Tag Archives: Boston Red Sox

About 2394 days ago Computer Security

The Dashboard Dilemma

When the Boston Red Sox reversed their curse in 2004 by vanquishing the Yankees and going on to take the World Series, many fans and pundits were quick to give much of the credit to management’s decision to enlist sophisticated computerized analyses of player performance data to make staffing decisions. This year, the team’s all-too-familiar collapse left these same observers wondering how the numbers could have led the Red Sox astray. Einstein kept a sign in his office that read, “Not everything that counts can be counted, and not everything that can be counted counts.” Baseball fans are not the only ones being forced to consider that the best decisions aren’t necessarily the ones based on analyzing reams of data. Companies of all sorts are setting themselves up for the same hard lesson, thanks to the growing excitement over technology’s ability to place all manner of salient data at the fingertips of managers. Armed with so-called dashboard displays on their PCs, CEOs can effortlessly summon up a cornucopia of performance indicators. Call up this week’s sales by product line, throw in profit by region, cost per widget produced, and change in inventory levels. Compare it all with last week, with the same week last year, and with forecasts and goals. And there you have it: a comprehensive guide to the organization’s performance and to what you need to do to improve it. If only it were that easy. The fact is, this sort of data worship can provide a distorted, misleading view of what’s going on, and it can lead to flat-out bad decisions. Part of the problem is that some of the most important inputs aren’t easily quantifiable. (Einstein used to keep a sign in his office that read, “Not everything that counts can be counted, and not everything that can be counted counts.”) Adam Galinsky, an associate professor at Northwestern University’s Kellogg School of Management who studies decision making, notes that a bias toward hard data causes organizations real harm. “Things that are hard to quantify tend to get left out of the decision-making process,” he says. For business owners, there are all sorts of intangible or hard-to-quantify factors that can mean the difference between life or death: employee morale, the emergence of new technologies, changes in the competitive landscape, evolution in customer tastes. Think of executives at Ford (NYSE:F) and GM (NYSE:GM) endlessly twiddling with the easy-to-track impact of rebates, advertising, and health care costs, while remaining oblivious to the cultural and political forces–forces that helped trigger higher gas prices–that spelled doom for their obsession with SUVs. This isn’t a new problem. Managers have always had a misplaced confidence in numbers. But the ability to do more and more with the data in an increasingly high-tech fashion is making things worse. Indeed, the availability of slick new data-crunching tools, and the hype they’re receiving, leads executives to rely on them more. Good managers know the nonnumerical stuff matters, of course, but it sure must feel as if you’re being highly effective when you can dash off a few e-mail notes and then in a few days or even hours watch those real-time graphs leap skyward on your screen. And, of course, companies can’t help but treasure these data tools, given that they’ve spent a fortune investing in them, egged on by consultants and other experts. Thus, the CEO risks becoming Nero, fiddling with his keyboard, as it were, while the company burns. The problem goes beyond neglecting the intangibles. Sometimes the data that goes into a dashboard is incomplete or biased in subtle but significant ways that can lead a manager astray. Jorge Grau, the CIO at cell-phone-tower operator SBA Communications (NASDAQ:SBAC) in Boca Raton, Florida, helped build a system to place virtually any sort of real-time report in the hands of managers. But there have been occasions when managers, delighted by the sheer number of facts at their fingertips, were oblivious to problems with the data. “We’ve been bitten,” Grau says. In several cases, managers were making decisions based on summary performance for the entire company, not realizing that those numbers did not include data from a few key regions. When data is misread this way, it can lead to bad calls on anything from budgeting to promotions. “Reports can do more harm than good,” Grau says, which is why he now cautions managers about accepting a slick table of figures at face value. Even when the data is complete, there are plenty of ways to misinterpret it. One temptation for managers is to assume that when two sets of numbers go up and down together, changing one will lead to a change in the other–inspiring a CEO, for example, to order up a series of costly facility upgrades simply because the last two facility investments happened to be followed by sales spikes. “You can find correlations between the most improbable things, if you look for them,” says Luca Rigotti, a decision sciences researcher at Duke University’s Fuqua School of Business. “You’ll just end up doing silly stuff.” In fact, there’s a range of potentially costly psychological tricks that managers can inflict on themselves in the face of perfectly solid data, says Northwestern’s Galinsky. For example, the same set of numbers can provoke wildly different decisions depending on the order in which the numbers are presented. That’s because people tend to jump to conclusions based on the first numbers they hear, and they don’t allow the later figures to change their minds. The same numbers can also have different impacts depending on how they are framed–for example, stating that 10 percent of the customer base will defect if a product is changed, as opposed to stating that 90 percent will stay. “Managers need to protect themselves against falling for those sorts of biases,” says Galinsky. Even if you avoid false correlations and biases, you’re still in danger of getting smacked by the law of unintended consequences when you try to manage by dashboard, says Christopher Zappe, who studies decision sciences at Bucknell University. “People tend to respond to falling numbers with a knee-jerk reaction to try to halt the fall,” Zappe says. “But it often ends up aggravating the situation because they often don’t really understand the ways in which the different things going on at an organization affect each other.” Thus, the manager who sees the on-screen sales graph start to droop might order sales reps to increase the number of prospects they contact, not realizing that sales are falling because the reps are already stretched too thin. Or a jump in inventory might lead to a decision to slow production, even though much of the inventory is set to go out the door. None of this is to say that dashboards are the enemy here. Indeed, CEOs probably get into more trouble when they fail to bring enough data into the decision-making process. And companies that sell dashboard-related systems are themselves quick to point out some of the pitfalls of data-driven decision making. “The concept of data quality is a very unsexy part of our business,” says Kendall Collins, vice president of product marketing for Salesforce.com (NYSE:CRM). “But without it you’re not going to have the ability to make decisions or react in an intelligent way.” Dashboards also can be modified to deal with the problems. Howard Diamond, CEO of ePartners, an Irving, Texas, consultancy that installs information systems that often include executive dashboards, notes that even intangible aspects of a business can be brought into a dashboard if companies are clever. For example, part of the Cool Cuts 4 Kids chain of hairstyling shops, an ePartners client, wanted to track trends in customer satisfaction. The company’s system will chart the number of customers who fail to return within 10 weeks. But part of the key to success also has to be to retain a certain amount of healthy skepticism about the value of the information we get from our computers, no matter how slick or costly the system. That, and not trading Babe Ruth to the Yankees. Contributing editor David H. Freedman (whatsnext@inc.com) is a Boston-based author of several books about business and technology. His latest, A Perfect Mess, co-authored with Eric Abrahamson, will be published by Little, Brown in January.

About 4859 days ago E-Commerce

What Business Is Amazon.com Really In?

Unsolved Mystery By drawing attention to its appetite for expansion and red ink, America’s leading E-tailer has cleverly concealed its grand plan from public view. Until now By now, surely everyone knows that Amazon.com isn’t actually in the book business. Nor is it in the business of peddling videos or pet supplies. Software? Please. Auctions? Get real. Sure, the giant E-tailer provides those offerings, having serviced cybershoppers to the tune of an estimated $1.4 billion last year. But with losses that would bury multiple businesses (more than $550 million, accumulated over the past five years), it’s abundantly clear that Amazon isn’t even aiming to become a viable retail business. The challenge, then, is to define what it is. It’s unprofitable, of course, but that’s just the superficial answer. The tsunami of red ink, founder and CEO Jeff Bezos has long maintained, is part of the plan. On to the deeper question, then: What on earth is the plan? Theories abound. Internet analyst Evan I. Schwartz — whose 1997 book, Webonomics: Nine Essential Principles for Growing Your Business on the World Wide Web, ranked as a number one business best-seller on Amazon.com — insists that Bezos’s enterprise, with its investments in fledglings like Drugstore.com and Pets.com, is “becoming a venture-capital company, and this is how they’re going to become profitable.” For his part, James McQuivey, the astute research director at Forrester Research, in Cambridge, Mass., believes that Amazon.com’s broad positioning is its way of preparing for a surge of new on-line-shopping households, 11 million this year alone. “Until 2001,” he says, “I’m buying the argument that it has to lose money to make money.” But such pedestrian interpretations fail to match the measure of Bezos’s vision. He is, we’re convinced, after something grander. All the talk — of profitability or its absence, of endlessly expanding product lines or investment in new business areas — amounts to an elaborate distraction, one that Bezos has created to keep his grand plan concealed. And his smoke screen has worked beautifully. Until now. Come with us beyond the pithy sound bites. Join us as we slip behind the numbers. Examine the evidence we’ve gathered. Those brave enough to connect the dots will find themselves staring at possibilities so plainly convincing, they seem eerily familiar. To wit, five solid theories as to what Amazon.com is really up to. 1. Today the World, Tomorrow the Country What do Steve Forbes, H. Ross Perot, and even “The Donald” Trump have in common with Amazon’s Bezos? Like them, Bezos has at times seemed bent on world domination. And just as they have all toyed with turning high-profile business success into political power, Bezos will soon reveal his so-called business to be a platform for a slightly more focused ambition. He’s out to run the country. Sure, none of them has actually won an election, but it’s easy to see why. They’re all out of touch, relics of a bygone era when CEOs believed companies needed profits. Bezos brings a refreshingly modern vision with a platform that holds that prosperity is an attitude, a way you choose to operate regardless of the bottom line. Casting himself as a latter-day Perot, he plans to crank up the espresso machine, throw the flip charts into the Volvo, and ride a populist wave into the White House. “We’re going to be unprofitable for a long time. And that’s our strategy,” Bezos told Inc. in 1997. What debt-strapped citizen could resist clambering aboard that bandwagon? He’s got a brazen cockiness that’s quintessentially American — and an inscrutability that’s quintessentially electable. All that remains is a choice of running mate. He’s got options: go the traditional route to balance the ticket, tap Bill Gates, and vie for the predictable profitability vote; or follow the model of Jesse “The Governor” Ventura, defy the system, and capitalize on sheer popularity. To that end we understand Bezos has been pursuing someone even more skilled at wizardry than he is. Would someone please tell him that Harry Potter is fictional? 2. It’s for Prophet, Not for Profit One day soon, America will sprout a host of billboards featuring a stark white background with a lonely line of bold text stretching across it that asks: “Depressed about the lack of security in E-commerce? For books about consumer insecurity, click here.” In the bottom left corner will be a logo, bright blue with a swirl of soothing yellow-gold — Amazonetics. It’s simple. It’s beautiful. Amazon isn’t unprofitable — it’s evolving into a nonprofit. Any day now, it’ll be notifying the IRS to reclassify it as a not-for-profit, thereby exempting it from paying taxes. Like L. Ron Hubbard before him, Bezos will turn a seemingly secular publishing venture into a religion. In the case of science-fiction writer Hubbard, that transformation culminated in a book called Dianetics: The Modern Science of Mental Health. In Bezos’s case, it all started with a virtual-bookstore-cum-electronic-mall. “We’re trying to change the world and maybe improve it in a small way, and maybe even a little more than a small way,” Bezos told the New York Times last March. As founding principles go, it’s not much, but what it lacks in clarity, it makes up for in chutzpah. 3. The Ultimate Product Line: Potential Drink deep and don’t worry. There’s plenty to go around. Amazon.com is our Miracle Elixir, our oasis shimmering in the distance. It’s in the business of being a desirable idea, the embodiment of unlimited potential. It’s a hair-loss-treatment product suggesting that high school cheerleaders will suddenly find themselves unable to resist paunchy middle-aged men. Let myopic analysts clamor for Bezos to define Amazon. He knows that his company’s success lies in his singular ability to continue to conjure the possibilities of all that it might become. It’s the mandate we’ve handed him: to establish his company as the icon of all that Internet commerce could mean. Amazon will continue to work that way only as long as Bezos can energize the illusion by unfolding one possibility after another. So far, he shows no sign of letting up. Eric Von der Porten, manager of a hedge fund that is basing its investment on the belief that Amazon’s stock will fall, describes Bezos’s work as “pumping smoke and flashing lights, saying, ‘Look at all this cool stuff we’re doing. Just don’t look behind the curtain.” According to this theory, Amazon can expand indefinitely, beyond even the loose boundaries of the Web. If Bezos is as good as we adjudge him to be, don’t be surprised if you see Amazon buying a sports franchise — the Boston Red Sox, say. Or investing in Rogaine. 4. Taking the Middle Ground — and Dominating It Once a valued presence in the American economy, the middleman has lost ground lately, accelerated by the proliferation of buying opportunities on the Web. Every day another manifestation of that “middle” class gets squeezed: the auto dealer, the insurance salesperson, the stockbroker. But the nature of the competition is to consolidate. The winner, the ultimate middleman, would mediate transactions in a variety of areas. Develop a trusted brand and people will buy from you, no matter what you sell, the theory goes. From the beginning, Amazon touted its ability to act as an efficient intermediary in Internet-based transactions. The virtual store boasted of its lack of physical location, its disdain for retail space. You order from Amazon, and the company buys the item and sends it to you. “Their core competencies are ease of use and customer service,” notes author Schwartz, whose most recent book is titled Digital Darwinism: Seven Breakthrough Business Strategies for Surviving in the Cutthroat Web Economy. “They can expand into anything.” Bingo. Unlike other Web giants, Bezos ultimately aims to be the essential middleman not only in every E-commerce transaction but also in every human transaction. Best man at every wedding. Marriage counselor. Basketball referee. Midwife. And you thought portal sites were ambitious. 5. Seattle’s Best If we are correct in our thinking — and there’s no reason to believe we aren’t — Bezos has been carefully planning and executing this one from the day he started Amazon in 1995. First, create an enormous virtual bookstore that is the very model of self-promotion to prove that book sales alone can’t sustain any company of real heft. Second, branch out into other areas of on-line sales to reinforce the unfriendliness of the Internet to (profitable) commerce. Witness: In the second quarter of 1998, riding the buzz of its brand-new music store, Amazon registered operating losses of $18 million. By the second quarter of 1999, buoyed by expansion into videos and investments in Pets.com and Drugstore.com, that loss ballooned to $122 million. Third, stay in the book business long enough to change the market dynamic and plow all those pitifully puny stores under. With all that accomplished, things will really get interesting. Then you’ll see Bezos wearing dark glasses and a trench coat, skulking around Seattle with real estate agents and looking for the perfect piece of property. Then he’ll disappear. Vanish. Only the particularly savvy will discover, months later, in a small storefront in a lonely block in downtown Seattle, a quaint-looking shop called Bezos Books. The smartest of those sleuths will connect that shop with the man who used his grand vision not only to prove the futility of E-commerce but to establish himself as a bookseller, a devotee working tirelessly to get his product into the hands of book lovers. It’ll be a smash. And Bezos will have realized his ultimate dream — to reinvent the small independent bookstore. Ron MacLean, a freelance writer based in Jamaica Plain, Mass., now aspires to figure out what business Starbucks is really in.