Author: Ian Ayres
Who should read it: CEOs, CMOs, Company Founders, Entrepreneurs
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Supercrunchers is a great primer for entrepreneurs on mining value from data. It is a fun read and the money-making opportunities it spotlights, makes it worth its weight in gold.
Data mining and selling the discovered insights presents one of the most lucrative opportunities of our decade. Think Google and Netflix : this book is a roadmap for founders to capitalize on a megatrend. The format is entertaining, comprising dozens of real stories of startups, businesses, doctors, artists and government groups using analytics to change how decisions are made.
Supercrunchers highlights a number of ‘big ideas’ and gives clear suggestions on how to implement them.
First the big ideas:
1. The use of predictive analytics is becoming endemic in consumer and professional life. It is changing how we work, buy things, meet people, recreate and deliver/receive expert advice. This presents one of the biggest money-making opportunities for founder entrepreneurs in the next decade. I am doing a lot of work in this category.
2. Data is becoming much more available. Predictive analytics as the basis for highly informed decision making is becoming mainstream as a result. It is often either freely available through the web or behind firewalls for relatively modest fees - predictive data is vastly undervalued today.
3. People have a deep-rooted, emotional challenge with relying on analytics for decision making. It took 100 years for Copernicus’s discovery that the universe did not revolve around the Earth to be accepted, because the human psyche could not accept that the Universe had not been created for the human race. Similarly, it can be hard for us to believe that our intuition or judgment can be improved with data and algorithms. Many people will overlook opportunities to apply analytics, leaving the entrepreneurs who think “out of the box” to capitalize on the situation. If you question this, think about the fact that the most valuable company in the world is Google, built with page rank technology.
4. The author sees a future where we use analytics as scaffolding, and flow effortlessly between intuition and analytics, capitalizing on the benefits of both and retaining some of our ego. For entrepreneurs, the resulting business process changes are great startup and/or market expansion opportunities.
You can employ the lessons in the book through a toe-dipping strategy or taking a full dive. Both are immensely valuable:-
The big win with this approach is to get your organization really tuned into the information available to improve decision making. Full Dive Strategy: You can jump in more aggressively from the start: build a predictive model that can generate dramatic process improvements. With today’s tools this is easier than you might think. As an entrepreneur I have done this several times now in my businesses and have found it to be incredibly effective (and profitable!). 1. Pick one of your most important business processes. It should be repeatable, happening at least several times per year. As an example, when advising founders on selling their business, I created a model predicting when companies would most likely be acquired based 5 different data inputs. This enabled me to focus on advising founders most in need of my counsel. 2. Set a target for your success rate. This doesn’t need to be perfect, just significantly better than your current predictions. For example, many entrepreneurs are amazed at how much time and resource is wasted marketing to people who don’t buy, or are poor customers. If 1 in 10 initiatives are currently successful, set a goal to get that to be 1 in 3. 3. Next is the fun part: ask yourself what information you need to make the prediction. Assume for a moment that any information you want exists. You may already know it, you just haven’t put it all in one place. It may be in your databases, or available on the web. Important: if the specific data you want is not available, think of a proxy. For example you may not know when a public company has slowing sales growth, but you can see from job boards when they are pulling back on hiring. 4. Finally put the data in a spreadsheet. Your model can be simple enough that you can eyeball the data and see a pattern, or sophisticated enough to use the spreadsheet function that does a regression analysis. A good spreadsheet jockey can help with this. 5. Set a target to improve the process, get more data and improve the results. You may need to get some help but for most projects this is not very expensive.
The Toe Strategy: Start collecting and using data for informed decision-making. This is so easy to do you will soon wonder why you hadn’t done it before. For me, the most dramatic change in tracking data is the improvement to your innovation cycle time: you can rapidly correct your course and innovate ( See Talent is Over-rated blog).
You don’t need to have a perfect answer or even to be correct all the time, you just have to be correct more often than your alternative (or competitors). In the words of one of my favorite - and most profitable – quotes from the Dutch scholar Erasmus: “In the Land of the Blind, the one eyed man is king."
ISBN 978-0553384734
A comment added by the book's author, Ian Ayres on 12/09/2009:
Thanks for the review. If you want to do some predictive analytics yourself, you might have some fun and my "prediction tools" page http://islandia.law.yale.edu/ayers/predictionTools.htm where you can predict all kinds of things -- like how Justice Kennedy will vote on his next case.
Thanks for the review. If you want to do some predictive analytics yourself, you might have some fun and my "prediction tools" page http://islandia.law.yale.edu/ayers/predictionTools.htm where you can predict all kinds of things -- like how Justice Kennedy will vote on his next case.
Posted by: Ian Ayres | 12/09/2009 at 03:11 AM