How good are you at listening, even to yourself?

Recently an ulcer in my mouth was quite distressing. I attempted to research it to find some sort of relief. You would think for such a simple thing as an ulcer in the mouth would be easy to find a remedy. But it is not so unless you ask the right questions. 

 Even so I did manage to record a short video about this dilemma. Trade work going on around me filled the air with dust hence the cover sheet hanging behind me to protect the pictures on my wall. 

Who profits from poor data quality?

In the course of reading I found something that I believe puts a very different perspective on data management. We talk about how real time fast retrieval based analytics reporting can be used to grow the business. The truth it that it is not always so. Modern business systems have high integrity built in and can present  data to you on demand, so you can ask questions that perhaps can be of high impact . That is the real value

But when a system process is broken or poorly designed, aside from fixing the cause, it seems bad data can provide business opportunities for the unscrupulous?

The question posed in the research material I read  asked, imageWho profits from poor data quality? 

Well apparently, the retail industry does—sometimes.

Poor data quality (and poor information quality in the case of intentionally confusing fine print) definitely has a role to play with things such as mail-in rebates—and it’s a supporting role that can definitely lead to increased profits.

In a post by Jim Harris  dated 06/16/2010 he describes how this works. When I read it I saw how poor data engineered to be supplied this way allows some dubious business practices  to scam the consumer.  His post is also re-published in the Smart Data Collective,

It is an excellent read with congratulations to the author. I have also reposted here ~

A few months ago, during an e-mail correspondence with one of my blog readers from Brazil (I’ll let him decide if he wishes to remain anonymous or identify himself in the comments section), I was asked the following intriguing question:

“Who profits from poor data quality?”

The specific choice of verb (i.e., “profits”) may have been a linguistic issue, by which I mean that since I don’t know Portuguese, our correspondence had to be conducted in English.

Please don’t misunderstand me—his writing was perfectly understandable.

As I discussed in my blog post Can Social Media become a Universal Translator?, my native language is English, and like many people from the United States, it is the only language I am fluent in.  My friends from Great Britain would most likely point that I am only fluent in the American “version” of the English language, but that’s a topic for another day—and another blog post.

When anyone communicates in another language—and especially in writing—not every word may be exactly right.

For example: Muito obrigado por sua pergunta!

Hopefully (and with help from Google Translate), I just wrote “thank you for your question” in Portuguese.

My point is that I believe he was asking why poor data quality continues to persist as an extremely prevalent issue, especially when its detrimental effects on effective business decisions has become painfully obvious given the recent global financial crisis.

However, being mentally stuck on my literal interpretation of the word “profit” has delayed my blog post response—until now.

Promoting Poor Data Quality

In economics, the term “flight to quality” describes the aftermath of a financial crisis (e.g., a stock market crash) when people become highly risk-averse and move their money into safer, more reliable investments.  A similar “flight to data quality” often occurs in the aftermath of an event when poor data quality negatively impacted decision-critical enterprise information.

The recent recession provides many examples of the financial aspect of this negative impact.  Therefore, even companies that may not have viewed poor data quality as a major risk—and a huge cost greatly decreasing their profits—are doing so now.

However, the retail industry has always been known for its paper thin profit margins, which are due, in large part, to often being forced into the highly competitive game of pricing.  Although dropping the price is the easiest way to sell just about any product, it is also virtually impossible to sustain this rather effective, but short-term, tactic as a viable long-term business strategy.

Therefore, a common approach used to compete on price without risking too much on profit is to promote sales using a rebate, which I believe is a business strategy intentionally promoting poor data quality for the purposes of increasing profits.

You break it, you slip it—either way—you buy it, we profit

The most common form of a rebate is a mail-in rebate.  The basic premise is simple.  Instead of reducing the in-store price of a product, it is sold at full price, but a rebate form is provided that the customer can fill out and mail to the product’s manufacturer, which will then mail a rebate check to the customer—usually within a few business weeks after approving the rebate form.

For example, you could purchase a new mobile phone for $250 with a $125 mail-in rebate, which would make the “sale price” only $125—which is what the store will advertise as the actual sale price with “after a $125 mail-in rebate” written in small print.

Two key statistics significantly impact the profitability of these type of rebate programs, breakage and slippage.

Breakage is the percentage of customers who, for reasons I will get to in a moment, fail to take advantage of the rebate, and therefore end up paying full price for the product.  Returning to my example, the mobile phone that would have cost $125 if you received the $125 mail-in rebate, instead becomes exactly what you paid for it—$250 (plus applicable taxes, of course).

Slippage is the percentage of customers who either don’t mail in the rebate form at all, or don’t cash their received rebate check.  The former is the most common “slip,” while the latter is usually caused by failing to cash the rebate check before it expires, which is typically 30 to 90 days after it is processed (i.e., expiration dated)—and regardless of when it is actually received.

Breakage, and the most common form of slippage, are generally the result of making the rebate process intentionally complex.

Rebate forms often require you to provide a significant amount of information, both about yourself and the product, as well as attach several “proofs of purchase” such as a copy of the receipt and the barcode cut out of the product’s package.

Data entry errors are perhaps the most commonly cited root cause of poor data quality.

Rebates seem designed to guarantee data entry errors (by encouraging the customer to fill out the rebate form incorrectly).

In this particular situation, the manufacturer is hyper-vigilant about data quality and for an excellent reason—poor data quality will either delay or void the customer’s rebate.

Additionally, the fine print of the rebate form can include other “terms and conditions” voiding the rebate—even if the form is filled out perfectly.  A common example is the limitation of “only one rebate per postal address.”  This sounds reasonable, right?

Well, one major electronics manufacturer used this disclaimer to disqualify all customers who lived in multiple unit dwellings, such as an apartment building, where another customer “at the same postal address” had already applied for a rebate.

Conclusion

Statistics vary by product and region, but estimates show that breakage and slippage combine on average to result in 40% of retail customers paying full price when making a purchasing decision based on a promotional price requiring a mail-in rebate.

So who profits from poor data quality?  Apparently, the retail industry does—sometimes.

Poor data quality (and poor information quality in the case of intentionally confusing fine print) definitely has a role to play with mail-in rebates—and it’s a supporting role that can definitely lead to increased profits.

Of course, the long-term risks and costs associated with alienating the marketplace with gimmicky promotions take their toll.

In fact, the major electronics manufacturer mentioned above was actually substantially fined in the United States and forced to pay hundreds of thousands of dollars worth of denied mail-in rebates to customers.

Therefore, poor data quality, much like crime, doesn’t pay—at least not for very long.

I am not trying to demonize the retail industry.

Excluding criminal acts of intentional fraud, such as identity theft and money laundering, this was the best example I could think of that allowed me to respond to a reader’s request—without using the far more complex example of the mortgage crisis.

Is it the name or the alias that matters?

imageBusiness people, not IT, make technology work to focus the business. The general IT role is more strategic to maintain and improve competitive positions of the business infrastructure to make people’s lives easier, It is not the other way around. Ask any CIO, he knows that. especially when he asks for a sign off on what is installed.

So why when changing a process do people go straight to IT to set up technical processes. When they do IT have no choice to do it their way, Then  they give things names that are either functional, relate to the software or are way too obscure?

There is no way this should happen in the public domain as things like product names and branded access URLs are always cleared by marketing. Then image and branding are so important. But internally that does not happen as all too IT often gets little business help or involvement.

It is like having two standards, one rule for customers and other those who service them. And that make no sense at all. Setting the service delivery culture starts with teaching people the supply chain in not about them but their suppliers and customers. So why do we still insist being too lazy to put some effort into more marketing rather than functional or geeky names.

To paraphrase from another well-known idiom.

If you feed them peanuts they will look like monkeys.

So why not give internal process the same respect you give your customers and suppliers so they will be more likely to perform and respond the way you expect. That of course needs a business person to own and manage the change process. And all too often they are missing or busy.

Most often too as learning is done in the development stage where the die is cast. “A habit of one” it is often called. When you show people something that continues to work for them they may never change even if it is improved the very next day. The process and a systems life is therefore limited by the language and thought we give it when it starts. Never mind people whom may struggle later once the initial support is gone.

http://Image076/ or some such useless ellipsis name embedded in key process URLs is unlikely to move your business forward. So why use language that you don’t understand or is not service related?

As for IT infrastructure and everything upwards it is vital for management to get involved. Once instances are set and business teams take over any plea to start where we want to end up is then forlorn and lost.  It is often too hard and too detailed for managements to consider, especially in the “lets get it done urgency” cultures to have something working and adding value yesterday. So it gets underway without good thought on the impact of a later change.

Using and understanding how to set names and use aliases in not an IT role, It is vital for business managers to break this nexus so the language of technology more natural to focus the business.

Can “Drive” itself be a motivator more than money?

A popular myth in business and life is that it is only money that motivates. Consider why you go to learn to play a piano or join a speech club and why you find so many professionals doing more creatively work for others for free when their employer pays them for the same type of work.

End user tools such as Gmail plus backend server tools like Lynx and Apache are some of the world’s highest used technologies. These are examples of things that would have never happened were they not motivated to be created by something other than money.

It may be true that the more money works to get better results when the task being done involves mechanical skills based on a set of rules. Then the more you scale up the pay as the  reward the more likelihood there is for a better result.

However MIT and other studies conclusively find that once a task calls from even rudimentary cognitive skills, the results most often get worse when you use more pay as the incentive to get more results. Profit motive then gets unhinged from purpose and bad things start to happen.

This is discussed in this Royal Society for encouragement of Arts, Manufactures and Commerce (RSA) Animate Video – “Drive: The surprising truth about what motivates us

This calls into question that if you reward something you get more of the behavior you want and if you punish something you get less.

The video that is has had extensive viewing since it was published on you Tube in April 2010.

This lively RSA Animate, adapted from Dan Pink’s talk at the RSA, illustrates the hidden truths behind what really motivates us at home and the workplace. www.theRSA.org

It bears no more comment except to say it may the best 10 minutes of essential information you can get to help you understand and pass your next creative leadership challenge.

 

Here also is the live version of Dan Pink’s RSA talk if you prefer to see him in action.

I wonder what others think?