Creativity, Strategic Thinking and Statistical Models
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Creativity, Strategic Thinking and Statistical Models

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It may seem something of an oxymoron to suggest creativity and strategic thinking fit with statistical models. This article seeks to demonstrate how statistical models can help executives improve ...

It may seem something of an oxymoron to suggest creativity and strategic thinking fit with statistical models. This article seeks to demonstrate how statistical models can help executives improve their strategic thinking.

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Creativity, Strategic Thinking and Statistical Models Creativity, Strategic Thinking and Statistical Models Document Transcript

  • Creativity, Strategic Thinking and Statistical Models By James Neils It may seem something of an oxymoron to suggest creativity and strategic thinking fit with statistical models. Yet, any time an executive beings the process of strategic thinking it should prompt a willingness to accept different methodologies and/or ideas. While the planning process may diminish the use of a novel approach, executives should not impose limits on creative thinking while developing a strategic plan. This article seeks to demonstrate how statistical models can help executives improve their strategic thinking. Because strategic thinking is a learned skill, like any learning to improve competency requires repetitive practice. While some may only engage in strategic thinking on major issues, improving strategic thinking can also be accomplished by using any issue regardless of the size. Thus, staff aspiring to be executives can also practice strategic thinking regardless of their current position or decision making responsibility. In many ways practicing strategic thinking is similar to warm up prior to any physical activity. Few would expect anyone to complete a triathlon without training. Athletic training tends to be focused, repetitive and oriented to achieve the larger goal. In the same way, learning to think strategically requires training and conditioning the thought process. While seminars can teach a process, it is the constant "reps" by the executive that conditions the brain to be creative and to think strategically. Strategic thinking involves some measure of creativity as well as practice, regardless of how complex the process might be. Sometimes learning and applying simple concepts will more easily invigorate the creativity useful for strategic thinking than complex analysis and multiple measurements which simply adds data to consider. This is why, although an unlikely source of inspiration, statistical models can be sued to add a measure of creativity to the thinking process. Contrary to what some executives might think simple statistical concepts can be used in a variety of management situations. Statistical analysis is not always about the task of "number crunching." Sometimes it is about statistical concepts to view a problem or find a solution. Strategic thinking is partially about viewing an issue from a different perspective and statistical models provides an opportunity to do just that. There are several statistical concepts that require little expertise, have already proven helpful in a variety of fields, and are easily adaptable for use in association management. While some association executives may shy away from the notion that statistical models might enhance creativity and strategic thinking, the effort here is to demonstrate how statistical models can contribute. Presented are three simple statistical concepts that not Creativity, Strategic Thinking and Statistical Models 1 James Neils 2008
  • only can be used in the daily management of an association, but also provide an unusual approach to problems and therefore offer a means to enhance strategic thinking. The 80/20 Rule Used primarily in business, there is a wonderful statistical concept known as the 80/20 Rule. In the late 1890's Italian political economist Vilfredo Pareto developed a mathematical formula that today is called Pareto's law, but more commonly referred to as the 80/20 Rule. Researching the distribution of wealth he found that throughout history, in every society, eighty percent of the wealth was controlled by twenty percent of the population. Since publication, its application spans business, money management, manufacturing, customer service, human resources and even the management of lifestyles. There are numerous seminars, blogs and conferences where participants review and share its application. One reason this rule has been embraced by Business is due to its ability to efficiently measure a wide-range of issues. In the business setting the 80/20 rule states generally that 80% of profits will come from 20% of the clients, 80% of the problems will come from 20% of the customers and 20% of the personnel will consume 80% of human resources time. Apply that same statistical approach to association management and Pareto's law would suggest 80% of volunteers come from 20% of membership, 80% of referrals come from 20% of the members, 80% of members will use 20% of the available benefits and/or 80% of the board members will function well on the board while 20% will not. The rule’s usefulness can be tested on just about any management issue. Consider conference registration, does it fit the 80/20 Rule model? The model predicts 80% of the registrations should occur prior to or on the deadline and the remaining 20% after the deadline. The rule is not designed to be absolute, rather a quick guide to compare against actual measurement. Depending on the size of the variance, if performance is less than eighty percent, then it might be a reason to consider a brief review and use the rule as a goal. But is this statistical concept strategic? The application of the 80/20 Rule to registration may not be strategic. Learning how to apply this conceptual model in daily management and being prepared and skilled to use it on larger situations or problems can be. What, for instance, makes an Association unique? Applying the 80/20 Rule can help to focus thinking on the distinguishing features. Pareto's law suggests that 80% of what any association does is similar to other associations, while 20% is unique. Most associations collect fees, have meetings, offer vendor products, have web sites, seek to expand in some ways and have boards that change routinely. Most of the staff’s activity is in support of these common functions. Creativity, Strategic Thinking and Statistical Models 2 James Neils 2008
  • There are sure to be executives who would challenge the application of this 80/20 Rule to association work. However, "Best Practices", reflects the kind of commonality the 80/20 Rule addresses. "Best Practices" is the acknowledgement that common procedures and business practices exists. Further, there is a common desire across a variety of people to establish procedures and practices into the lexicon of association management. Being able to recognize the common 80% as well as focus in on the unique 20% of any issue or problem is strategic in thinking. Consider an association that depends on charitable funding as its primary source of revenue. Learning that 80% of revenue comes from 20% of the benefactors would be a good thing, even though having 80% of the funding come from 20% may not be. An executive and/or board might alter the funding campaign if it found the 80/20 Rule held true for their revenue sources. This simple concept has a way of putting many things into perspective. Consider any number of association issues, whether it is staffing or conference programs or funding, and apply the 80/20 Rule. Imagine teaching staff the 80/20 Rule and having it as a common benchmark for their projects or decisions. The issue is not how complicated or simple a conceptual model is rather how it can be applied. The 80/20 Rule may not be applicable in every situation and is not designed to be, but its use might persuade an executive to think of the implications. If membership campaigns were consistently supported by the same twenty percent of the members would it cause a rethinking of the "reward" system, if there is one? Would it have any affect on how these members were viewed by the board or staff? Are there characteristics of the twenty percent that can be identified and used as a means to find others who are not active but could be? What would happen if this twenty percent began to decrease either as a result of ending careers or no longer feeling appreciated for their efforts? The 80/20 Rule is a useful tool to improve strategic thinking because of its simplicity. It is a quick easy measurement, against which actual data can be compared. As Business has discovered its range of application is what makes it an important tool for any executive. The next two models involve the use of common and simple well-known concepts but take a slightly different direction. Although statistical analysis is generally about numbers, converted graphically, numbers can seem to take on magical qualities. Instead of rows and columns of seemingly indistinguishable numbers, a graphic display conveys a meaning all those numbers never could. Further, viewing and thinking about visual references add a dimension that reading numbered text does not. Since viewing objects stimulates different parts of the brain than reading and reasoning with numbers, graphic displays serve as another way to stimulate creative thinking. The Bell-Shaped-Curve Among the more interesting statistical models, simply because it can be so easily applied to nearly all management issues, is Gaussian distribution, better known as the bell-shape- curve. Named after Carl Friedrich Gauss, the bell-shape-curve is among the more widely known statistical concepts and hopefully, executives have learned to incorporate it into their Creativity, Strategic Thinking and Statistical Models 3 James Neils 2008
  • thinking and decision-making processes. Rather than discuss the technical aspects of what produces the bell-shaped-curve, the focus here is its use for strategic thinking. The first introduction to the bell-shape-curve for most occurred early on in education to demonstrate test performance and distribution. Its use illustrated there would be some who scored well, some who scored poor and the majority who scored somewhere in the middle. As many can attest, the typical distribution looked like this. Whether it is measuring membership, program participation rates, volunteerism or registration, the bell-shape-curve concept can be used in association management and helpful to improve thinking strategically. For example, an association's conference planner would like to decrease the number of members registering late or on-site for the national meeting and proposes the association set a new deadline. Here is an opportunity to think strategically and for the executive to practice identifying all the components involved in the decision. This can be a learning experience for staff as well as an executive. This decision is more than just about a deadline, but about all of the issues involved and what it takes and the costs to set a new deadline. Chief among these costs might be an often-overlooked strategic resource of any association, staff time. A lot of staff time might be consumed in meetings prior to a decision and later to prepare a presentation for the board, write new policy, update conference information, change the web site and/or deal with questions or complaints. Viewing staff time as a strategic resource is one way an executive can learn to become more strategic in their thinking and will certainly help when dealing with the board and members who routinely see staff as being available and without cost. Apply the Bell-Shape-Curve concept to the registration issue discussed earlier. Generally, the pattern for member registration should follow the bell curve model, a few sign-up quite early, most around the deadline and then, as a percentage of the total it should decrease as the conference draws near. Additionally, the 80/20 Rule would imply that 80% of the members have registered by the deadline. Plotting the registration frequency across time an executive could "see" whether registration fits a typical bell curve model and whether registration conforms to or varies from the 80/20 Rule. Compare the two illustrations below. They represent registration patterns displayed as bell curve models and the example of proposing a change in the registration deadline. In both, the solid vertical line represents the existing deadline and the dashed line the proposed new deadline. The conference start date is to the left and registration opening date to the Creativity, Strategic Thinking and Statistical Models 4 James Neils 2008
  • right side for each curve. It certainly does not appear in either case that a change in the deadline would significantly alter late registration numbers, even though clearly one of the registration patterns is better than the other. A B Conference begins Registration Opens Suppose instead of the data being displayed graphically it was displayed as a list of dates with corresponding number of registrations per date such as this table. May 8 60 May 9 165 May 10 190 May 11 180 May 12 175 A list and corresponding graphic display will have the same information, but visually as a bell curve numbers take on a different quality and can illustrate meaning even without the viewer knowing the actual figures. It is the ability to understand and to interpret through visual cues that enhances the thinking process. The power of the bell-shape-curve comes from its ability to stimulate intuitive thinking. Viewing the distribution patterns in the next example, which one of the two curves represents greater concentration of registrations near the deadline? Not only is it apparent which graph it is, but there seems little need to know the numbers in order to make a decision. There are a surprising number of management issues where a bell-shaped-curve could be used to measure performance. For example, the two graphs could represent the results of a campaign to inform members about benefits, or responses before and after a web site was updated. It seems the issue is not whether this concept is useful, rather whether executives and aspiring executives know how to use the concept. In addition to the bell-shape-curve there is another easy to use statistical concept, the bull's eye which when combined with the bell-shaped-curve can promote innovative thinking. The Bull's Eye While most people are familiar with a target's practice bull's eye, the idea it could be used in management while at first may seem unusual, actually is not. To graphically depict how Creativity, Strategic Thinking and Statistical Models 5 James Neils 2008
  • the University of Wisconsin at Stout was “people centered” Dr. Charles Kruger developed a bull’s eye model, (www.uwstout.edu/ctem/ppc/bullseye.html). To demonstrate to senior Boeing officials how well Boeing’s Space Transportation Systems group was meeting its customer’s needs and contributing to the company, the group used a bull’s eye model, (www.stsc.hill.af.mil/.../1997/08/seicmm5.asp). To identify how venture capitalist would turn a charitable organization into a profitable business, they used several models including the bull’s eye, (cvar.venturecapital.org/.../Charity/charity.html). What is intriguing about the bull's-eye is how easily is can be applied in association management as both a conceptual tool and a visual representation for measurement. Consider what the bull's eye could represent: membership and distribution across various categories of members. To demonstrate its use, let’s apply it to a fictitious association of bank tellers. Each ring would represent a particular segment of the membership. The inner portion represents the members who are most closely aligned to the mission and purpose of the association: the tellers themselves. The first outer ring could relate to other bank personnel and the final outer ring could correspond to providers of equipment or supplies which bank tellers' use. This would then provide a visual reference of membership distribution in a way significantly different from the typical numeric tally of members in the various categories and permits visual cuing that simple numbers do not. It is clear which group forms the "core" members of the association membership. For a membership recruitment campaign it would be easy to help existing members focus on whom they should recruit. Imagine the impact for a committee or staff if new members were positioned onto the target. It would visually reference whether the campaign was "centered" or just somewhere on target. Its impact can go far beyond acting as a simple reference. Similar to a scatter plot, it can depict distribution. By dividing the bull's eye into quadrants we can see that it can clearly provide a visual reference in membership categories and the following demonstrates how powerful this visualization can be, even within just one segment of the membership population. In this example, the bull's-eye displays just the bank tellers segmented by four different types of banks to satisfaction with the association and years as a member. The X axis represents years as a member while the Y axis represents satisfaction with the association. While it is possible, this particular example would not display a member who is totally dissatisfied with the organization and have a negative satisfaction score. Also, the midpoint is zero for both axis and values increase as distance from the center increases Creativity, Strategic Thinking and Statistical Models 6 James Neils 2008
  • +10 Private City Private Suburban +10 0 +10 Member satisfaction Branch/Main City Branch Suburban +10 Years as a member This type of display could be completed for each member type or for all combined members on one display. Yet, while this is all possible and could be useful, a bull's eye does not seem to posses the creative qualities that would make it helpful for strategic thinking. Add a little Creativity Suppose, however, the perspective of the bull’s-eyes would change and instead what is possible to present is not a flat at all? Imagine, instead of looking at this as a simple flat bull's-eye, it is viewed from the top view of a three dimensional, 360°, bell-shape-curve. The idea that a bull's-eye could represent a bell-shape-curve certainly does have creative qualities. Further, because of the Internet and shareware, the statistical software that can produce this graphic display is free and available to anyone. Statisticians actually combined the two concepts years ago and an entirely new field of statistics emerged. With the advent of higher speed personal computers, the application has become universal within certain fields, especially within statistics. Similar to the representation of the bull's-eye most people view the bell-shaped-curve only on a single flat plane. Since its general use in education was to represent a single application, scores for a test, there was little reason to consider that it might have greater potential. What happens when these two concepts are combined with the notion of multi-dimensions is not only interesting it can useful in management decision making. A representation by Richardson is perhaps the best display of the two statistics and the concept of multi dimensional. Richardson's diagram helps to show not only the typical flat display of the bell curve as it cuts through the middle of a bull's-eye but also how the height, usually expressed as a measure of frequency, could elevate a bull's-eye. Richardson's model also makes it possible to see the how many other dimensions could be measured. In school the bell curve was most often to report on one degree, such as test scores, rather than included as part of a full range of possible student measurements. It could have just Creativity, Strategic Thinking and Statistical Models 7 James Neils 2008
  • as easily been used to display comparisons for attendance, participation in extra-curricular activities, ACT/SAT scores, or parental involvement. In other words, there could have been a bell curve for a full 360° range of measurements. Imagine taking a range of measurements within any association across members and visually displaying them on the multi-dimensional combination of the bull’s eye and bell shape curve. Let’s illustrate the power of combining these two simple statistical concepts and what can be produced as it applies to association management. Remember the proposal on the executive's desk to move a registration deadline? The association has registration data and is now prepared to view, instead of numbers, a graphic display of just one quadrant, the members who work in or supply private suburban banks, to see the registration pattern. The purpose is to assist the executive, and staff, make the decision about whether it would be helpful to move to a new registration deadline. The resulting graph below which is a combination bull’s eye and bell shape curve displays intuitive meaning that numbers simply cannot. After viewing this graph with minimum reference points and no numbers, as long as other quadrants reported similar results, the Executive could be confident in making the decision that there is little need or significant benefits to warrant moving the registration deadline. Number of Registrations Registration begins Registration deadline Tellers Other Employees Meeting begins Vendors Looking at the graph there is a lot of information being displayed simultaneously and yet at the same time there is a simplicity that numbers could never achieve. There is not a single number referenced on the chart, yet most executives and staff could not only interpret the graph, but could make a decision as to whether it would be useful to move the deadline and whether members might object to the move, particularly when a second quadrant is added as seen below. Creativity, Strategic Thinking and Statistical Models 8 James Neils 2008
  • Visual references are powerful cues in the thinking process and the reason speakers are encouraged to use visual aids. Look at the difference between these two bell curves, one illustrated earlier in flat mode and the corresponding partner in a partial bull's eye three- dimension mode. Statistical models have the ability to transform numbers into meaning and add a measure of creativity to strategic thinking. The bull's eye may not initially seem creative or strategic but as a visual reference to represent data, it can help develop more creative thinking especially when combined with the bell shape curve. Imagine a presentation before a board with the registration graph to explain the recommendation. These are not gimmicks but useful tools in being able to think more strategically and with greater creativity. There is no denying that a bull's eye is a simple concept as is a bell-shape-curve, yet they can produce powerful representations, and that is what makes them so useful. Implications As these examples have hopefully demonstrated, statistical models can be used in association management and be used by executives and others to improve strategic thinking skills. Business has long used models and they do belong in association management and should be in an executive's daily thinking and decision making skill set. Whether executives choose to use the 80/20 Rule, the Bell-Shape-Curve or the three- dimensional Bull's-eye in their work is a personal choice. Models, including statistical models, can help an executive examine issues from various perspectives and contribute a measure of creativity into the thinking process. With powerful visual cues statistical models can play a role in the thinking process. As in any learning, practice provides the opportunity to prepare strategic thinking for larger more complex problems. Daily association management can provide the opportunities to practice and executives can develop or improve the creativity needed for strategic thinking. Current and future executives can expect greater emphasis will be placed on innovation, strategic thinking and results. This will mean executives must expand their skill sets and be Creativity, Strategic Thinking and Statistical Models 9 James Neils 2008
  • capable to accomplish what previous executives may never have thought possible. Many people never considered a bell-shape-curve could be more than what they learned while in school, yet someone did take the time to think that there could be more. As a result of their creative thinking, the bell-shaped-curve model has changed forever. Whether association executives will have that kind of influence on their respective associations is dependent upon their willingness to consider different perspectives, to think about what could be and have the confidence in their creative talent to achieve what others have not. Creativity, Strategic Thinking and Statistical Models 10 James Neils 2008