MOVING INSIGHTS FROM THE IMMEDIATE TO THE STRATEGIC This short-run focus shapes the analytics environment. Emphasis and investment are made in reporting and visualization tools. Hiring for these functions tends to come from syndicated data providers and thus may not have significant experience in corporate strategic thinking. This creates an organizational effectiveness problem in two ways. First, an exaggerated focus on short-run issues can lead to a short-sighted firm. Second, if analytics teams only contribute to “immediate problems”, then those teams will not be able to influence the strategic vision of the company. 1 This creates a mismatch between what operational teams see and what they are told by strategy, creating organizational confusion and lowering market performance. In this paper, we will discuss three ways of communicating strategic insights. These methods of communication will be in order of appropriateness both in terms of analytical power and ability to be digested by internal stakeholder. We begin with a framework appropriate for an A&I function trying to achieve traction and ending with a prescriptive action plan appropriate for an A&I function with recognized strategic credentials. In all of this, it will be important for A&I professionals to understand their organization’s ability to absorb and act on the insights they generate. For the purposes of illustration, we will use a hypothetical market example of disposable diapers. While, in this example the analytics team is global in scope providing insights to global managers and local operators, the same framework and thinking also applies for insights teams with a domestic focus. Please note that these numbers and insights are purely illustrative and completely fabricated. Building the economic foundation For the A&I function just beginning to gain traction with strategic issues, we recommend establishing the economic foundation for growth for two reasons. First, getting the greater organization to understand the correct economic relationship with their business will be a big step in establishing the correct strategy. Second, a country’s economic performance is impersonal and factual. Focusing on a topic like this will make it easier to get initial buy-in from local operators as you are only establishing facts. This makes it less likely that your analysis or its implications will be taken personally before you have had a chance to establish an intellectual partnership. 2 COMMUNICATING STRATEGIC INSIGHTS EFFECTIVELY 1 Analytics and insights (A&I) professionals have a difficult task. They are expected to be on top of every metric and able to produce them at the beck and call of stakeholders across the entire organization. Many workstreams are very immediate, snapshot-type analyses, trying to solve whatever concern management have on their mind at that moment. The three crucial capabilities for any analytics and insights (A&I) function are to curate information, distil it into insights, and communicate how these insights affect the business. In this series of white papers our experts discuss how organizations can build and improve these capabilities within the context of strategic insights. This paper focuses on the communicate dimension of the curate-distil-communicate analytics framework.
Transcript
MOVING INSIGHTS FROM THE IMMEDIATE TO THE STRATEGIC
This short-run focus shapes the analytics environment. Emphasis and investment are made in reporting and visualization tools. Hiring for these functions tends to come from syndicated data providers and thus may not have significant experience in corporate strategic thinking.
This creates an organizational effectiveness problem in two ways. First, an exaggerated focus on short-run issues can lead to a short-sighted firm. Second, if analytics teams only contribute to “immediate problems”, then those teams will not be able to influence the strategic vision of the company.1 This creates a mismatch between what operational teams see and what they are told by strategy, creating organizational confusion and lowering market performance.
In this paper, we will discuss three ways of communicating strategic insights. These methods of communication will be in order of appropriateness both in terms of analytical power and ability to be digested by internal stakeholder.
We begin with a framework appropriate for an A&I function trying to achieve traction and ending with a prescriptive action plan appropriate for an A&I function with recognized strategic credentials. In all of this, it will be important for A&I professionals to understand their organization’s ability to absorb and act on the insights they generate.
For the purposes of illustration, we will use a hypothetical market example of disposable diapers. While, in this example the analytics team is global in scope providing insights to global managers and local operators, the same framework and thinking also applies for insights teams with a domestic focus. Please note that these numbers and insights are purely illustrative and completely fabricated.
Building the economic foundationFor the A&I function just beginning to gain traction with strategic issues, we recommend establishing the economic foundation for growth for two reasons. First, getting the greater organization to understand the correct economic relationship with their business will be a big step in establishing the correct strategy. Second, a country’s economic performance is impersonal and factual. Focusing on a topic like this will make it easier to get initial buy-in from local operators as you are only establishing facts. This makes it less likely that your analysis or its implications will be taken personally before you have had a chance to establish an intellectual partnership.2
COMMUNICATING STRATEGIC INSIGHTSEFFECTIVELY
1
Analytics and insights (A&I) professionals have a difficult task. They are expected to be on top of every metric and able to produce them at the beck and call of stakeholders across the entire organization. Many workstreams are very immediate, snapshot-type analyses, trying to solve whatever concern management have on their mind at that moment.
The three crucial capabilities for any analytics and insights (A&I) function are to curate information, distil it into insights, and communicate how these insights affect the business. In this series of white papers our experts discuss how organizations can build and improve these capabilities within the context of strategic insights. This paper focuses on the communicate dimension of the curate-distil-communicate analytics framework.
COMMUNICATING STRATEGIC INSIGHTS EFFECTIVELY
Pictured below is the annual per-capita consumption of disposable diapers (going up the Y-axis) versus income per capita (on the X-axis). Over these data we have fit an S-curve, our preferred framework for understanding consumer demand at the market level.3
The two reasons why we prefer an S-curve framework for a physical consumable are a) that it requires sufficient market development to get the product to the consumer; and b) that there are only so many physical products each person can consume. While new parents may disagree, there is an upper limit to the amount of diapers a baby can use.
The key analytical feature of the S-curve is that it enables the estimation of take-off points and plateau points with respect to income. In the graph above we can see these take-off and plateau points. The markets between them, Stage 2, are the ones that will grow the most with income. Markets with income levels below the take-off point, Stage 1, will also grow with income, but at a slower pace (and maybe too slowly for the risk). Markets above the plateau point, Stage 3, are mature markets in which increases in income have little to no effect on the per-capita consumption of the product.
This basic insight has profound strategic implications.4 A firm which believes that demand is linearly related to income will overinvest in emerging and mature markets where, realistically, expectations of growth might be low (those within Stages 1 and 3), and underinvest in geographies with higher expectations of growth, those in Stage 2.
Again, because this type of insight is very high-level, it will not offend any individual local operator nor presume to tell them what to do. Thus, developing a framework like this should be a great first step in building traction within the various parts of the organization.
Overlaying megatrends and cultureWhile the S-curve is a great economic foundation for those in a global strategy role, it can seem abstract to those operating in individual markets. Idiosyncratic market conditions can be cited as causes of differing market performance, making it easy for local operators to dismiss the entire framework. Thus, even the most successful rollout of an S-curve framework may ring hollow to stakeholders outside the organization’s global headquarters.
One such way for the A&I professional to appeal to local teams is to overlay an analysis of megatrends on an accepted economic foundation. To do so, they incorporate demographic megatrends and cultural vectors to identify factors that affect market performance beyond income. Understanding the influence of non-economic market characteristics on consumer demand will help local operators “see” their markets in the framework. Further, it can help them prioritize investment decisions in local initiatives beyond the S-curve.
Going back to the disposable diaper example below, we see two highlighted areas. The first, in brown, represents markets in Stage 3 that appear to be under-indexing in their
Income per capita, PPP, US$.
Disp
osab
le d
iape
rs p
er-c
apit
a co
nsum
ptio
nU
nits
per
per
son,
201
6
Stage 1 Stage 2 Stage 3
Figure 2: Disposable diapers s-curvePer-capita consumption vs. income per capita, 2016
consumption of disposable diapers. An analysis of megatrends suggests that two factors contribute to this. The first is a low birth rate in those countries (thus fewer babies), and the second is a strong growth rate in favorable attitudes towards sustainability.
Turning our attention to Stage 1 markets, we have highlighted several markets that are outpacing their peers. Again, for the purposes of this example, we find that compared with their peers these markets have higher levels of female empowerment, such as higher levels of female education, resulting in higher labor force participation rates and therefore greater demand for disposable diapers.
To help drive this point home, the analytics project can illuminate these factors, by market, with several sets of sliders.5 For an example of sliders, see chart below.
By incorporating megatrends and culture, local operators are more likely to see their market in the data. The framework does not make a hard recommendation on what they may or may not do, but it does show them what influences markets such as theirs, and where they stand with respect to their peers. They will be much more likely to incorporate these insights into their strategic and operational plans and see the global insights team as providing value to their business that their locally-focused teams cannot.
Constructing strategic toolkitsThe ultimate way to convey insights to local operators is by packaging them into a coherent action plan. This can be best achieved after the A&I function has already established a trusted relationship with its internal stakeholders. A useful way of doing this is with a strategic toolkit, built by synthesizing the insights derived from understanding the economic, cultural and consumer dynamics of the product in the context of competitive and executional factors within the market. In doing so, it is possible to create a prescriptive set of action items to give operators the best chance of success within their markets.
Continuing with the diaper example, some geographies, especially those with declining sales, have been clamoring
to launch a line of adult diapers. While there have been previous successes, it is not a trivial investment to switch from baby to adult products because of the costs of retooling production lines, realigning marketing spend, etc. To guide the local operators in these geographies, the A&I function compiles case studies of successes and failures, identifies relevant distinguishing factors and then constructs a strategic toolkit for understanding the appropriateness of launching a new product.
An analysis of the case studies identifies four key success factors. A successful launch depends on the affluence of the nation, the use of adult care facilities, e-commerce penetration and, naturally, the age of the population. As we are answering a specific question, we indicate explicitly whether this market meets the criteria with something as simple as a check mark.
We observe that the country in question, country A, meets three of the four criteria, while country B meets only one. The launch is a non-starter in country B, but country A can move forward with more confidence and organizational buy-in, leading to an even greater chance of success. Only because we have established intellectual relationships with local operators through previous work like the S-curve and mega-trend analysis, can the A&I team make such prescriptive recommendations.
35,0000
11,0004,500
15,000
300
155 18
30%0%13% 18%8%
0% 100%
50%10% 65%
DRIVER METRIC TEST CASE CONDITION MET
Affluence
Age ofpopulation
Use of adultcare facilities
Income percapita (US$, PPP)
% of population above 65 years
E-commerce channel share
Number of facilities per100,000 people (a)
(a) Adult day services center, home health agency, hospice, nursing home, residential care community
Country ASuccess benchmark Country B
A B
Share ofE-commerce
3
COMMUNICATING STRATEGIC INSIGHTS EFFECTIVELY
CONCLUSIONOver time, A&I professionals will continue to see demands on their time and capabilities increase. However, for their own good, getting their organization to see the value of the strategic insights they generate will help align execution and strategy.
While no analysis or framework will be 100% precise, it is important to understand what thinking within these frameworks brings. It simplifies the life of every executive by focusing management energy on the execution of actionable strategies. It also simplifies the life of the A&I professional by narrowing the number of requests sent to analytics teams to investigate hypotheses that can be easily dismissed by accepted frameworks.
By incorporating frameworks like the one illustrated, we have seen our clients benefit by:1. providing a factual and consistent foundation
for understanding and comparing current and evolving opportunities;
2. fostering the development of global/regional assets that can serve the firm across different markets with similar relevant characteristics;
3. illuminating potential cross-market strategies that can be served from regional production hubs; and
4. preventing local market operators from prematurely introducing products simply because they were successful in a neighboring country.
Finally, at the organization level, these frameworks generate management leverage. Continuing within our example, the global team will have an informed and consistent opinion as to what each market should achieve and how they can and should go about achieving it. Further, it compels the local operators to act as a global portfolio instead of many independent local operators reporting into one umbrella organization. These two effects together improve overall organizational effectiveness. Thus, by effectively communicating insights to get internal clients to buy into useful frameworks, the A&I team can make their firm more competitive in the marketplace.
4
COMMUNICATING STRATEGIC INSIGHTS EFFECTIVELY
1. The situation can even be so extreme as strategy teams and operational analytics teams using contradicting data sources2. Unlike if the analysis began with the presumption that some commercial activity such as marketing or pricing was ineffective3. For a more in-depth treatment of the S-curve, please see “Understanding Where to Play”, https://www.canback.com/
5. For ease of illustration, we cluster by level. In practice, however, it is usually more correct (and easier to demonstrate a relationship) when we look at the megatrends effect on growth rates rather than the overall level of consumption.
REFERENCES
5
lack of understanding can have severe real-world consequences. The development of the global beer industry illustrates this point perfectly. Before 2015 the two largest brewers in the world were not from the “traditional” (and affluent) markets of Europe and the United States. Instead, Brazilians and South Africans, AB InBev and SABMiller, fuelled by high growth in Stage 2 markets, overtook and acquired incumbent companies in Stage 3 markets.
canback_understanding_where_to_play.pdf4. This distinction between understanding demand in terms of an S-curve versus just a linear relationship is not academic. This
COMMUNICATING STRATEGIC INSIGHTS EFFECTIVELY
About the author
About Canback
Canback Consulting is a management consulting firm working with senior management of the world’s largest consumer-facing companies. We offer a type of management consulting deeply rooted in science and predictive analytics. Our ability to apply scientific theory from economics, statistics and other fields, is married with deep in-country experiences. This creates a competitive advantage for our clients.
At Canback the aim of being “managerially relevant--analytically robust” is central to what we do. We are experts in translating the results of complex models into strategic recommendations that challenge the norms. We help to create a compelling, data-driven narrative for change, and typically convey the results at the most senior level within our clients’ organisations.
We travel the globe to understand markets and deliver our work. Our consultants have worked on the ground in more than 80 countries. In our analyses, we never look at markets or categories in isolation. Instead we always place our findings in a regional or global context. We also draw on the heritage of our parent The Economist Group to understand the economic and political forces that shape our world.
Our work is underpinned by our own proprietary data. The Canback Global Income Distribution Database covers GDP, population, household income, socioeconomic class sizes, and income brackets for every country (213), large subdivisions (698) and all cities with more than half a million inhabitants (997) in the world.
6
We work with our clients on multi-year efforts to enhance strategies and build organisational capabilities. From a growth perspective, this includes geographic expansion, identifying new markets, optimising portfolios, and improving revenue and profits through pricing decisions. We also provide operational due diligence support when growth opportunities are inorganic.
Jonathan Mayes is a Vice President at Canback. His experience spans strategy and predictive analytics with B2B and B2C clients in the United States and around the world.
Canback was acquired by The Economist Group in 2015 and is based in Boston. We share the principles of independence and intellectual rigor.
