: It’s absolutely true. If you lead with technology, you’re going to fail. One of the problems with analytics and one of the reasons I wrote this book is, it is amazing what you can do with it but if you read what’s going on, only one out of five projects are successful. There’s an 80% failure rate. What we want to do is move that to five out of five successful and that why we call it guaranteed analytics.
But a lot of it is just really how do you go about the project because if you go about it from a tech standpoint, from a data-only standpoint, you’re going to probably end up in the four out of five that fail.
Nikki Van Noy: Can you give me an example of something that you’ve seen throughout your career, where a company has brought a solid, very defined problem to the table, and they’ve effectively used the information derived from data to solve that?
Jim Rushton: There are a few examples I like and I’ll tell you one that we can all relate to. With a large telecommunications company, they had a problem. So, we start with the problems and that was good. The problem was that customer satisfaction was just not good. They aligned it and said it looked like when customers made an order for a new product install if it took too long, they knew that customer satisfaction was going to go down. They became completely focused on one and only one metric and that was, “Have we closed out all the open orders within seven days to make sure customers are happy?” And that’s all they looked at. Pretty soon, that number went to almost 100% of all open orders were closed within seven days but the customer satisfaction number never went down or never went up.
We couldn’t figure out what was going on and we looked at it–remember I said that data is facts. Zeros and ones. It doesn’t ever lie. The data was that there were no open orders longer than seven days. What we saw was there was a human component of gaming and every time it got near seven days on open order, the reps would close it and reopen a new service order and they would do that multiple times in a row, at which point, we could see, “Well hell, the customer wasn’t happy,” although the metric looked like it was okay from a data standpoint. That was a really good one because once we uncovered that, then we could have a dashboard and let people know not just what one metric looked like, but what was going on overall at that residence or that business to get an idea of why customers satisfaction numbers weren’t moving up.
Nikki Van Noy: Interesting. So that draws a really clear map there from data to info to insight.
Jim Rushton: Yes.
From Data to Insight
Nikki Van Noy: Let’s land a little bit more on that insight component. So that is, “I have this information, what do I do with it?” Can you talk to me a little bit about that and maybe some best practices around it or, any advice you might have for listeners?
Jim Rushton: Yeah, one of the beauties is, there is a lot of art and business in people’s jobs. We don’t want to take that art away, but what we say is only use art when you need to, or your gut. Whenever it makes sense. So, for example, if you were to say–I am going to pick a retail example so most people can relate to it. If you were to say, “I think this product sold really well last year when the weather was cold.” There is no need to use your gut because that is backward.
So, let us go to facts because facts are better than your gut, but if you are looking forward to saying, “Based on what I am seeing I think this will occur in the future.” There is no way for a computer to do that. That is where your art or your gut needs to come in and that is where we really like to see people use it. One of the things I like to think of is, of all the clients I have ever worked with, I never had a client have an analyst whose job description was just fooling around with data as your job.
I have never seen that, but yet nearly every client that we go to, we find 80% of their time is just fooling around with the data. What we say is, “Let us let a computer do that because your job is to really to use the information from that data to be better about how you deal with your product selection, your vendor relationships, your pricing strategies, and your promotions.” What we want to do is free up people’s time to let a computer do what it’s better at than a human, and then the human can do the ‘art’ or ‘gut’ part of the project.
Nikki Van Noy: As you’re talking it almost sounds to me like people are actually making their lives more difficult than they need to in this arena without getting any return on that time, or at least not the return they could be getting on that time and effort.
Jim Rushton: I think that is absolutely true and if it is just entertainment to you it is okay. For example, I’ve got people who are really into sports. They want to realize every statistic, they want to read the paper, they want the latest and greatest, they want alerts coming to their phone. There is no return on that. That is simply entertainment and entertainment is not what someone’s job is in a business.
A business is usually to make something better or more efficient and so I think sometimes people cross these things and don’t understand. They do it in their personal lives, so they think “Maybe I should be doing this in my business life?” But think about how much people would spend on just analyzing sports data for fun. There is no return. That is simply entertainment and normally your job description is not to entertain yourself.
Nikki Van Noy: For the most part yes, unfortunately. That is another book.
Jim Rushton: We want you to have fun but that is not your job description.
Nikki Van Noy: Another thing you talk about in your book is this idea that numbers lead to stories and that stories are important. As a bookworm, l love that concept, so I’d love to hear you talk to that a little bit.
Jim Rushton: Boy, it is just so true that we as humans are never good with data. Data is, just again, zeros and ones. It is facts. It is black and white, but we don’t do much with that. That is only in the cognitive part of our mind, but in that subconscious part of our mind are stories, are emotions, are things that we really get behind and can remember. Kind of the ‘why’ in things, and so you’ve got to have the story behind what you are trying to do because there is no amount of black and white on your screen that is going to change the way you think.
We love it whenever we uncover something we have never thought of before. I will give you a story of one of our customers. It was an electricity provider and they had a customer who had not paid their bill in 63 days and the normal protocol was to call them and not threaten them but say, “Hey listen, we have to turn your power off if you don’t pay your bill. You are 63 days overdue,” right? And that was the data. That was the fact.
And we said, “Look, we can never change the data because that is true.” But when we step back, we say, “Hey, here’s a wealthy entrepreneur that owns 10 Pizza Huts and only one location is 63 days overdue and every other location is paid on time. Do we really think he’s at financial risk or do you think maybe he has a billing problem?” Imagine the change in that insight in the story.
Now instead of you spending money to make a call to this person to threaten them, you are now calling them with the customer service question to say, “How is everything going? How are we doing?” and you have completely changed that relationship. That is an amazing one to me of how that information changed the insight into the business.
Nikki Van Noy: I feel like again there you are seeing that more human element at play.
The Human Element
Jim Rushton: Well everything that we do at the end of the day is a human because we are trying to change behavior.
Nikki Van Noy: Something that just occurred to me is, you talk about how when people change their strategy around data and interpreting it, they begin to shift into an insight-driven culture. Can you talk to me a little bit, obviously that would begin to move the ROI like you were talking about, but I am wondering if as you’ve seen people incorporate this, have you have seen other ways that companies tend to shift along with that?
Jim Rushton: Yeah, culture is hard, and people change very slowly. We’ve had customers that had literally giant books that got printed every week of all the reports and people wanted to memorize those on Sunday night before they came in Monday morning to be on top of it. No actions are ever taken out of that but there was a pride. Like, “Oh I knew all those numbers. I know them back and forth, I could speak to them,” and if that is part of the culture, that is not a data driven culture.
That is a bravado culture. That is a, “Who can work the hardest?” type culture. That is not an insight culture and so when we see something like that, we know that we need to spend more time on the change management aspects of the project than on the technology or the data capture side of the project. A lot of our approach is going to be like, “What is the culture of a company from a tech standpoint and organizational standpoint, both from the IT side, and on the business side, as well as their general understanding of data?”
When you think about analytics, the companies that are good at it are companies who are built around data. Some of these are going to make sense and some aren’t, but a FedEx, a Google and Amazon, those are all very much data companies. And the only difference between a FedEx and a Frito and what a Google does is that sales reps always have a handheld where they are capturing the package and the drop off. They have the data throughout their whole chain, so they are very good with data. But all the other companies out there, they have never been built around data and so they don’t really know how to use it, and that is why all of our customers are those companies that say, “Hey, we know there are opportunities here. Help us figure out how to take advantage of those.”
Nikki Van Noy: And is there anything we haven’t touched on yet that you want to make sure listeners know?
Jim Rushton: Well one other story I would tell you is if you think about–analytics was the original dream of computers becoming a part of business, which was, “Imagine if all that data were in one place, what we could do with it.” That was the whole idea of computer technology, but what happened is when they said, “Hey we got computers. Let us automate business.” The first thing was accounting data because it was so structured.
So, all the big consulting companies came out of accounting companies because the first thing that happened was just the automation of accounting data. Now, the problem was as soon as they did that, it really just became about, “How do we automate the transaction of accounting?” They got away from, “How do we use the insights of all of this data, now that it’s in one place?”
And what I am going to say about that is an analytical system and a transactional system, while they are computers, while they are databases, they’re not at all the same. And so, I will give you an example in your own life. If you were to go to an ATM, put your card in, and try to get $150, it would immediately say, “Does Nikki have a $150? Has she taken more than $150 in the last 72 hours because there is a $300 limit per 72 hours?” It would make sure that if the power went out it didn’t give you the money and not debit your account.
Similarly, it doesn’t want to debit your account and not give you the money even if there is a power failure or communication failure. It is doing this against the name of 33 million say Bank of America names, but it does it instantaneously, snap of a finger.
If I went to that same database, which was a transactional system and I said, “Hey, show me all the customers I have on every state that have a balance of $5,000, use the ATM’s three or more times in a quarter, and live in this cluster of zip plus four neighborhoods?” It literally couldn’t answer it because it was created to do the transaction. Which it did amazing with all of those rules that I was telling you, but you couldn’t run analysis against it. So, all the methodologies that are out there for almost 95% of IT projects are around, “How do you automate transactional systems?” Analytics is a completely different approach and that is one of the things that we find causes that high failure rate is people trying to go at it with the wrong methodology.
What I have put in this book is a prescriptive approach to, “How do you go about this in a prescribed manner to make sure it is an analytical approach, not a transactional approach?” Because we are just not automating. We are trying to get to insights.
Nikki Van Noy: That is so interesting, and I feel like that is value that someone like you really brings to the table because you have seen the rise of this entire industry. So, you have an understanding of where the roots are, what it was originally designed for, and how we have lost sight of that over time.
Jim Rushton: Yeah, so if you want to be successful in your projects, you need to have somebody who is worked on a half a dozen analytical projects before. Those are going to be a good resource and they are hard to come by unless you are already a data company, like I was talking about like FedEx or Frito or Google or Amazon. You’re going to need to go get some of those people or get someone that can help you, because they worked on five or six of those before.
Going through it on your own, you are going to run through the same problems that everybody else has and with a 20% success rate, we’d rather you not do that on your own. So please take advice from the book or engage somebody that can help you through that.
Nikki Van Noy: I have a very disparate question for you. I would love you to tell me about your rock collection.
Jim Rushton: It is not a rock collection. It is that I am an outdoors guy and I like to collect rocks to build things. We’ve built a stone chapel that looks 150 years old all out of native stone from the land and it is pretty amazing.
Nikki Van Noy: That is so cool. What led you to do that?
Jim Rushton: There is a famous woman, she’s like a 100 plus and owned a ranch in Texas a long time ago. It then became a bed and breakfast, and I had visited there once and there was a little hand built stone chapel I thought was amazing. Then years later I was out at my ranch and I saw the rocks. I said, “You know what? I want to do that,” and it became a real love of what kind of rocks to collect, where do you get them, and it takes a lot more rocks than you think to build something.
Nikki Van Noy: I can see how that would be very true. I have heard of a lot of hobbies in my time but that is a totally different one. I absolutely love it.
Jim Rushton: Well, I mean this isn’t really the podcast, but I am a big believer of a lot of these technical things are really important in life and we have outsourced so many of them. It has created problems in our society. I am really a rubber to the pavement person.
Nikki Van Noy: I feel like that is sort of connected to this book in some ways. I can see the thread of that philosophy and what you are talking about here.
Jim Rushton: In my mind it is because the book is really about how to get to information, and we are just not very good at that as humans. Our brains don’t work that way. They can be tricked very easily.