Analytics Gotchas To Watch Out For!

Companies win or lose in the modern marketplace based upon the actionable insights they can derive from their data. We’re in the age of information warfare (that is used against us everyday, especially in political elections, but that’s a post for a different blog), and companies are competing with, or attacking, each other based on the quality of their data. This is why big data science is taking off and why many companies are engaging third party “experts” to help them get started. But not all of these experts are truly experts. Here are some questions to ask and gotchas to walk out for when considering the pitches from supposed experts.

What’s in the 10% to 20% that wasn’t mapped?

While it’s true you can get a lot of insight when 80% of the spend is mapped, and often enough to get an idea where to dig in, there’s two things to watch out for when the data “experts” come back and say they’ve mapped 80%. First of all, is it 80% of spend, 80% of transactions, or 80% of the supply base? Be very careful to understand what 80% was mapped. If it was spend, chances are it’s the big value transactions, and the tail spend is unmapped. If the tail spend contains small, but critical components to production (such as control chips for expensive electro-mechanical systems), this could be problematic if this spend is increasing year over year, or everyone could be okay. If it’s 80% of transactions, this could leave the largest value transactions unmapped, which could completely skew the opportunity analysis. If it’s 80% of the supply base, the riskiest suppliers could go unmapped, and the risk analysis could be skewed.

How many of the recommendations are backed up with your data and not just industry benchmarks?

If the “expert” says that their benchmarks indicate huge opportunities in specific categories, make sure the benchmarks are based on your data, and not data gathered from your competitors (and used in lieu of doing a detailed analysis on your data). Make sure the “experts” are not taking shortcuts (because your data was dirtier than they expected and they didn’t want to make the effort to clean it).

Remember what Sir Arthur Conan Doyle said, It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts. And, specifically, before one has their own data, not just any data!

Never forget there are lies, damn lies, and statistics!

In the best case, statistics are used for supporting arguments rather than leading, illuminating, arguments. In the worst case, they are used to plug holes in the preliminary analysis that the “expert” would rather not tell you about. (Experts rarely want to admit your data is so dirty and incomplete that they couldn’t do their preliminary analysis to the promised level of accuracy in the time given. They’d rather discover that during the project, after they have it, and, if necessary, put in a change order to clean it for you, and take more of your money.)

Remember that statistics can be used to skew arguments just about anyway you want to, especially if you are willing to use +/- with 90% confidence …

Not everything that can be counted counts!

Remember what Einstein said, because in this age of data overload it’s never been more true. Detailed analysis on certain types of trend data, social media reviews, and segmented consumer purchase patterns don’t always yield any insight, especially when the goal is spend reduction or demand optimization. It all comes down to what Denning said, if you do not know how to ask the right question which will help you focus on the right data then you discover nothing.

There’s no such thing as an alternative fact!

While most consultants in our space won’t try to sell you alternative facts, they may try to sell you alternative interpretations to the ones the data suggest. This is almost as bad. Always remember that Aldous Huxley once said that facts do not cease to exist because they are ignored. If we only had to deal with experts and consultants ignoring facts. These consultants especially in the political arena, that try to sell alternative facts or alternative interpretations are selling what has to be the biggest crock of bullsh!t they have come up with yet.

Finally, its not only opportunities that multiply as they are seized (Sun Tzu), it is also misfortunes that come from making bad decisions from bad or incomplete analyses.

And yes, someone has to be the gnashnab!

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