Monday, June 6, 2016

BADIR: A Simple Approach to Analytics

The best companies in the world have embraced data analytics. They know how to capture and analyze data for continuously solving problems and improving the bottom line. Unfortunately, analytics is often lacking for less sophisticated or smaller companies. One way to put analytics into your business is to follow the BADIR Formula:

  •  Business Questions are Defined

  •  Analysis Plan and Models are Selected

  • Data Collection for Running the Models

  •  Insights are Gained by following Steps 1 thru 3

  •  Recommendations issued to Management

Let’s start with defining the problem. This is important since some Analyst immediately rush to apply analytical models that may or may not fit with solving the problem. Instead, you want to clearly understand what you are trying to solve and this leads you to selecting the appropriate analytical model(s).

One way to define a problem is to use root cause analysis. It doesn’t have to be complicated. Toyota invented a simple approach of asking Why several times until you identify the source. This is the “business question” or Step 1 of BADIR - Why is this happening? Once you know Why, then ask other questions for understanding the scope of the problem.

Now that you have the problem defined, you can develop the plan and select the right models for solving the problem. Perhaps the most popular of all analytical models is SWOT – Strengths Weaknesses Opportunities and Threats. If you are trying to assess what your current situation is, then this the analytical model you would choose. If you are trying to understand your industry, then you most likely will reach for Porter’s Five Forces. If you are trying to analyze your different product lines, then you would use the Boston Consulting Matrix. Each of these models has its own data needs. This is why we defer model selection until Step 2 and this in turn drives our data analysis and collection plan.

In Step 3 we want to collect the data for the analytical models selected in Step 2. In the case of SWOT, you need to collect information about opportunities and threats in the marketplace. This may require research using other analytical models such as STEEP – Social Technology Economics Environment Political. With STEEP, you conduct research into trends impacting your company across these five dimensions. There are all types of analytical models available – it’s important for people involved in analytics to understand the full range of models available.

In Step 4, you want to provide information to Managers – something they can act on. Dumping data on people does not work. You want to show people what is happening and compel them to take action. This requires giving decision makers insights; i.e. intelligent information that is highly useful and informative. It may be something that helps you understand your customers better or maybe it helps identify a weakness in your operations or maybe you shed light on new opportunities in the marketplace that the company is failing to address.  

“You can never have too much insight. The more you see, the better the decisions you make – and you never want to be in the dark. You want to see what lies ahead, preferably before others do. It’s like playing the game Let’s Make a Deal where you have to choose the door with the hidden prize. Which door do you choose? They all look the same, so it’s just your best guess – your choice depends upon you and your luck. But what if you had an edge – the ability to see through the keyhole? Predictive analytics can give you that edge.” - Predictive Analytics for Dummies by Anasse Bari, PhD, Mohamed Chaouchi, and Tommy Jung

In Step 5, your final step is to give people recommendations on how they can address the issue. This expedites the process and delivers much more value to the decision makers. In some cases you may have to present several options or high level recommendations that require additional analysis. You may need to form a Tiger Team for a rapid response or task a specific department to develop recommendations by a certain deadline.

This is where the real benefit in analytics resides – searching and forcing something new as opposed to just doing the same old thing. It’s about inventing and re-creating something in a rational way, derived from collecting and analyzing your data. We all want to be optimistic about the future, but it has to be based on real data and analytics. This is why every company should be following a mature process for analyzing their data.

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