book.chapter Fundamental principles of real time data

It's a common misconception among many managers that forecasting the future is crucial for their company's success. This belief, however, is not entirely accurate. If managers were to concentrate more on comprehending the current state of their business with greater precision, they would likely achieve better results. A significant number of managers make the mistake of basing real-time decisions on data that is so outdated it's no longer relevant. Essentially, the secret to 'predicting the present' lies in having sufficient information to answer the question: "how close are we to achieving our business objectives right now?" Ever-present data ends surprises Gartner dataquest's five-year investigation into unexpected events across natural and business sectors revealed a consistent pattern: warning signs preceding crises were often overlooked. This study, which examined events like the dot-com bubble, accounting scandals, the three mile island incident, the challenger disaster, and the september 11 attacks, found that predictive data was available but not heeded. This challenges the notion that business surprises are unavoidable and that predictive efforts are futile. The study shows that with less than 5 percent of information being crucial for an organization's goals, proper monitoring and analysis of this data can prevent surprises and foster growth. The adoption of real-time information can empower managers to proactively identify trends and devise strategies, thereby enhancing productivity and profitability. Kenneth mcgee highlights the significant impact managers can have on their companies' futures by adapting to changes and making informed decisions. Few factors truly matter In the modern business landscape, where managers are overwhelmed by vast amounts of data, a two-step filtering process aids in decision-making. The first step, identification, involves outlining goals, establishing metrics for their achievement, and prioritizing the most critical goals. Managers must then assess if real-time data can enable timely and impactful reactions for these key goals. If not, they identify and prioritize the main factors that could influence the chosen metric, evaluating the feasibility of acting on real-time data. The second step, Justification, refines the selection by asking four crucial questions to ensure the information's alignment with the company's vision and mission, its relevance to objectives, strategies, goals, timelines, and programs, its materiality, and its potential corporate impact. This process, highlighted by kenneth mcgee, suggests that only about 5 percent of operational data is needed to predict current conditions and detect real-time opportunities. By employing the identification and justification filters, managers can narrow down the overwhelming array of potential metrics to a few essential for real-time measurement. This approach helps prioritize materially important information and avoid processing unnecessary data, enabling managers to anticipate trends and assess their probable impacts before they manifest, thus eliminating surprises and creating opportunities for the business. Constant capture of key data In the expansive sea of business data, a manager attempting to collect every quantifiable detail would soon discover that the data landscape has evolved by the time they reach the last piece. Therefore, rather than pursuing an exhaustive analysis of all operational data, it's more practical to focus on key material data to avoid unforeseen business shocks. The real-time acquisition of critical information is crucial as it equips managers with a broad spectrum of response options. Typically, the window for effective action narrows as time progresses following an event, with the potential to mitigate adverse effects diminishing. Astute managers enhance their response capabilities by tracking leading indicators of significant events, not just the events themselves. It's essential to differentiate between real-time monitoring and real-time reaction. While it's beneficial to monitor material data continuously to fully leverage its value, responding to changes in this data doesn't necessitate immediate action; rather, it calls for a timely and well-considered response. Ideally, a series of processes should be in place from the moment an event occurs to when its impact is felt: ongoing surveillance of relevant information, prompt notification of any significant changes to the concerned parties, thorough analysis of the information, and the formulation and execution of an appropriate response. However, the challenge lies in the fact that in many instances of business surprises, the real-time capture and monitoring of material information are overlooked. Consequently, the subsequent steps are often neglected until it's too late to craft and implement an effective response to the event. Progress tracking through monitoring While it's not common for managers to rely on market information that's two years old, they frequently base strategic planning and tactical maneuvers on last year's market share numbers. Managers often aim to achieve their objectives without a steady flow of updated information on their progress or the current conditions, struggling to grasp the present due to a lack of real-time information. This situation is akin to a ship's captain trying to navigate based on the ship's location from a week ago, which is clearly ineffective for a captain who needs current position data. Similarly, without real-time information, making sound business decisions is impossible. In business operations, three types of events can occur: surprises, which are not adequately reported, monitored, captured, or analyzed, making it too late to influence the outcome when their impact is felt; suspected events, where information was available and analyzed but withheld from decision-makers until it was too late to react; and surmounted events, where the event was reported in time, allowing for effective action and a suitable response crafted and executed before the impact was felt. Preventing business surprises doesn't require psychic abilities or knowledge of the future but timely updates about the present. This concept, referred to as "predicting the present," necessitates that the monitoring, capture, analysis, and reporting of critical information shift to real-time. This enables managers to take action to prevent surprises and convert them into opportunities, determining the 'right time' for a response to achieve the best possible results. Uncovering future opportunities Access to real-time operational data is a game-changer for business leaders, enabling them to detect opportunities for growth and gain a competitive edge. Sales leaders can leverage immediate revenue data to offer timely incentives, boosting sales. Product managers stay abreast of consumer demand shifts, allowing for agile product development. Managers can analyze trends to strategically position their companies for market opportunities. Executives gain instant feedback on new product reception, informing the timing for product iterations. Daily profit-and-loss statements help managers make informed decisions on investments or cost reductions to sustain profitability. Marketing campaigns' effectiveness can be evaluated instantly, allowing for quick adjustments. Investors benefit from real-time performance data, avoiding the wait for periodic reports. Real-time evaluation of employee output helps executives optimize resource allocation for production targets. Additionally, a company's stock price is safeguarded against the repercussions of unmet analyst expectations. In essence, managers with real-time business insights can proactively enhance outcomes or mitigate negative ones by adapting their strategies. This revolution in business through real-time information is already underway, with companies like ford adjusting prices for profitability and pharmaceutical firms efficiently directing research efforts. The transformation will extend beyond individual companies to entire economies, driven by real-time enterprises. Managers must consider whether current information could prompt a change in direction. The concept of 'present shock' is inevitable; the choice is whether to lead through it starting now or to be caught off guard later. Being prepared is key.