Thursday 5 June 2014

Getting a fix on Big Data by switching your focus from 'dot collection to dot connection' (Seth Godin)

Ideally, Big Data - the ultimate 'dot collection' - provides total knowledge, real-time, and requires optimisation via real-time action.

However, leaving aside the amount of computer firepower required to manipulate large data-sets, real-time, with the attendant costs and time implications, it is obvious that Big Data is too big for NAMs to ignore...

Apart from the need to cope with the crazy compromises of real life account management, it seems obvious that NAMs need a way into the potential insights represented by 'total knowledge'. Whilst it can be tempting when under time pressure to revert to a 'fixer' role by deciding on a solution and diving into the data in a search for facts that support our prejudice, it seems obvious that more is required.

On the other hand, awaiting the collection of all the dots can take too long...leaving time for a more pragmatic competitor to find an 'adequate fix'.

What the pragmatic NAM needs is a basic reference-point, a way of looking at the data, and some courage...

One approach can be to acknowledge that a retailer is ultimately measured by Return On Capital Employed and its attendant ratios Net Margin and Capital rotation (stockturn), driven in part by like-for-like sales performance and market share. All else is supportive of these measures...

How to help Tesco?
For instance, Tesco's latest problems with their share price arise from the fact that the global financial crisis has reduced their key results to the following:

Tesco 2013/14: ROCE 8.2%, Net Margin 3.6% and Stockturn 17.8%, whereas Walmart, in the same global climate, have managed to maintain their pre-crisis performance:
Walmart 2013: ROCE 18.2%, Net Margin 5.2% and Stockturn 10.6%

A NAM wishing to use Big Data to help Tesco, needs to access the dot collection looking for ways to improve Tesco's margin (i.e. by driving sales and cutting costs, shopper marketing etc.) and increase stock rotation (i.e. via smaller, more frequent deliveries matched to shopper need, catman etc.)

Avoid the temptation to use every dot, and focus on real creativity, the ability to connect enough of the dots to get to Tesco with a workable plan, before the next guy... 

See Seth's blog here

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