I recently read an article in WSJ.Money magazine that profiled how University of Notre Dame business graduate student, Cory Albertson, mastered the massively popular fantasy games market. Where most sports fans use emotion, intuition, and hype to play in these leagues, Albertson determined that success in this massive $3 billion dollar business is all about data.
He spent months developing a sophisticated algorithm that gathers, evaluates, and ranks key data points. “It is all about having logical inputs that lead to logical outputs,” he says.
Last year he made more than $200,000 and is projecting to make over $1,000,000 this year. More interesting, Albertson believes that the value created by mastering the fantasy game data will allow him to bring on investors and create something of a fantasy sports hedge fund.
Similar approaches to using data have also reached the business world. The movie “MoneyBall” popularized the idea that professional baseball players could be evaluated using analytics. Previously, as the movie portrays quite well, baseball relied heavily on the ‘experts’ who had years of experience and intuition to evaluate the qualitative factors. Albertson dismisses this as bias and “only trusts the numbers which tell him who is overvalued and who is undervalued.”
All of these scenarios seemed like a rational evolution as people and organizations learn best practices from other industries. That is why I was shocked to read the results of the 2014 Smart Manufacturing Technology Survey results.
Only 20% of respondents indicated that they use objective data in evaluating their business. That means that the large majority of businesses are relying on subjective inputs in making key business decisions. It is good to know that some businesses deploy techniques like Cory Albertson and the Boston Red Sox, but it is a scary thought that the majority of businesses still think ‘gut feel’ is the way to succeed.
The other key statistic from the survey was that 54% of companies reported that at least 10% of production cycle time is non-value added process waste. If your company incurs $10 million in production costs, that is the equivalent to $1 million dollars on the bottom line. Alternatively, if it takes 10 days to produce a product, one day could be saved with proper processes.
Competition continues to grow and the only chance of success is to be the best organization possible. Whether competition affecting business is from local technology improvements or overseas entrants, companies cannot continue to do what they have always done or they will be wiped out.
The contrast of the fantasy football example and the current state of business crystallizes that there is still a lot of work to do to improve the business competitiveness. Despite the obvious benefits, two key business tactics still need to be embraced in business:
- Master your data – proactively capture key business metrics, rely on the data to make key decisions, and continually improve this process.
- Drive out inefficiency – use the data to identify process inefficiencies and vigorously remove impediments to a better process.