How to Avoid Confusing Analysis with Understanding

A friend of mine recently changed jobs. He left a successful consulting firm to work with one of his clients — a high-growth SaaS company. When I asked how he likes his new role, he said, “It seems like every company I’ve ever worked with, as a consultant or employee, has tons of data but doesn’t do anything useful with what they’ve got. They do a lot of analysis, but no real understanding of what the data mean.” 

An example from a Formula 1 racing team

Consider the British Formula 1 team, Williams Racing. After years of unimpressive results, the family-owned racing business changed ownership in August 2020. Following a transition period, James Vowles, the chief strategist who helped the Mercedes F1 team win eight consecutive constructors’ championships, took the helm as the Williams team Principal. 

In his new role, Vowles quickly concluded that Williams Racing had lots of data with little benefit. One of the most critical activities of an F1 racing team is building a new state-of-the-art car every year, drawing from cutting-edge technology, new high-performance components, and continually advancing production techniques. 

Design, development, and car production are essential to enabling drivers to win F1 races. Williams Racing wasn’t excelling in any of these areas. In an interview with The Race, Vowles said it is not an exaggeration to say that up to and including at least the initial work on the 2024 Williams vehicle, its car builds were handled using Microsoft Excel, with a list of around 20,000 individual components and parts. “The Excel list was a joke. Impossible to navigate and impossible to update. […] Managing a car build is not just about listing all the components needed. There wasn’t information on the cost of components, how long they took to build, how many were in the system to be built.” Plenty to analyze. Little understanding about where the company was falling short of expectations (specifically, winning Formula 1 races).

Why companies confuse analysis and understanding

Companies gather gigabytes of customer data, employee engagement insights, and the latest industry-specific technology trend details, then fall short of translating this information to evolve their go-to-market business models, whether they are building race cars, providing financial services, or selling wholesale plumbing supplies. Why? Often, the answer is confusing analysis with understanding

Analysis is the process of breaking something down to understand its elements. Understanding is the ability to grasp the complete picture and cause-and-effect relationships in a meaningful way. In the business world, this principle translates to understanding today’s operating environment as well as how changes unfolding now will affect tomorrow’s business environment. 

Understanding makes analysis actionable

In my book, Leading from Now: A Leader’s Guide to Navigating Change, I focus on understanding those operating environment elements in perpetual motion and how they can inform leaders’ proactive actions.  

  • Customers change. Who they are, what they value and what they expect now is different than five years ago and different than it will be over the next five years.
  • Competition changes. The firms you compete with, how you compete (price, offering, engagement approach, technology), the intensity of competition, alternatives and substitute offerings available are in flux.
  • How businesses engage with customers changes. Interfaces with customers (human interaction, physical sales/service locations, self-service, technology platforms), digital connectivity, customer acquisition marketing (digital, social, other) and ongoing engagement are all in motion.
  • Employees change. Who they are, what they value, what they expect from your firm and your firm’s value proposition to employees are different now than five years ago and will be five years hence.
  • Technology supporting business changes. Core platforms required to operate the business are different today than over the past five years. The technology horizon over the next few years is evolving. Business processes will need to be refined or redesigned to enhance operational efficiency.
  • Economics of a business change. Staffing, supplies, transportation, premises, technology, insurance, and tax costs are dynamic. How will the next five years differ from the previous, and what impact will that have on pricing and profitability?

Analysis matters. Turning analysis and data into understanding is valuable. Developing and sustaining understanding is essential in Change Leadership, meaning proactive, ongoing adaptation of an organization to its operating environment, which is in perpetual motion. Leaders must be tuned to conditions in the present moment to infer and inform actions taken today, aligned with future success. With understanding, leaders can choose to initiate change intentionally (or react to forces evolving in the organization). 

Whether you are the Principal of a Formula 1 racing team or manager at a SaaS firm, developing and sustaining an understanding of your business information is vital to making analysis actionable.   

 

Originally published on SMARTBRIEF, march 27, 2024
Image: We ARe/getty Images