Analytics Process

23 11 2009

Over the last couple of months I have been writing about a handful of US Economic Indicators.  While I have reviewed these over the last few years of my life, I had not done so on a regular basis.  This inconsistent and let’s call it a casual curiosity lead to never really understanding the implications behind the numbers.  Sure I could talk about them, but I could not leverage them.  While not an expert by any means, I can see a lot more now than I did when I started this blog series.

This is similar to ad-hoc analysis without purpose.  We do something once and create a little hype.  When we don’t have any vehicle to take advantage of the newly found ideas, the idea dies as does the learning.

Think about the process of how you handle ad-hoc analytics within your organization:

  • Do you have the right minds constantly looking for new issues?
  • Or, do you put the right minds on solving issues when they arise?
  • Can you name your best analytical minds?  Are they assigned to thought leadership and problem solving?
  • Do you use your analytical minds to challenge the knowledge levels of others?
  • How do you foster new thinking?

 

Consistency breeds familiarity, and familiarity breeds knowledge





Consumer Price Index – October 2009

20 11 2009

Yesterday the US Department of Labor – Bureau of Labor Statistics released the October report on the US Consumer Price Index (CPI).  Not all that surprisingly, the number rose .27% following last months .17% growth.  This marks the six straight month of growth in the CPI and that the Index is returning to the trend line prior to the October disruption.

In the chart below are two parallel lines marking a rough trend of the CPI.  It appears as if the steady growth rate is returning.  This is at least an indication that the economy is stabilizing.





Mass Layoff Events October 2009

20 11 2009

Today the US Department of Labor – Bureau of Labor Statistics reported the October Mass Layoff Events (here are the Sept and Aug blogs).  We have watched this since late last year when the number of events crossed the 2,000 mark.  This marks our 14 month in a row where we have exceeded that level.  While this is still an alarming rate of Layoff Events at least we can say that the trend could be moving in the direction of dropping below the 2,000 next month.

I still have concerns about the state of the US Economy as we approach the end of the year.  If I were to guess, I think we will see this number drop below 2,000 for November, but return to greater than 2,000 in December and/or January.





Producer Price Index October 2009

18 11 2009

Yesterday’s Bureau of Labor Statistics (BLS) release of the Produce Price Index (PPI) saw prices moving north again, this time a .3% gain compared to last months .6% loss.  The numbers seem to be stabilizing (one month a little up, on month a little down).  Looking into a little more depth we see that Energy and Food are the primary drivers.

If you are looking for more information relevant to your industry – check out www.bls.gov/ppi/.  They break out the information a number of different ways.

 

 





The Death of the Dissenting Opinion

16 11 2009

Typically, the person with the shortest shelf life within an organization (either in terms of politics or employment) is the team member willing to pose the question, “Is this the right thing?”

  • Why do we demand everyone line up and support management philosophy?

I know organizations don’t set this as a mandate, and it is probably more an example of personal politics, but it is amazing how destructive this mentality becomes. Why are we so worried about having someone in our business ask critical questions?

The are obvious examples when we need someone to play the role of the Devil’s advocate.

  • Would tobacco products have been created with such strong addictives?
  • Would Nasa have launched the shuttle Challenger?
  • Had the US intelligence agencies worked together, might we have stopped at least one of the fateful 9/11 planes?
  • Would Enron still be an energy giant today if we listened to employee concerns?

We love good debates, so why not embrace the power of dissenting opinion?  Collect all the feedback and you probably have a stronger argument for moving forward.  In the end, you can still continue an initiative or program.  When we politically assassinate the people with a strong voice, we send a message to agree or be rendered ineffective.  This evolves into a “yes” culture and we risk leading lemmings.





The Cost of Infrastructure – Environmental Scanning (Blockbuster vs. NetFlix)

12 11 2009

Last week in a workshop I was asked the question about Environmental Scans and Strategy Management.  The challenge was probably long overdue.  When I was first drawing up my framework on Performance Management, I specifically wanted to call out questions about how we look at the market.  I felt I had seen too much insular thinking within companies with the risk being much too high.  We need to be looking at the market on a regular basis, perhaps not with high frequency.

Let’s roll back the clock on the movie rental business to 1990.  In almost every suburban strip mall was a mom and pop, or small chain movie rental store.  We were able to rent a movies and watch them in the comfort of our on home.  There was no DVR (though if we could figure out the VCR we could have taped movies), there were not 427 premium movie channels, and cable was still in its infancy.  Over the next decade, Blockbuster moved in and wiped out almost everyone else in the industry – “opening one store every seventeen hours” (Wikipedia – no reference).  We loved the new model, and the fact that our membership card worked even when we were on vacation.  If we went back and looked at the analyst reviews, I am sure they had glowing views of how this was the model for the future.  Viacom jumped in and bought the business for $8.4 billion in 1994.

Oh, how internet time flies.  NetFlix with no brick and mortar costs jumps into the game (not to mention DVR, Pay-for-View, TiVO, etc) and what was once valued as a $8.4 billion dollar business was spun back off for a fraction of its original purchase price.  Today Blockbusters market cap is ~$160 million (compared to NetFlix $3.2 billion) and it continues to loose money.

What happened…you can spin this a number of ways:

  • They were too tied to their infrastructure
  • They were slow to react, or never really understood the threat before it was too late
  • They thought they were too big to fail

They were a great business model, let’s take a cottage industry and scale it.  And it worked great for a decade.  How do you think they would answer the question about the relevance to a more rigorous environmental scanning process?

Just think, perhaps even one conversation about “what would happen if someone figures out how to deliver movies via the internet” might have saved Blockbuster.  I know, I know, this could never happen to you as this was an isolated incident.  Think of the travel industry, General Motors, Enron, Compaq, CompUSA, TWA – and I am sure you could add 20 more…

Companies, like the products they often make, have shelf lives.  If we are not thinking of new ways to reinvent ourselves, it is highly likely someday we will become a “where are they now” business case.

  • What do you specifically do to challenge status quo?
  • When was the last time you had your best minds come up with the next generation business models?
  • When was the last time you identified the 3 largest threats to your business?
  • When was the last time you had a 3rd party provide a critique of the market you are in?




Defining the Customer – Brandwagon

9 11 2009

One of my favorite strategy quotes is Michael Porter’s – “The essence of strategy is choosing what not to do.”

It is easy to jump on what we perceive as good deals, or trends.  Take for example my old story about Patagonia after Sarah Palin stated Patagonia as one of her favorite brands.  Instead of jumping on the bandwagon of seemingly a guaranteed increase in sales, they choose to distance themselves from Sarah Palin with the following quote:

“Patagonia’s environmental mission greatly differs from Sarah Palin’s,” Patagonia rep Jen Rapp told the WSJ. “Just wearing the clothing of an environmental company does not necessarily make someone an environmentalist.”

Or when Pepsi comes knocking with a “great deal”…

  • How well do we know our customers?
  • Can we use this to our advantage and draw more people in by being selective in what we offer?
  • When Wal~Mart moves into town…do you change what you do, or let them eat up your profits?
  • How unique are you and what value does that create?




Employment Situation Oct 2009

6 11 2009

The employment situation continues to demonstrate the frailty of the current economic climate.  In Sept the unemployment rate was 9.8%, Friday it was announced that Oct witnessed this number increase to 10.2%.  “This is the highest rate since April 1983.”  We are also at the second highest point (and growing) in the history of tracking the data – 1948.

(Here is the link to the commissioner’s report to Congress and the original report)

Employment Situation Oct 2009

If we look at a visual of the informtion, a number of things jump out at least to me:

1.  The Good, it looks like (at least to me) the higher the number, or the swifter the increase, the quicker the the unemployment rate drops.  There appears to be a natural slope (green line – A) to the decline in the the unemployment rate after a spike, which then is followed by a less gradual slope that marks a return to a healthy market (red line – B).  In roughly 1975 and again in 1983 we saw two spikes which then followed the green line’s slope – except in the case of 1983, we actually saw that trend bear out over the longer term, yet moved faster during the initial recovery period (reb box).

2. The Bad – if this follows the trend pattern of 1983 we may be looking at another 7-8 year recovery process to return the unemployment rate to around 6% which roughly appears to be natural healthy level.

3. The Ugly – We have yet to see the peak of this trend.  And even if this does turn around in the next month or two, we are so bad a shape across so many other sectors it may take far longer for us to return to a 6% unemployment rate.  If we continue to see credit tighten up at the rate it is going, we will see continued pressure on unemployment.





Price of Oil

27 10 2009

One of the biggest impacts to the US economy is the cost of oil.  We are still the leading consumers, though our lead is being taken over by China.  It is no surprise that the price of oil/gas can either fuel US economic growth, or bring it to a crawl.  I remember (somewhat fuzzy) as a kid waiting in line for gas, and I sold my Ford Expedition in fear that gas was going to see $5/gallon last year. While perhaps I sold the car a little prematurely, the basic fundamental truth about the control of the price of oil is well beyond me. And in someways beyond any of us.

OPEC mostly gets away with what it wants in terms of prices, and China is clearly working to leverage its relations with OPEC countries to improve its position.  While this isn’t necessarily bad for the US, we do lose some of our bargaining power.  And as China continues to increase demand, it drives up market prices.

I am going to try to add the Price of Oil to the Baumohl Indicator series on a bi-weekly basis.  My goal is to continue to explore some of the indicators of US Economic Performance and how they impact business cycles.





Mass Layoffs Sept 2009

22 10 2009

The Bureau of Labor Statistics today announced the Mass Layoffs from September.  The number of events (more than 50 people laid off) is down a little from August, but we are still seeing much larger levels than normal.  The September number of 2,561 layoff events is roughly 2x the normal average.

This is a slight sign the economy may be bottoming out.  What is still disturbing here is the consistency of the level of mass layoffs.  For the last 12 months (see blue box in chart) we have had over 2,000 events per month compared to a normal level of 1,250.  We are still adding too many people to the unemployed – and a system that is built to run on full employment.  Over the last 20 years we have only seen two other spikes, yet in both of those periods we only saw a brief period of spike.  And again in neither of those cases did we ever reach 2,500 events.  Over the last 12 months we have seen 5 months in excess of 2,500 events.  Not good news on any front.

Quite soon, we need to see a substantial drop in Mass Layoffs to give us a positive  indicator that the economy is turning around.  We see a good number of positive signs, but this one is still a big red flag.  Again, if we look at the post 9/11 trend you can tell this trend tapers back to normal.  Mass Layoff Events Sept 2009





Producer Price Index Sept 09

20 10 2009

This morning the Bureau of Labor Statistics released the September 2009 Producer Price Index report.  The PPI dropped a little this month mostly due to cost of gas declines (0.6% decline).  In August we saw a significant increase at 1.7% raises a little alarm in that the fluctuations are evident.  The fact that most of this is based on energy prices swinging is both a little calming and potential for more signs that oil prices are moving too much.

“Wholesale prices in the U.S. unexpectedly fell in September on lower fuel costs, a sign inflation remains muted and the Federal Reserve has leeway to keep borrowing costs low as the economy recovers.”  Bloomberg

What does this mean to me: we will probably not see much increase in prices over the coming months (keep watching the price of oil/gas).  This is also a sign that while some of the recent indicators have been good, we might see a lull in the recovery process.

As a part of this series, I am also going to add the price of oil.  It was not one of the Baumohl Indicators, but I think that might have been because it comes out of the financial markets.





Product Complexity

19 10 2009

Jonathan Becher of the Manage by Walking Around Blog last week wrote about “Less is More.”  While he starts out with an attack on PowerPoint presentations, he then broadens his commentary to software.   His point is spot on and while I can not think about specific example in software, there have been a couple of interesting technology gadgets that could answer his question.

The most obvious to me is the Flip video camera.  They started with the premise that you don’t need all the special effects, and gadgetry that bloats R&D, wastes battery life, and ultimately increases the cost.  They provided just a video camera with a USB connection to download the film.  No more, no less.  And surprisingly (and telling) in the age of endless features that are rarely used it was an immediate hit.

  • In your space, are there customers that are over-served by the functionality of the competitive product suites?  If so, could you use this as a little Blue Ocean styled opportunity to address a new market?
  • How much of your product’s features are truly used?
  • Are the core functions of your product complicated by the rarely used features?
  • Do you run the risk of over complicating your product to its own demise?

I think it will be interesting to watch Flip grow over the next few years.  Will it attempt to morph the product to compete with the more complex video cameras?  Will it lose it’s identity as it does?  Is accessorizing the Flip a step in complexity, or merely a nice personalized touch?

Too Much

If we take Jonathan’s initial question a step in the opposite direction, can you think of a company that got too complex for its own good?

Here I think we can come up with a great many examples.  A clear example is Social Networking.  The initial idea behind LinkedIn was fantastic and it was easy to see why everyone bought in.  Lost former co-workers were easily found, and we could maintain a single repository for our network.  No matter when they changed jobs, everyone updated their profile.  Now, in an attempt to do more, LinkedIn is at risk of losing their audience.  Groups were a great idea, but their were no controls, no rules on how to use them (or not use them).  Now there are groups in every direction and people are using LinkedIn as a database marketing tool for pushing spam.  Facebook is perhaps beginning to fail under a similar complexity.  We all have friends that put their entire lives into Facebook (which may create its own problem) and send out virtual drinks, winks, pokes, games, flair, etc.   I would love to periodically hear what my friends are up to, but I can no longer find that out unless I spend a tremendous amount of time to design and manage the environment.





The Dow (DJIA) hits 10,000

16 10 2009

On Wednesday this week (October 14, 2009) the Dow Jones Industrial Average topped 10,000.  Although it struggled out of the gate this morning, I am curious why we did not take the time to celebrate re-reaching this milestone.  Clearly, this is a sign that the economy is chugging forward again.

If we look back to September 19th, 2008, the DJIA closed at 11,388 and only days away from near free fall.  Over the next couple of days, panic would set in and the markets were paralleled to “The Great Depression.”  The DJIA at 10k represents we have recovered 70% of what we lost since September 19th, 2008.  We still have a way to go, but a little celebration might just be what we need right now.  Not much, we can’t afford the hangover, but perhaps a little toast to reaching 10k again and may we keep doing a little better every day.

Looking back…Between Oct 24th, 2007 and September 19th, 2008, the DJIA shed about 20% of its value (14,093 to 11,388).  It would then lose an additional 34.4% by March 9th 2009 when the market reached its lowest level in 12 years at 6,547.  If we start the clock at Oct 24th, in two years we have recovered about 45% of the losses we incurred during the recession of 2008 and 2009.  Perhaps not as happy a picture, but consistent progress in the right direction.  This still represents ~50% recovery in 6 months, what we lost over two years.  If the trend holds, perhaps we are back to 2007 levels within another 6-8 months, and then can continue to recover on the lost time.

DJIA Recovery

The other item worth noting is the declining variation in the closing gains.  Over the last three months, the variability has diminished to levels not seen during the recession.  This is another great sign indicator of stability and overall economic health.  The market likes gains, but it loves consistency.

DJIA Recovery Variation





Consumer Price Index Sept 2009

15 10 2009

The CPI for September was released today.  Nothing all that surprising – it looks like the rebound last month towards a positive trend (perhaps not for everyone), or an upward trend continued for a second month.  It appears as if the trend may be resetting with a 1.3% drop from where we were in Sept 2008.

CPI History 1997

How to use this information:  Have your internal statistician look at CPI (and PPI) and see if they give you any early warning signs against some of your variable costs – raw materials, finished goods, average selling price, etc.

  • Does CPI move with your Cost of Goods Sold (COGS), or your margins?
  • Could it give you a one month warning to tighten the belts a little bit?
  • What is the impact on your average selling price?
  • Do your customers move faster than you?

Historical Trends

If we look at this from a historical perspective, we can tell there has been a stead upward trend since the mid 60’s.  The variability was pretty consistent from the mid 60’s through 2004, then in 2005 it looks like the variability began to increase.  These charts don’t provide us much actionable information, but show us the trend has been consistent, and that there was a disruption with the recent economic conditions.  This disruption is what is highlighted in the earlier part of this blog.

CPI History 1913





Employment Situation Sept 2009

6 10 2009

Statement of Keith Hall, Commissioner, Bureau of Labor Statistics before the Joint Economic Committee UNITED STATES CONGRESS (PDF of his speech, or PDF of the actual report)

Job losses continued in September, and the unemployment
rate continued to trend up, reaching 9.8 percent. Nonfarm
payroll employment fell by 263,000 over the month, and losses
have averaged 307,000 per month since May. Payroll employment
has fallen for 21 consecutive months, with declines totaling 7.2
million. In September, notable job losses occurred in
construction, manufacturing, government, and retail trade.
Construction employment decreased by 64,000 in September.
Job losses averaged 66,000 per month from May through September,
2
compared with an average of 117,000 per month from November 2008
through April.

“Job losses continued in September, and the unemployment rate continued to trend up, reaching 9.8 percent. Nonfarm payroll employment fell by 263,000 over the month, and losses have averaged 307,000 per month since May. Payroll employment has fallen for 21 consecutive months, with declines totaling 7.2 million. In September, notable job losses occurred in construction, manufacturing, government, and retail trade.

Construction employment decreased by 64,000 in September. Job losses averaged 66,000 per month from May through September, compared with an average of 117,000 per month from November 2008 through April.”





Analytics Competency Center

28 09 2009

We spend a lot of time on Business Intelligence, Master Data Management, Data Governance, Standardization, off-shoring, etc., yet I rarely hear organizations spending time and energy on analyzing the data.  We have cubes, we can do all sorts of things with reports and dashboards, yet I still hear people say “I need more information!”

It is impossible that we are short on data!

  • How then are we not getting enough information out to the organization?
  • Is it possible that we are spending all of our time and energy on data preparation and data movement?
  • Are we creating value, or just planning to create value?
  • What about creating a center of excellence around the business user?
  • Or something around the levers of the business?




Mass Layoffs August 2009

24 09 2009

Yesterday the Mass Layoff report was issued by the United States Department of Labor – Bureau of Labor Statistics.  The data here is interesting in a few ways.  The Mass Layoff report highlights the number of events where 50 or people were laid off by the same firm.

  • Perhaps a little good news for the US economy
  • A little analytics lesson

First off, the US Economy.  We can look at a couple of things here that probably tell us the situation is still bad, but perhaps another indicator that we are rebounding.  In the first chart, the bars represent the events (not total layoffs – but the numbers are highly related).  You can see that the number for August appears to be quite a bit better than July and the previous 12 months, but August is also lower in general.  When you consider the raw volume of the last 12 months, perhaps we just ran out of people to layoff.  My initial assessment is that while it looks like we are heading in the right direction, we may just be witnessing the normal August dip.  Call it cautious optimism.

Aug 2009 Mass Layoff Peaks

Now looking at the data from a visual standpoint…below is how we typically look at this type of data.  Here we would conclude that things look like we have hit bottom and are moving in the right direction.

Aug 2009 Mass Layoff Raw Data1

Yet if we look a little more closely at the data above (and perhaps dig at some of the underlying regional or industry data) we can make a lot of different potential comments.

  • We are coming out of a major event – any data is going to be a little blurry.  Any investments are going to be risky, but with that risk comes the upside reward of potentially being a first mover.
  • The general trend might be improving, but the volumes are still way above normal levels.  How long can we continue to shed people like we have for the last 12 months?
  • The peaks and troughs also show that we are still greater than 2x normal levels.  Clearly, there are still problems in the economy.




Wii or not to Wii

22 09 2009

One of the most interesting brand developments in a long time is the Nintendo Wii.  The video game market has been hot for some time now, but the story was the same.  Better graphics, better visuals, better reality and gore filled titles.  How do you break out of the crowd?

Look no further than the Nintendo Wii for a great story.

How about finding a different tact all together?  By starters, let’s take away a barrier to purchase – parents that don’t want their kids just sitting in front of their TV.  Let’s add an element of physical activity into the game.  Then let’s market family styled competition.  This is nothing less than brilliance.

  • What can you do to change the market parameters?
  • When was the last time you had a meeting of your best minds to challenge status quo?
  • Are you playing leap frog with your competition?
  • What would happen if you did something radically different?
  • When was the last time you came up with a brilliant idea and pushed it forward?




Survival and Adaptability – Hot Arple Pie

20 09 2009

I noticed an ad today absolutely worth noting…it simply and succinctly said:  “Does your marketing suck?”

At first I was shocked and appalled, but the more I looked at it I found myself compelled to click on the ad.  Who in there right mind would start an ad that way – probably someone willing to try something different.

It also jostled an old memory from one of marketing professors about a similar incident.  As he was driving to a client one day he passed a sign that said “Hot Arple Pie.”  He knew it was an apple pie, and was not really all that interested in apple pie, yet the sign got him thinking enough that he turned around to actually see if it was “apple” or “arple.”  And as you guessed it, 30 miles and one sale later and it was confirmed “Hot Apple Pie.”  And 20 years later, I am still thinking about “Arple Pie”

So back to “Does your marketing suck?”  It was catchy, adversarial, and in the end it moved me from unknowing to slightly informed. Perhaps in this case, the ends certainly justified the means.

Take a look at your marketing material:

  • Does it intrigue?
  • Does it invite action?
  • Is it any different than your competition’s?
  • When was the last time you changed up your marketing campaings, slogans, taglines, etc?
  • Can you afford for your programs to perform at the rate they are performing?
  • Would you consider your company competitive in terms of adaptability?

Interestingly enough, once I clicked on the ad I was taken to the company’s home page where I found a great quote:

“It is not the strongest species that survives,

nor the most intelligent;

but rather the most adaptable to change.”

Charles Darwin





Performance Management Defined

17 09 2009

Last week I asked Jonathan Becker of Manage by Walking Around blog and Gary Cokins of Closing the Intelligence Gap blog to argue the definition of Performance Management and what it might look like…and in all fairness, I need to also share mine:

Performance Management is composed of three distinct disciplines, Strategy Management, Operational Performance Management, and Financial Performance Management. It is a systematic and standardized management and communication process to proactively enhance performance gaps.

  • Strategy Management – to set direction, foster alignment, and communicate priorities
  • Operational Performance Management – where we execute our goals and objectives by creating customer value along with our core processes.  This is also the most widely defined as each industry handles this somewhat differently, but how we manage it should be integrated with a common process.
  • Financial Performance Management – to provide insight into what resources we have and how best to use through monitoring and reporting upon the budget.

In addition to this we need to use within the same system our enabling support structure.  This includes managing technology, culture, people, etc.  Each element needs to be improved upon based upon strategic need, thus helping to eliminate personal politics and squeaky wheels.  Below is my Performance Management framework.

PM Framework Master

Gary makes a great point that most people create a framework that is intentionally incomplete to enhance their offerings (and I completely agree).   I built the above framework with the goal of a complete framework.  It is not perfect, but I feel provides a strong starting point to assess our process improvement gaps.

In the end, management is just a process, albeit a very important one.  It needs to be enhanced and improved to leverage the most of the management talent.