As the forces of globalization continue to connect and intertwine commercial and financial markets, and new technologies come online in the marketplace, the time between “event” and “action” is rapidly closing.
In the past, managers could take weeks or days to make important decisions, however to effectively compete globally, some companies are making critical decisions in hours, minutes or even seconds. With windows for decision making closing faster than ever–are your decision making processes setting you up for success–or failure?
While most would agree that strategic decisions require thoughtful consideration that should rightly stretch out months or weeks, the financial market turmoil of the past year plainly shows that decision making windows can open and close quite rapidly. In fact, as marketplaces grow more complex, and financial markets interconnect in ways analysts still struggle to understand, strategic decisions (even those involving M&A) sometimes need to be made in 24-48 hours.
The window for operational decisions is also shrinking. Companies now need the ability to detect and respond in real-time or near real time when fraud is occurring, products are out of stock, lines at store checkout are too long, online shopping carts are abandoned, or customers are calling with product/service quality issues.
There can be significant financial benefit to speeding operational decisions. Case in point is the financial services industry.
As early as the 1990s, trades were conducted on a system called SuperDot which still exists today. However, according to Richard Bookstaber, an equity fund manager and author of “Demon of Our Own Design“, there was nothing super about the system. “Orders were sent using primitive 386s communicating via Hayes micromodem,” he writes. “Between short sale restrictions and bottlenecks from excessive volume, there was no guarantee orders would get executed at all.”
Now let’s fast forward to the future. In Technology Review, an article titled, “The Blow Up” mentions that many high frequency financial services traders make 1,500 or more trades a day, whereas the computers at some brokerage firms execute “hundreds of thousands of trades everyday”–most of which are automated by computers following complex business rules and require no human intervention.
The same article details how the “science of event processing” allows computers to “read, interpret and act upon news” such as making a trade in response to an “FDA announcement–in milliseconds!”
The ability to act upon information faster than others–in this instance to execute a trade faster than other market participants–can make a huge difference in profits or loss. Creating business value via faster and better operational decision making extends to other industries as well.
In retail, analytical systems are enabling workforce and inventory optimization to ensure plenty of staffing and products, notifying managers of stock outs, and even helping speed up the checkout process.
According to an article in the Economist titled, “Watching While You Shop“, one very large British retailer is using a system to sense the number of shoppers that enter and leave the store, and then use that data to predict how many check-stands should be open. Systems predict, “up to an hour in advance and monitor average waiting times and queue lengths.” Since most of the point of sale systems at this retailer are self service, the system can detect when lines get too long and then open check-stands accordingly.
Faster and better decision making can infer a competitive advantage for companies, but those advantages don’t traditionally last very long. Competitors can invest in the same technologies and copy workflows. However, those companies that create a culture based on analytical decision making are hard to imitate as “thinking by the numbers” becomes a way of life.
Getting back to the original premise, I believe that in a complex and global economy, there is less room for error as economies, companies and even individual actions are more tightly coupled. Nothing happens in a vacuum anymore. This means there is less time to react as single events often start chain reactions.
To thrive in a global economy, companies must be able to make the best decisions based on accurate data sources that present as complete a picture as possible. Windows of opportunity are opening and closing faster than ever before. The ability or inability to capitalize on those open windows could be the difference between sustained competitive advantage and obsolescence.
Questions for DailyFix readers:
* Do you see the “windows for decision making” closing at a much faster pace?
* What other drivers besides technology, globalization and interlocking financial markets are driving a reduction in time between “event” and “action”?
* With decision making windows closing faster, will “gut decisioning” play a bigger role going forward?
* When decision making opportunities arise, how are you preparing yourself or your company to best act on those opportunities?
I’d love to hear your comments!
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Tags: analysis, analytics, competitive advantage, decision making, future of marketing, global economy, globalization, number crunching, operational decisions, speed
Paul,
I fear you are correct. In place of thoughtful, well-planned and carefully contructed stategic decision-making, we have greed determining our business moves. The result: Short-term profits and a revenue growth chart that looks like the snow-packed and steeply uneven peaks of the Rocky Mountains.
Paul,
Lewis is right. Financial giants all have sophisticated data-gathering systems, and yet human beings chose to make poor decisions motivated by greed. Was data properly assimilated or even fully understood, is my question. . .
Quick decisions motivated by the speed in which things were happening in the marketplace, and the potential opportunities for windfalls have led to a catastophe in the entire financial sector, haven’t they? Some quick decisions might lead to success and a decided advantage while others can lead to disaster.
Lewis and Ted, thank you for adding your comments to this post. Your insights are always appreciated.
Regarding the financial markets, surely excesses and the push for “more” played a large part in the mess. That said, there are way too many variables in the equation to pin the mess on greed alone.
What I continue to find interesting about the financial marketplace, and many other industries is how interconnected industries, economies and even individuals are becoming. It is because of this coupling – this interconnectedness- that decision making windows are closing faster than ever.
Things are spinning fast. Markets move quickly, customer perceptions change rapidly based on the onslaught of up-to-the minute information. I believe that there is more volatility (beta) than ever before.
For marketers, this means we must be able to react quickly to these changes and have the most current and accurate data available for analysis so that we can make better decisions and capitalize on change. We must constantly be refining and tweaking our models and the assumptions that they’re based upon. This isn’t a “nice to have” – it’s a necessity.
Good post, Paul. As you point out, the speed with which more reliable data is being produced as well as the complexities of a global marketplace, necessitate faster and faster decision making. It strikes me that managers at every level, including marketers, won’t be able to endlessly deliberate and shelf making tough decisions. There really isn’t anywhere to hide anymore. Complacency, ineptitude and indecisiveness have no place in today’s business environment–if we want to stay in business, that is. This will require stamina and the occasional gut check, though. Some decisions, no matter how compelling the data for making them, are still very difficult to make and might lead to a few failures. Not for the faint of heart, is it?
Paul,
Great post; yes this does have large implications. The smaller decision window means that you must continuously be prepared to make a decision. This implies continuous strategic planning, and “knowing the numbers”.
The numbers game becomes more difficult because you must understand WHAT numbers impact your business rather than just gathering statistics. This will be an iterative process; as business progresses the measurements may change.
If you’re unprepared it is better to pass on the opportunity than to assume the risk. That in itself is a strategy; control your own destiny and not let the time pressure force your hand.
Claire, I love your comment on “nowhere to hide.”
Many managers have in the past made a living based on not making decisions. For many this is a tactic for survival as making decisions means that you have to step out and take risks. But as you rightly point out, decisions will need to be made and faster than ever. If as a manager, I’m going to take risks, I need understand the scenarios in which I can succeed or fail and the implications of my decisions. I’ll need the facts, advice of my peers, and then use my experience and -yes- my gut to make a call.
Paul,
Some good discussion here.
One thing’s for sure–there’s already a whole lotta gut decision-making going on and this perception that things are speeding up even more will certainly offer a ready excuse to do more of it.
I do have to chime in here that while it’s true that there are many kinds of decisions that need to have instant, tactical responses, MOST marketing decisions DO NOT need to be made in a New York minute.
In fact, I think it’s safe to say companies tend to waste MORE time and resources when they make quick decisions, having to back track, start over, again and again and again until maybe–MAYBE–they get it right. It would have been far more effective and LESS time- and resource-consuming if they’d just taken some more time to get it right in the first place.
The best thing a company can do in a faster-paced, unstable business environment is to get a solid strategy in place. And by “solid” I mean one grounded in data and balanced with judgement and experience. With a strategy in place, there’s a strong base from which to make quick, tactical decisions–it actually makes a company more nimble and able to adapt.
NW Guy, thank you for taking the time to post a comment.
Your point about being prepared is very important, however there are some scenarios that one cannot be prepared for in their entirety. We can scenario plan, but that generally only works out for 3-5 scenarios, none of which will fit perfectly with our particular instance.
Sometimes, we may encounter a situation as an outlier –something from left field–way left field. It’s in those times that, as you say, it helps to know your business and your numbers. Even more importantly, you need to know who you are as a person and/or company so as to align decisions with either your “as is” or “to be” state.
When you cannot predict, then you need to be as prepared as you can be. We do control our destinies via the choices we make!
Kevin your comments about having a strategy struck a chord with me. It makes life so much easier when you know who you are and what you want to be. Decisions can be made rather quickly in such an environment because they highly correlate with your strategy.
I will say that while many marketing decisions don’t need to be made in a NY minute, the evidence is clear that decision making windows–even for marketing are shrinking. We need to decide if a customer is credit worthy on the spot. We need to know what product to offer the customer–when they call us–no guessing. We need to solve service issues when they arise–heck even better– before they happen. We need to offer customers a better experience on premises, not the promise to do so in a later marketing campaign.
These are just a few examples where having the right analytical infrastructure can help us better serve our customers. We’re definitely moving to a “now” economy.
Point taken, Paul. I was thinking of the examples you mention as more of the tactical variety and would agree that many of those do need to be made on the spot, on the floor, in the store, in the sales call, etc.
My concern is that this quick turnaround timeframe on tactics trickles back to bigger strategy deicions such as which group of buyers to target, how to position a brand, and what messages to use in the ad campaign. The targeting decision in particular is one that gets far too short shrift in companies these days–often just a five minute discussion around the conference room table–because there’s this perception the decision needed to be made yesterday.
Kevin you make some terrific points. In fact, in my 15 years of marketing experience, I see way too much time spent on individual tactics and budgeting as opposed to larger strategic issues. Most marketers seem too focused on the “what” instead of the “who”…
Great, well thought out and though provoking post Kevin. I agree that technology plays a significant role in this, primarily by raising the bar. Because your competitors have employed technology (everything from executive dashboards to complex analytics systems) to beat you to the punch, you’re forced to evolve or die. However, I also believe that this can only extend to a point- a plateau where too much technology bogs people down and actually slows the process. And, for now anyway, a total reliance on analytics often paints a skewed picture, thereby putting you at a disadvantage. So, the most effective leaders are those who find and follow the ever-moving sweet spot.
Hi Rob, not sure if you were responding to Kevin Clancy’s comments or my post.
You mentioned that many companies have deployed very sophisticated technologies. I’ll agree to a point, but also argue you might be surprised to know how many companies are still managing their entire operations by spreadsheet and datamart.
Analytics are by no means a single panacea to solving a company’s problems, nor solely going to help them connect to customers better.
The old saw, “people, process, technology”, coupled with “strategy” still very much applies. When these four are aligned and in motion, better decision making isn’t far behind.