Why understanding data is critical to business growth.
Published: June 24, 2020

Abraham Wald was a Hungarian mathematician working for the United States during World War Two. He was tasked with working out the optimum amount of armour for a warplane. A crucial calculation. No armour and the plane could be shot down. Too much armour and the plane would be cumbersome, limiting it’s flying range and manoeuvrability, making it more vulnerable to enemy attack.

Looking at data from engagements all over Europe engineers noted that planes had far more shots on the wings and fuselage, indicating that these were the areas that needed most protection. But Walder took a different approach. He realised something significant. The engineers were focusing on the planes that made it safely home, a principal known as “survivorship bias”, focusing on those that survive, rather than those that fail. But there was a more important question to ask – where were the planes hit that didn’t make it back? Walder recorded that the areas on the planes with the fewest recorded shots was where armour was needed most. Walder’s approach was to look beyond the obvious. His thinking saved planes and saved lives.

So what can business owners learn from people like Walder?

The answer is to look beyond the data.

  • What is it really telling you?
  • What can you learn from it?

It’s all too easy to take numbers at face value, and assume you have all the answers. The question to ask is – what is the true insight behind the numbers?

Certainty Scorecard.

To improve our own knowledge and help owners assess their own business we created something called the Certainty Scorecard test, a series of questions to uncover how certain you are about your current strategy. The Scorecard provided us with some fascinating insights into how British businesses work, or, in some cases, don’t work.

One question asked –

Do you have a strategy that you implement on a regular basis?

Of the 500 plus businesses that have competed the Scorecard, only 36% answered yes to this question. The news didn’t get any better.

  • 74% of businesses had no strategic plan for the next 90 days.
  • 79% of companies don’t have a marketing strategy that targets their perfect customer with any precision.
  • And 80% of businesses had no financial planning in place for the next ninety days.

What did this data tell us?

It told us that huge numbers of businesses were merely paying lip-service to their strategy, creating plans and not putting them into practice, thereby diminishing their chances of achieving growth. But the numbers told us more than that. It revealed that there was inefficiency at the heart of many companies. That they didn’t have the systems in place to deal with issues when they arose. It also helped explain why 65% of businesses don’t’ survive beyond ten years. Now, more than ever, companies need a robust, meaningful strategy that a team can get behind, that suppliers can understand, that customers can relate to, that investors can be excited by.

Numbers may not lie, but they don’t necessarily give you the whole picture. To take the warplane analogy, you don’t just focus on where you’re taking the biggest hits, you need to look at the areas where you’re most vulnerable and unearth the data you don’t yet have. Your numbers may tell you that sales are down, or that cash flow has become a trickle, or that the last quarter was poor. But that may hide other important issues. Ask, what is your data not telling you? There could be issues that don’t appear in your spreadsheet. The area of real vulnerability could lie in your supply chain, or customer confidence, or focusing sales on a particular time of year, or over-reliance on one person, or failing to have the right product market fit.

As Abraham Walder said –

“The most important data is the data you don’t have.”

As a business owner, you probably feel you know your company inside out. But only by understanding data, uncovering hidden data and discovering real areas of vulnerability can you begin to correct any problems and build a sustainable business. As a first step, why not take the Certainty Scorecard. In just four minutes you’ll discover how your current business strategy stacks up. But the most important information isn’t the numbers themselves, it’s what they tell you about how your business is run, and the steps you can take to make your company stronger, more valuable.

To take the Certainty Scorecard test click here.