We Ignore Data Because We Are Delusional – by Jason Kilgore

I love data.  I teach college statistics for fun.  Data sheds light on the truth and sometimes that truth is offensive, causing us to become defensive.  Sure, it is always worthwhile to question the data source, veracity, and collection method.  Yet, even when the data is solid, we ignore data we don’t like.  I call it Data Denial Syndrome.  And we are all guilty of it.  As defined by me, DDS is a condition whereby we emotionally ignore what our analytical brain knows to be true.  Here are half a dozen delusions commonly associated with DDS.

1.  Delusion:  “The data doesn’t match what people are telling me.”   Reality:  People are telling you what you want to hear.  Stories people tell are anecdotal and are true only in the singular moment when the event occurred.  Meaningful data is a summary of all the facts, including the facts we subconsciously filter out.

2.  Delusion:  “Statistics often lie.”  Reality:  Good statistics mirror the larger population.  When appropriately collected, the samples answer a very specific question.  Sometimes we try to use specific results to answer a question for which that data set was never intended to answer.  Data doesn’t lie, but sometimes we ask it to answer the wrong question.

3.  Delusion:  “We’re still better than half the companies out there.”   Reality:  There are 120 teams in NCAA Division 1 football.  It is unlikely that you know which team was ranked 59th, just two spots above the bottom half.  It was Wake Forrest and they had a losing record.  And, they are perennially irrelevant to all but a handful of alumni.

4.  Delusion: “The data looks bad, but we are the exception.”  Reality:  No you are not. In fact, those claiming to be the exception are often in the majority.  The truly exceptional don’t play the “we-are-the-exception” card.  They simply accept the data, act decisively, and fix their problems.  In so doing, they become exceptional.

5.  Delusion:  “This data is an anomaly.”   Reality:  Ted Williams had a 0.344 lifetime batting average.   Only once in nineteen seasons did his yearly batting average drop below 0.300.  More often, his average exceeded 0.400.  If your “bad anomalies” occur more frequently than your “good anomalies,” your “bad anomalies” are, in reality, a trend.

6.  [My favorite] Delusion: “The sample size is not valid.”  Reality: Sample size correlates to certainty, not validity.  Without boring you with the details, increasing the sample size of a data set allows us to see the data with more precision.  It does not render the information invalid.  If I were to randomly survey five of your customers and all five say your company sucks, it is not fair to say that their responses are invalid.  We can say with certainty that those five people may or may not represent 100% of your customers.  Just because the sample size is five does not make those responses any more or less valid or any less actionable.

Here’s the simple truth:  Positive data is not actionable, but negative data highlights opportunity.  Data that points to our flaws gives us the opportunity to improve.  Therefore, time spent trying to excuse, invalidate, or justify unflattering data is time wasted.  Use data to understand weaknesses and available resources to improve processes.

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Process Improvement – Getting the Right Details Right by Jason Kilgore

If a symphony performance is to be truly exceptional, each musician must master every note within the selection.  Each instrument must be finely tuned.  The venue’s design must enhance the look, feel, and sound of the event.  The “team” must function as a unit, keeping rhythm and timing.   Well-designed processes are much like a symphony performance.  There are a million details that must be considered, vetted, and executed.  Process improvement is a disciplined approach used to synthesize random details into a cohesive series of desired events.  Here are three reasons why improving processes depends on getting the right details right.

Reason #1:  Details are the difference between success and failure.  John Wooden said it this way, “It’s the little details that are vital. Little things make big things happen.” Even the casual sports fan recognizes that games are won and lost by doing the basic fundamentals correctly.  Play good defense, don’t turn the ball over, use proper technique, pay attention to the out of bounds lines, keep your eye on the ball – the list is almost endless.  The same is true in process improvement.  Mistakes in our business, as in sports, compound on each other to the point of complete system failure (our team makes mistakes, the other team scores; the other team scores, our team loses).   Success depends on doing the little things right – each person on the teaming do his or her job precisely, on cue, every time. Ignoring the details makes us average at best.

Reason #2:  Understanding the details requires building relationships.  As project groups come together to decipher data and map processes –activities necessary for improving processes – relationships are built.  Poring over details focus our minds on the common goal, encourages lively debate, and pushes our team toward consensus.   Each person learns to appreciate the talents, contributions, and motivations of every other team member.  Teams focus on the opportunity to the point that personality flaws are overlooked and connections are made with people who share a common passion for improving the status quo.  Subconsciously, we build a robust database in our minds of who does what well.  Our success depends on our ability to leverage our collective strengths and overcome our collective weaknesses.

Reason #3:  The ability to discern the important details fills the leadership vacuum.  Finding people who can lead process improvement projects is difficult.  There are those who obsess over every detail, unable to discern the critical few from the trivial many.  (They become paralyzed by indecision and are ultimately ineffective.)  Other “big-picture” thinkers make universe-altering decisions without giving careful consideration to the tactical details.  (This type of person quickly loses interest in the project altogether.)  It takes both of these people to make a project successful.  Yet, a third type of person existing in the narrow middle, is able assess entire systems, identify key triggers, and initiate improvements.  It is critical to have a person the team with the ability to act as funnel, ensuring proper focus on the details that really matter.

Shuffling through mountains of details is seldom fun, usually thankless, and always time-consuming.  However, uncovering and acting upon the nuanced opportunities will transform your business.  And that is truly rewarding and worth the time and emotional investment.  The details do matter.

Selling Extended Warranties Sends a Mixed Message

I know it is the Christmas season because I am bombarded with extended warranty offers on everything I buy.  One sales person in particular asked me if I wanted to buy an extended warranty on a television.

ME:  “What does the warranty cover?”

HIM:  “It covers the cost of repair or replacement if something goes wrong.”

ME:  “Like, if I drop it or something?”

HIM:  “No, it doesn’t cover that.”

ME:  “Oh, you mean if there’s a power surge and the electronics get fried?”

HIM:  “No, it doesn’t really cover that either.”

ME:  “Then, what does it cover?”

HIM:  “The warranty covers any repairs needed as a result of an internal failure.”

ME:  “Internal failure, meaning defective?”

HIM:  “Yes.”

ME: “So, there’s a good chance this TV is defective and I will be screwed unless I buy the warranty?”

HIM:  “Ummmm….”

ME:  “I’ll pass.”

The logic behind selling extended warranties is fundamentally flawed.  (Yes, I recognize warranties are sold because consumers buy them and the retailer makes money.)  Selling extended warranties sends mixed messages to consumers.  On one hand, retailers depend on their customers believing in the quality of products offered and the reputation of the organization to deliver that expected level of quality.  On the other hand, customers are asked to pay a hefty fee in anticipation that the seller will fail to live up to the standard of excellence it is trying to portray.  This is the reality, but does it even make sense?  Carefully consider the following before offering to sell your customer an extended warranty.

  1. Extended warranties contradict the consumer’s sensibilities about the meaning of “fit-for-use.”  As consumers, we expect the products and services we buy to be fit-for-use, meaning those products and services will function as intended in the normal environment of its use.  For example, we don’t expect our pet fish to survive an afternoon of playtime with our pet kitten.  We do expect our snow boots to keep our feet warm and dry in the snow.  We expect our kids to be kept safe at school or camp.  Extended warranties contradict the consumer’ core belief in the product or service– the same core belief that drove the consumer to purchase the product or service.   Put yourself in the shoes of the consumer for a moment.  When we are offered an extended warranty, there arises a brief contradiction to what we believe about the product (the product is fit for use) and what the seller implies about the product (the product is not fit for use).  Alternately, when the seller of a product offers us a free bumper-to-bumper extended warranty, our core belief about the product is reassured.
  2. Extended warranties presume a lack of quality.  Why do consumers buy extended warranties?  Because consumers assume the product or service will fail sometime within its useful life.  As consumers, the more we are asked to pay for an extended warranty relative to the initial product price, the more we become convinced the product might be defective.  If we were to buy a computer for $1,000 and shamelessly pressured to buy an extended warranty for $250, we could assume one of two scenarios exists.  First, there is a 25% chance the PC will fail.  (Why else would the warranty be 25% of the purchase price?)  Alternatively, we could assume that there is a much lower chance of failure, the seller knows it, and is just trying to make extraneous profit on the sale.  Either scenario creates distrust between the buyer and seller based on the presumption of the lack of quality in either the initial product or the subsequent customer relationship.
  3. Extended warranties reduce the incentive to build quality products.  Extended warranties are often backed by a third party (excluding most automotive and Apple warranties).  So, if the product is defective, it is NOT the manufacturer taking the financial risk for failures.  In fact, the manufacturer may never see its lack of quality.  The third-party backer will repair or replace the product from the funds collected from the 75% of consumers whose products do not fail.  The cost of the poor quality is not transparently passed back to the entity responsible for poor quality in the first place.  The extended warranty, in effect, insulates the guilty party from fully feeling the pain of inferior products.  The producer is numb to the “improve-or-die” incentive inherent in companies that stand behind the quality of its products.  [This reasoning should encourage consumers to give preference to products and services backed by the manufacturer directly.]

As a practical matter, there is a time and place for extended warranties.  It is always wise to weigh the risks and reward of such offers before any major purchase.  The philosophical dilemma is in the message extended warranties send.  As you think about your business model, consider every single message you send to your customers, whether expressed or implied.  We know that extended warranties generate revenue, but what do they say about our product or service?   What quality statement is made by a surgeon offering to sell you life insurance just prior to performing your surgery?   – Jason Kilgore