Maximum noise is produced by the exceptions. Managers
beware.
The Pareto (80/20) principle holds good at all times.
Period. I heard this incident (now an anecdote) from an ex-CXO at an erstwhile
taxi aggregator startup and found it so interesting that this story ought to be
told. So often than not, as management we are swayed away by the noises created
around us. It’s quite ironic that these noises that compel us to take life
altering decisions are more often than not produced out of exceptions.
Just the other day I requested my new intern to call up some
of our existing customers to introduce a new product and get their feedback. On inquiring, she reported that one of our customers seemed extremely unhappy with
her call and backfired her with complaints like when the supply of our current
products is insufficient to them, how can we think of introducing a new product
and she went on offloading her distress upon me.
Once she was finished I quietly inquired how many other customers had she called. The answer was 9 others. “And what was their reaction”, I asked. “Yeah they were quite happy with the new introduction”, she replied. Well, there you go – a live example of how the exceptions cause the most ruckus.Thus it becomes necessary for managers to carefully identify and ignore the exceptions to be able to see the big picture.
This other incident narrated to be by my friend will help me
rest my case. A big problem arose before the management team of this erstwhile
taxi aggregator startup based out of Bangalore when their sales and marketing
team started showing dissatisfaction towards the one-fare-for-the-entire-city
policy irrespective of a particular region’s proximity to the airport. The
insistence was that the fares should be reduced for the northern region as it
is closer to the airport in comparison to the rest of the areas and this will
help them satisfy the customers in the north. The management was under pressure
to give in to the demand and introduce differential fares. However, they chose
to look into the data before taking any decision.
After comparing bookings from
all four regions (north, south, east and west), it was revealed that the north
region (closest to the airport) had close to 0% contribution to the total
bookings while the south region (farthest from the airport) had the maximum
i.e. close to 80% contribution to total bookings followed by the east and west
respectively. So, the sales and marketing insisted that they want the reduced
fares for the north in order to increase the booking contribution from the
region. However, the management stumped them by presenting an analysis of the
demographics of the north region (showcasing the income group residing in the
area) substantiated by booking patterns from competition (all of which had
minimum bookings in north) thereby establishing the fact that due to its low
income residents and proximity to airport, the north region can never be a
heavy contributor to business hence it is best to concentrate on rest of the
regions and keep the fares unaltered.
Thus we see how analytics has become a way of life
(business) and data is important to kill the noise.
