The Power of Data Transformation

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John Brodie, the co-founder of Merkle Aquila, reveals the power of data-driven business transformation, from the humble burger, to the world’s most addictive video game.

 

There are some amazing examples of businesses that have used data analytics to transform the way they operated and what we can learn from them.

It might shock you to learn that in the first instance we are going back to 1948 for one of the best examples of data analytics transforming a business – and in turn create an entire new industry – fast food.

In October 1948, the McDonald brothers, Maurice and Richard, also-known-as ’Mac and Dick’ completely changed their McDonald’s Bar-B-Que restaurant based on two pieces of detailed data analysis. Firstly they changed the product range by understanding the profitability and volumes of sales of their product range – this highlighted that Burgers, Fries and Milkshakes generated over 80% of their profits. By cutting out the products that didn’t sell or didn’t make them margin they were able to focus on maximising their efforts on selling the products which did.

Asking the Right Questions

In my experience many businesses still struggle with this basic concept – what is selling?  How much are we making from those products? Which channel is most effective at selling our products? Should we reduce the product range and be more focussed in our efforts?

One of our clients had exactly this issue – through detailed customer and product analysis including profitability and customer satisfaction analysis they reduced their product range and now focus on products which deliver high value but are also the products which customers liked most.

Data Driven Improvement

The next data driven improvement at McDonald’s had a much bigger impact on the business. The McDonald brothers changed the entire process of making and delivering the reduced product range. The kitchen was completed transformed and customers came to the window to collect rather than sat in cars and had a waitress bring the food.

To achieve this improvement required a huge effort in collecting data, every action was timed, recorded, analysed, refined and optimised. Interestingly McDonald’s still do this, but now use sensor data to review all parts of its operations including drive-in, kitchen and restaurants. Although every McDonald’s feels identical they are each slightly different, based on data that is captured for each location.

We will continue to see businesses look to capture more and more data about all of their operational processes as they look to make evidence-based decisions on improvements.

The Match Three King

Another case of transforming business through data analytics was King, home of Candy Crush Saga. I could have picked out any number of businesses within the games sector as they are all trail blazing in this area but the phenomenal performance of Candy Crush a few years ago makes it stand out.

In December 2013 Candy Crush had 93 million daily active users and 1 billion games played per day – that little mobile game generated $450 million per quarter back then. The analytics behind these games are just as impressive; many models working in real time to predict if the user was becoming frustrated, if they were frustrated would they attrite or would they pay to complete the level?

These models then fed into the game, again in real time, to change the game for that individual – the phrase used was ‘changing the product in the customers hand’. I have often thought about how truly transformative it would be if other business could change the product in the customers hand. For example – a bank that could change the APR of my mortgage when I logged into digital banking based on knowing I had become dissatisfied or had been on comparison site or had just seen an advert on TV for a competitor.

Just two great stories of data transformation in action.

 

John co-founded Aquila in 2012 with Warwick Beresford-Jones. It was acquired by Merkle in 2017. John and Warwick remain in charge of Merkle Aquila which has more than 60 statisticians and data scientists, working with major brands such as Royal Bank of Scotland, Sony Mobile and Tesco Bank to develop analytical and data-driven strategies.

John Callagy