The “big data revolution" just keeps getting bigger. 
And more confusing, too.
How can a small business make sense of it as big companies like Amazon, Cisco and FedEx do?
Well, there is a “back of the envelope” trick that can greatly reduce the time and expense of making decisions based on facts and data...
and not just “gut” and intuition.
Decisions like where to spend scarce ad dollars, the right messaging to use in those spends, who to hire, who to fire, which new products and services to develop, and the list goes on and on.
And it is in this “on and on” element where data-based decision making gets complicated very quickly.
“Split tests,” regression analyses, choices as to which sets of data are important, which are noise, and then which software to use to organize and interpret it, to name just a few.
And even when we get all this right, the business challenge remains of doing something positive and profitable with it.
The disappointing result of all of this complexity and ongoing intellectual burden is that data - based decision making, in most companies, is done sporadically, poorly, or not at all.
I don't see this dynamic changing anytime soon.
Most companies are just not going to benefit from the big data revolution as it is currently construed without a significant simplifying of the process.
And a great “back of the envelope” simplification trick is the concept of Expected Value.
Expected value is the idea that for business decisions, there are just two factors to consider - 1) the probability of the series of outcomes resulting from that decision and 2) their related economic values.
Just get these two factors right and we can quickly determine whether or not any decision is a good, or a “Positive Expected Value” one.
From this frame we can break down complex decisions into simple bites.
To illustrate, let’s evaluate a simple marketing spend decision, such as deciding whether or not to invest in a new advertising campaign.
Let’s say we are considering a $15,000 monthly ad spend on Facebook, with the related goal / hope of securing 10 new customers from it that will generate on average $5,000 in profits each.
As we are clear as to the economic value of the success outcome - here, the $5,000 in profits from each new customer (which is usually reasonably easy to calculate) - we can focus on determining the outcome probabilities.
As in what is the probability that we generate zero customers from the spend?
3 customers, which would get us to break-even?
5 customers? 10? Or more?
When we grapple with these probabilities, the depth of our confidence or unease will become quickly evident.
More often than not, we’ll get to a vague “feeling,” and depending on how strong the feeling is, we will either just “damn the torpedoes” and plunge forward or get stuck in the dreaded “no decision” mode.
It is at this juncture where thoughtful data analysis can vastly improve our confidence, and speed of decision-making.
Some of this analysis can be benchmarking, as in utilizing the plethora of online competitive intelligence tools to determine marketing spends and yields of companies with marketing campaigns similar to ours.
Some of it can be vendor assessment, as in asking marketing agencies for data - based on examples of successful ad campaigns they have managed, again for scenarios similar to ours.
And some of it can be internal, as in dispassionately evaluating our appetite for risk and comfort with uncertainty, and our ability to financially withstand losses from campaigns and new initiatives that don’t work - i.e. how much are we prepared to lose before we we win?
All of this analysis is still serious and difficult, but is far more “contained” when we do it exclusively for the determination of probabilities.
Try it for your next important business decision.
It allows any executive to quickly start making better decisions based on data.
Without getting lost in all of the numbers and the noise.
Are you facing a key business decision? Considering an important new initiative? Would you like help in evaluating its probability of success? And its related expected value?
If so, then complete this short questionnaire and give us a brief description of your current situation. And we’ll reach out with our thoughts to help you.