Do you recall the school science experiment involving a frog, a beaker of water and a Bunsen burner?
Thankfully banned from classrooms now, the experiments were used to explain how all animals, humans included, tend to sense and respond to gradual changes, rather than abrupt ones.
Such subtle changes are now rife within retail. The opportunities in showrooming and mobile searches, digital cross-selling and omni-channel integration highlight that retailers cannot rely on historical shopping behaviours alone to make strategic decisions for their businesses anymore. Your consumers are increasingly expecting a more personalised, digital experience from you.
But how and where do you invest to react to this; how do you read the subtle changing heat? Traditionally, successful retailers put a significant sway on traditional truths and instinct. As with many leaders this is still a valuable part of their leadership styles, however, business leaders are increasingly using analytics as a thermometer to know when to jump out of the beaker and when to make those big decisions. Big decisions can change strategy and the long-term course of your business, so making practical use of data will allow you to make speedier and more sophisticated decisions for competitive advantage.
According to PwC’s global report Gut & gigabytes: Capitalising on the art & science in decision making, 44 percent of retail executives in 2014 relied the most on their own experience and intuition to make their last big decision, while only 22 percent relied on data and analytics. It’s promising to see that change in decision-making practices is starting to happen, with 66 percent of retail executives having changed the way they’ve approached big decision-making as a result of big data or analytics in the last two years.
Difficulty in assessing which data is truly useful is cited as the main reason preventing many retail executives from making greater use of data, and many believe the quality, accuracy or completeness of the data isn’t high enough. In a world of overwhelming inputs, it's a skill to learn what not to react to. Imperfection isn't always bad but new insights can be gained from incomplete or imperfect data, provided they are triangulated with other information. Retailers should be using a balanced approach to using data and analytics for business-defining decisions.
Looking to the year ahead, 41 percent of retail executives say they are “fully prepared” and 54 percent are “somewhat prepared” to make the most important decision they’ll need to make. For 32 percent, their most important decision will be based on a new opportunity they simply can’t ignore, while 44 percent expect to make at least one big decision each month. Fifty-six percent plan to revisit their most important decision within three to six months to adjust for new information.
Top goals among retail executives in the year ahead include a focus on corporate restructuring, looking to collaborate with competitors and to enter a new industry or start a business. Other top goals for retailers making big decisions this year include corporate financing (34 percent); growing an existing business (29 percent) and negotiating a major contract (29 percent).
Making big decisions could change the course of your business and in this digitally disruptive environment, past experiences may not be good predictors of the future. With more data within your reach to understand what was previously unknown, analytical tools are available to “see” a wider range of possibilities and evaluate them quickly. So, if you haven’t already – looking to data analytics to help improve your business’ decision making capabilities should be your New Years’ resolution.
This story was originally published in NZRetail magazine issue 736, March 2015.