Winter Olympics Vancouver - What is the Best Measure of Success?
We’re all familiar with the medal tally that comes out of any Olympics, summer or winter and there’s much conjecture about the relevance of the medal tally. From the recent Winter games that were completed in Vancouver, the overall medal tally (i.e summation of gold, silver & bronze medals) was as follows:-
United States 37
Germany 30
Canada 26.
Based on the overall tally Australia came in 18th with 3 medals.
However, if success is ranked by gold medals then the leaderboard is
1. Canada
2. Germany
3 United States and Norway.
Australia comes in at 14th.
Recently though there was an article referenced on the Freakonomics website, where they recast the medal count by market value. The gold and the silver medals are actually 92.5% silver, while the bronze medals are mostly copper. So the gold medal, which is really just gold plated, is valued at $537, the Silver medal is valued at about $300 and the bronze medals are valued at about $3.40.
When the medal tally is ranked by market value then it is as follows:-
1. Canada $9,635,
2. United States 2nd $9,377
Australia was 14th with $1,374.
However, if you count every medal won by a country, i.e. one for each player, on the hockey team and the bobsled and so forth, then Canada was very much clearly out in front with $41,000 of value and 68 gold medals. The USA with 12 gold medals and had a market value of $25, 719 in value and based on this measure Australia was 15th with $1,374.
Now these are an interesting aside, but the interesting question is “What is the best measure of success that we should be looking at from an Olympics?” As you know, I always try to boil it down to the one main number, the one main thing we focus on and I’ve been trying to consider in my mind, what is the important measure for the Olympics.
Now as a little context, some years ago I had some involvement with the New Zealand men’s kayak team for the Athen Summer Olympics. I assisted in taking some video, during their training and providing other support roles as they were training on the Maroochy river here in Queensland (yes it was the New Zealand team).
The conversation with these people in thea New Zealand team was purely focused on the Gold Medal. Two of them went on to win silver medals, and they were happy to have won a medal, but there was no doubt that they believed that they’d lost gold, rather than won silver. Also the athletes looked at what their personal best times were, and they looked at how that compared to where they’d been.
I’m not going to conclude or give an answer on this post. I am going to ask for comments but, I believe that the athletes would say its gold medals, or personal best times.
It’s interesting to think that the media focus has been significantly on the gold medal tally, but I would like to see what the tally of personal best achievements was. When we think of the motto of the Olympics, ‘Swifter, Higher, Stronger’, I think it’s probably in the spirit of the Olympics to look at the personal best times.
But of course, if I was a Canadian I would be looking at value based on market value and counting every gold medal awarded to every player, because this places them with 68 gold, 15 silver and 8 bronze to a value of $41,043. A clear winner, go Canada!
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The Evidence & Intuition.
In a recent blog post I outlined the 5 aspects that make our intuition unreliable and inconsistent. We need to consider the alternative to purely relying on human intuition in business. There are numerous factors in play in business from the various market forces to the various customer, direct customer base to internal team issues, government issues, economical issues etc. Even the simplest business has a number of factors at play and relying only on human intuition means that some flawed decisions are being made.
I must reiterate that I’m not saying that we must never use human intuition. My point is that leading & managing only by intuition is a problem.
As I have asked in recent days “how do you know”. We must look at data and understand what pattern is in the data. But it is not just any old data. Just because it is easy to get it does not necessarily mean that it is important.
The first step is to understand what is driving the business and then determine what we need to measure.
There are a raft of statistical techniques designed to find patterns and I don’t wish to complicate the management of small business in referring to statistically techniques however a number of these are very simple to utilise in a small business but can be extremely useful.
The use of statistically techniques can be applied to any setting including wine evaluation. Princeton economist Orley Ashenfleter predicts Bordeaux wine quality and hence eventual price using a model he developed that takes into account winter and harvest rainfall and growing season temperature. Massively influential wine critic Robert Parker has called Ashenfleter an absolute total sham and his approach is so absurd as to be laughable. But Ashenfleter was correct and Parker wrong about the 86 vintage. Also his way out on a limb predictions about the sublime quality of the 89 & 90 wines turned out to be spot on.
It’s not just wine that we can analyse the data to determine a more accurate prediction or to make a more informed decision.
But we need to measure what is important to the success of the business. This success factor will be found in the operations of the business not the financials.
To illustrate the power of looking at the evidence a paper in 2000 surveyed 136 studies in which human judgement was compared to algorithmic predictions. 65 of the studies found no real difference between the two and 63 found the equation performed significantly better than the person. Only 8 of the studies found that the people were significantly better predictors of the task at hand. If you are keeping score that’s just under 6% win rate for the people and their intuition and a 46% rate of clear losses.
So why is it that we continue to place so much stock in intuition and expert judgement. Overall it is clear we get inferior decisions and outcomes in critical situations when we rely on human judgement and intuition instead of hard cold boring data and measurement. This may be an uncomfortable conclusion but it’s the fact. We need to make better judgements thus we need to have those boring data and numbers.
Again I’m not proposing that we remove or dispense with the human expert or the human business owner but rather we couple the humans in the middle of an evidence based process. This has been the situation with medicine where the evidence conducted from numerous studies of techniques and processes and drugs pave the way for doctors to provide the correct diagnosis but it hasn’t removed the need for intuition of the expert specialist to make a judgement call. They are just being able to make it with the cold hard facts and the knowledge of the studies undertaken previously.
In a business if we have the information if we have the right numbers, if we have the right measurement then the management will be able to have this as their starting point for making decisions and determining the future of the business. Surely these decisions will be better informed as a result.
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The one main number is not found in the financials.
Businesses are used to collecting the financial information and with their accountants compiling financial reports. But the one main number that is driving the business is not found in the financials. The one main number that will predict where the future of the business is going is not in the financial data.
Because we are measuring the accounting data it is easy to be tempted to use this information to lead and manage the business. The accounting data though is a history statement and is useful to review but you will never find the engine of the business in these statements.
The one main number will be found in the operations. The operations of the business drive the future of the business. But be careful. It is imperative that we understand what is important to the customer to determine the engine of the business.
A great example from a few years ago is Contintental Airlines from 1997. Gordon Bethune became the CEO the airline had as the one main number as :- cost per airline mile. Now whilst this significantly impacts on the bottom line it is not what the customer sees as important. It lead to behaviour to reduce the quality of meals, fittings etc. Gordon changed this to :- on time arrivals. This changed the focus to something that the customer value. The airline went from worst to first.
The one main number was in the operations. Importantly though it was what the customer see as valuable.
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How will you know?
In the recent blog post I asked a question that was provoked by a podcast by Joseph Michelli about “How do you know?” In other words, what data are you relying on in your business to make decisions?
The question now is “How will you know?” I’m here looking at the future, that you have some goals and objectives in the business, but how will you know whether you’ve achieved them?
See, often goals and objectives can be nice words but it is not clear that we will know when we’ve achieved those nice words. Words are important in a business, critically important, but also just as important is the data.
What number are we focusing on? What is the critical main number that we are targeting in the next 3 months, 6 months, 12 months? What is the number or the measure that matches those nice words in our strategic objectives and goals?
It doesn’t matter whether the organisation is a small local business, a big business, or a not-for-profit organisation. We all have a purpose with the services or products we are providing and we all want to achieve a better result in the future than we have in the past.
So the question that I ask is “How will you know” that you delivered a better result? What is the one main thing that will tell you that you have delivered a better result?
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How do you know?
Recently Joseph Michelli gave an excellent podcast and also the transcription was up on his blog, asking the question “How do you know?”
In his podcast Joseph talked about in his experience of dealing with some business clients, that they’ll state a particular situation is the case and Joseph will then ask the question “How do you know?” What data is being collected to verify this stated fact?
I would like to also endorse the comments of Joseph Michelli. It is critically important in business to have the facts at hand to make informed and correct decisions.
Too often assumptions are made about how the customer is behaving, how the staff are behaving, that are not actually based on fact. They may be generally held belief within the business or organisation, but nobody has undertaken the task to collect some data to verify the reality. Yet it is only with this data that you have a starting point to determine how to improve the business, or a part of the business.
Data does not to be collected using the most complex IT system, collecting everything. There are many simple tracking and analyst tools for collecting useful data of a business. The key thing is actually to determine what area is important that we need to focus on.
What is the engine of the business? What has the potential to drive future value in the business. Often there is one key area that the whole business needs to focus on for a period of time, or it may be one area per division of the business. But it is important to have the data as the starting point.
Don’t make assumptions. Don’t accept generally held beliefs without some verification. The data allows informed decisions, and the application of intuition to the development of the business. Constantly ask yourself an your team “How do you know?”
Photo :- LauraKGibbs
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5 Aspects That Make Our Intuition Unreliable and Inconsistent
5 Aspects That Make Our Intuition Unreliable And Inconsistent
Human Intuition or gut feeling is perceived to be reliable, accurate and that we should rely on this more to make our decisions predictions and run our businesses. I believe that in leading and managing in business it must be a synthesis of evidence and intuition. Not everything is in the data but nor can a business be completely lead or managed by intuition.
How our intuition works and it’s limitations have been researched at length. The research clearly shows some limitation that we need to be aware in leading and managing our businesses.
1. We apply intuiton inconsistently.
Even experts have been found to be inconsistent. It has been found that Doctors in determining how they diagnose patients those with a clearly defined model did a better job of diagnosing the new cases than humans whose knowledge was used rather than the evidence based models. In other words their intuition varied. Models though don’t have intuition. So the Doctors armed with models and being able to use their intuition within that framework had a better clinical outcome. The same is the principal in business that having the evidence or the model or framework allows us to operate business more efficiently and then applying the intuition within that framework.
2. It’s easier to make bad judgements quickly.
Our biases that we have affect us when we make decisions. There are plenty examples of this but to use an example that was in a recent Blog post on Harvard Business Review:- if you were to ask a group of people “is the average cost of German cars more or less than $100,000″ and then ask them to estimate the average price of German cars, they would anchor around BMW’s and other high end makes when estimating. If ask another group the same two questions but say is the average cost of German cars more or less than $30,000 instead they will anchor around VW and give a much lower estimate. How much lower? Well when this study was performed it turned out around $35,000 lower on average or half the difference between the two anchor prices. How information is presented affects what we think. This is powerful in that it shows the short coming of our intuition but it also shows the ability that if we present our information properly to our team then we can determine the decisions that assist in determining the decision that they will make.
3. Intuition only works well in specific environments ones that provide a person with good ques and rapid feedback.
A good que is a rapid indications on what is going to happen next. Feedback from the environment is information about what worked and what didn’t. So if the environment is perfectly suited up with these rapid ques and accurate feedback then intuition can work. Unfortunately the environments where this is the case are few and far between.
4 It takes a long time to build intuition.
Malcolm Gladwell talks of 10,000 hours rule. This is that it takes 10000 hours of application to become expert at a particular area. It is understood that chess players need approximately 10 years of studying competition to assemble a mental repertoire of patterns to allow them to compete at the upper level. It is only after many years that intuition can be fine-tuned to be consistently accurate subject to the correct environment as discussed above.
5. We don’t know where our ideas come from.
There is no way for even an experienced person to know if a spontaneous idea is the result of expert intuition or of a pernicious bias. In other words we have lousy intuition about our intuition.
These 5 reasons show the shortfall in relying on our intuition. What are your thoughts?
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Do Your Frontline Staff Look At Things From The Customer’s Perspective
Recently I travelled to Tasmania on business and stayed at the Mid City Motel. I was there for 2 nights and the motel room itself is quite well appointed. The lady on reception was a little bit vague when I checked in. I got up to the floor and the swipe cards that had been presented didn’t work but housekeeping were there cleaning out other rooms and let me in and were quite friendly. I went back downstairs thereafter and the check in lady (reception lady) corrected the cards. so this point in time I’m still neither extremely happy or in no way could I say that I was unhappy. In the room it advertised that breakfast was a buffet breakfast available in the restaurant on the ground floor.
The next day I went downstairs to the restaurant and I couldn’t see the buffet breakfast so I asked the lady present and I was told no we don’t have buffet breakfast you just order al-a-carte. I’m thinking to myself that this is a little odd as it was contrary to the information in the room. But then it started to deteriorate from there. I was asked as to what room I was in and I stated the room 506 and she went off to her computer and came back to me and said nobody is in 506. I said well I am and showed her the envelope with the swipe cards in it that quite clearly showed that I was in 506. She asked for my surname went off and came back and said “No, you’re not in 506 you’re actually in 603.” I said “Well I am in 506, but obviously your computer system is saying 603.”
The upshot of the conversation was that this lady did not in any way believe that I was in 506. So that I could actually enjoy breakfast I signed the voucher as 603 and I’m thinking the poor person in 603 is going to end up with my breakfast bill, but I’ll go to reception straight after breakfast and sort it out. So after the breakfast I went to the reception and I was told by the person there that I was in room 603 despite me quite clearing saying where I was and the envelope. But they continued to disbelieve me.
The next day at breakfast again I thought “No, I’m not going to go to the motel’s breakfast service.” So I went off to a restaurant elsewhere to have breakfast, rather than argue which room I was in; so the business lost that service. Then I came to checkout, which could have been … well a tad intriguing. And once again I was told I wasn’t in 506, but 603. To which I then asked “Was there a difference in room rate?” And there was - $20 a night difference, so then an argument ensured to prove I was in 506 which after a few minutes they finally amended the bill to reflect that I was in 506 and I checked out.
The upshot of all this is that at no time did anybody that I dealt with try to actually take the situation in hand and resolve it. Customer service was not even in the consideration. The computer must be right, the customer must not have a clue as to which room he is in.
So the little thing of the sign in the room about the buffet breakfast became a big issue, because suddenly you are looking at everything.
Now I am telling the world and using the experience as an example of poor customer service. The attitude from the people was not of trying to help but rather it was “customer get away, you don’t have any idea, you are a pain”.
They did not even try to look at it from the customers perspective.
Do your frontline staff look at things from the customer’s perspective? How many clients are you annoying because of your systems and processes? How many customers are you turning away? Not because of necessarily hugely bad service, but just because of an attitude of ‘we are right, the customer is wrong’. I think lessons can be learnt from this example that in no way did they try to distinguish themselves from other accommodation in the town, but rather had the attitude of the customer is wrong. Suffice to say, I won’t stay there again and suffice to say that I’m recommending to everybody else to look at alternative accommodation.
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How does a brand become trusted?
Many advertising agencies and the old media sales representatives will talk about the importance of brand advertising. They will produce a spiel that goes along that ‘it is necessary for a business to establish it’s brand in the market place. They will state that brand advertising is more important than direct response marketing.
Recently there has been a survey in Australia of the most trusted brands. The top brand was Australia Post. The second was Toyota with third going to Cadbury.
To my knowledge Australia Post and Toyota do not undertake brand advertising. They are always advertising and marketing a product or service. Toyota are always marketing a car; Australia Post are always advertising and marketing one of their services.
This seems to highlight the ploy that brand advertising is actually a waste of money and small business in particular need to be careful not to get caught in the trap of doing any marketing that would just purely be focussed on brand only.
The next important aspect of this is that these brands deliver on their promise.They inform their customers what they will be getting and then deliver it, consistently. It is this delivering on what they promise is the reason why these brands are the most trusted in Australia.
Obviously the big 4 banks do a lot of TV marketing, but because the belief is because they are not delivering on their promise, they do not make it into the top 10 most trusted brands in Australia.
This survey highlights the fact that a business must be focussed :-
- on delivering on its promise, delivering on its service and product in an exceptional consistent way
- if it does any marketing and advertising at all it must always be promoting a product or service, the brand development will follow from that.
Your brand will be trust not because of advertising but because you deliver on your promise.
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My School Website - Measuring Output vs Input.
Here in Australia the Federal Government has recently started a new website called My School This website provides profile information about all of the schools in Australia (government and private).
The information detailed is various educational results from National testing that all students undertake in Years 3, 5, 7, & 9. Also the final year results are also included. The results for each school are compared to the national average and to statically similar schools.
The website has created some considerable controversy. The teachers unions are unhappy. A number of the school Principal’s are also unhappy. Their arguments is that these results are not reflective of the schools performance.
I am not an expert in assessing the educational results of a school, I am just a parent with a keen interest in measurement.
The metrics may not be perfect but they are better than what we had prior : - nothing. One measure that I would like to see is to track the results of a cohort of students through the schools. This would show the impact of the school. Given we are testing each student and then compiling them, it would relatively easy to track the students results throughout their time at the school.
The focus in the pass in education has been measuring the input. The politicians, teachers union, and schools themselves would talk about :-
- how many new teachers are employed
- class sizes
- dollars being spent nationally, state and school level.
The output though is a much more accurate reflection whether the money has been well spent. The My School website had least is moving towards measuring the output ie the educational results. So why the objections. Could it be that this start to reveal where the money is being wasted. Could it be that finally the focus on output will mean that people will be shown up.
This lesson is just as applicable to business. Be careful of measures that focus on the input. It is the output that is important. In business the output is measured by looking at what our customers think and do. Our measures must focus on what is important to the customer.
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What Problem Do You Solve?
In business today we can get tied up in our products and services that we offer. We can talk to prospective customers and current customers about the various range of products, models or services that we can provide. But people don’t buy products or services, they buy solutions. I know it’s an old adage that ‘they don’t buy the drill they buy the hole’ - ‘they don’t buy the sausage they buy the sizzle’ - so my question to you is “What problem do you solve?”
I’ve been thinking about this, with respect to my business. So I thought I’d take the opportunity to explain some of the problems that I solve.
1. Business owners are not getting the operational result i.e. profitability, cash flow, team engagement, customer engagement that they desire.
2. Wanting to get some hard numbers on the soft issues e.g. leadership customer engagement.
3. Too many meaningless numbers in the business.
4. Helping the team to understand how the business makes money; helping the team understand the mathematics of business; helping the team gain financial literacy.
So I conclude this post by again asking “What problems do you solve?”
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