Hindsight to Insight
Learning from the past to propel your business into the future
Overview
The success of our businesses rely on directors making the best possible decisions. In a world that is generating more digital data than ever before it’s become more and more important to make sure that the data that we use is as reliable as possible and is also easily accessible on a timely basis.
How do we help Directors make the best decisions?
Looking and learning from the past is possibly one of the best ways to make an insightful business decision. We’ve learnt that by looking at “hindsight” (previous market activity or previous business performance) you can drive the business forward. Over the years, we’ve helped many organisations take their “hindsight” and turn it into “insight” that transforms the way they do business.
What is hindsight and insight?
Hindsight is historic data. Historic data has value and is important, but on its own it can have limited value. There’s only so much you can do with historic information.
Insight is taking your hindsight and marrying it with additional information which makes it really valuable to the point where it can transform how you do business and what the results are.
First example:
Stop losing market share
We undertook a fascinating project where a global software company was losing market share, but they didn’t understand why. They collected a lot of data about their customers (customer feedback, customer satisfaction surveys, market “feel”, etc…). Our customer had no way of knowing how big the issue was or really what the problem was. They just knew that their sales were reducing. They had the data available to them, but they weren’t able to use it to make informed decisions. They were collecting and generating more and more data, but the insights they needed to transform their business weren’t available to them.
We were brought in to help to turn their “hindsight” into “insight”. We worked with them to build the systems and processes they needed to really get the value out of their data. They had a great CRM, which their sales team were very diligent in collecting valuable customer feedback and responses and they also had very good financial reporting. What they didn’t have is a way of marrying these two types of data together so that they’re have some insight that could drive business decisions to transform their business.
We were able to help them to link their sales data with CRM data, which gave them some insight into why they were winning sales and also why they were losing sales. This insight, which came from hindsight helped them to transform their business and increase their growth and success, which resulted in a very happy client!
We also helped them to implement data governance to ensure that the quality of the data that was using for decision making was maintained.
Second example:
What’s really happening in your supply chain?
Our customer, a global manufacturer of lubricants, was only able to forecast overall cost of goods sold at a very high level with little or no calculations to substantiate the figures presented. Two different groups of people in the organisation produced a radically different view of the future which in turn caused major lack of confidence and trust. The directors of the business were unable to make effective decisions because of differing information.
The first step in the process was to bring in the “actuals”. These were the actual sales of product (at a granular level), the costs associated with producing the products and a whole host of other data (forex rates etc), which was essentially “hindsight”.
The second step was to understand how the various factors affected the data. In essence a picture of the history of the actual cost of goods sold was created and compared with the known financials. In this particular case a “straight edge” allowed us to verify the calculations etc.
The third step was to extrapolate, based on a few assumptions, what the future would look like. This was the modelling process.
The fourth and final step was to take the model created in the previous step and create scenarios. A scenario is simply “what if this influencing factor was this instead of that”. It goes without saying that in order to get this right the previous steps should have been successfully executed.
In addition to modelling the future sales volumes and cost of goods sold the project also provided a whole host of very important data such as identifying suppliers at risk of not supplying enough raw materials under certain conditions.
By using the “hindsight” (which was the actual historic data) and applying the assumptions and other information, extremely valuable insight was generated which was used to drive business decisions and increase performance. In an age of incremental improvements, often in highly competitive environments, it is becoming increasingly important to use your data to drive those improvements in your decision making.
Conclusion
If the purpose of studying hindsight is to find out what happened then companies are missing a trick. Hindsight that is not leveraged to produce insight is simply history (in more ways than one … it won’t be an acceptable business practice for long as it only tells us about the past). Companies should strive for more insight because this should form the basis for important decisions.
Both the software company and the global lubricants manufacturer gained extremely valuable insight by looking at the past (at hindsight) and using that to produce the insight that they needed to improve their business and deliver great results. They were able to increase performance and growth by using this valuable insight.
4 Steps to go from Hindsight to Insight
Understand your data. What is it telling you about the past?
Understand the influencing factors. This could include foreign currency rates, political events, weather, social events (eg bank holidays). What are the natural cycles. Are sales affected by season? Are sales higher on certain days of the week?
Model the future (insights). This gives us a glimpse of the future.
Build scenarios. E.g. What if the weather was great and there was a bank holiday. This gives us a glimpse of different versions of the future.
Please feel free to contact us if you’d like more information about this paper.