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Dr. Paul Bracewell14th December '05

Consistency and Decision Making

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Overview

Defining Consistency Analytics and Decision Making Using Data to Make Decisions Imposing Perspectives Manufacturing a Dashboard

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What is Consistency?

How often have you mentioned to a colleague/manager/subordinate/yourself “standard deviation” to be greeted with:a) a blank look?

b) glazed eyes?c) disgust?d) all of the above?

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Being Consistent

Understanding the variability of data is crucial to making robust business decisions – but so often it is neglected and only averages are explored Embracing basic statistical understanding leads to better business decisions Challenge is to introduce statistical concepts in a user friendly way

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Defining Consistency

Consistency is the “reliability or uniformity of successive results or events” More simply – consistency relates to the variability of a process. By discussing consistency of a process with colleagues/mangers/subordinates – you get them thinking statistically without knowing it! In the long term – success stems from consistency (Provided average outcome is favourable)

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Using Data to Make Decisions

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Using Analytics to Make Decisions

Statistical techniques are there to make working with numbers easier – show us when to look and where. Humans are poor at detecting patterns in large data sets. Correct use of statistics avoids mistakes and bias. Technical Note - Often simple techniques do the job such as using the chisq option in a proc freq for cross tabulations.

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Making Robust Decisions

Is there a real difference between$1677.58 and $2268.17?

Consider the context:consistency of process (variability)

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Example Context

Monthly Credit Card Spend of Individual at Major NZ Bank. First Question – how variable is the process (monthly spend)? Use graphical techniques to explore data

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The Small Picture

$2268.17

$1677.58

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The Big Picture

Mean

90% Upper Confidence Limit

90% Lower Confidence Limit

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Big Picture in Perspective

Customer got married, partner obtained joint card

Customer got Competitor Card

N~(2000, 300²)

N~(1100, 100²)N~(900, 200²)

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Imposing Perspectives

Which is larger?

Without experience or a frame of reference it is difficult to tell

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Use of Dashboards

Dashboards and ratings create a frame of reference – making comparisons easier. We have all encountered: “On a scale of 1 to 10, how do you rate…” This allows variability to be considered instinctively – thereby sneaking it under the radar. Not as robust/accurate as using actual measurements of variability – but it is a start.

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Constructing a Dashboard

Quantify process Standardise Data: Subtract mean and divide by standard deviation with respect to groups/events/elements of interest Scale Raw Data: For a scale of 0 to 100, multiply standardised data by 12.5 and add 50.

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Dashboard View

Minimum Maximum

View Process Range

Display statistical tests

Incorporates Variability

Fits directly into reports

Hypothesis Test

0

6040

100

8020

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Dashboard Examples

Intelligence Quotient (IQ) Team Lode-ings (Rugby Ratings) Temperature (Degree Celcius)

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Summary

Considering variability means that the business is considering individual behaviours. This leads to customer centric approaches. Allows businesses the ability to manage risk effectively. Leads to improved modeling of processes Better understanding of process results in better decisions

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