Making sense of it

May 20, 2013

In analyzing data on a competitor, the first thing you have to keep in mind is they are not you. Just because you and your competitor are in the same business, making similar products or delivering the same services, and competing for the same clients, does not mean that they see the world the way you do.

Skipping past this is one of the most fundamental mistakes that novices, as well as experienced professionals, can make one attempting to analyze raw data.

The recent issue of Entrepreneur highlights this. A feature article[1] dealt with a technology firm’s decision about marketing its sign-on technology. As the article relates, the firm in question was showing 8% sales increases over the previous year, but wanted to do better. When it looked at its book of business, it made what, to its competitors, probably seemed to be an irrational decision. It decided to focus its marketing efforts on only one segment of its customer base, healthcare, that then made up 40% of its business.

This had the effect of cutting 60% of its business away. The results? The firm reports that it’s 2012 sales have increased 40% in one year and showed significant overall growth since this critical decision. Digging into the details indicates that the decision was made, in part, based  on a study of the customer base, showing that the healthcare portion was the one positioned for the greatest growth, and that the largest segment, financial services, was facing substantial growth, even survival, issues.

But if you had looked at this firm in 2009 and saw evidence of its apparent release of 60% of its business, you would not have appreciated what was really going on, because it seemed counterintuitive. Counterintuitive is intuition, not analysis.

[1] Kristan Schiller, “A Narrower Focus”, Entrepreneur, June 2013, p. 46

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