In my latest post at VentureBeat’s Entrepreneur Corner, I look at why forecasting customer growth is so important for valuation, venture capitalists, and cash management.
I like writing for them since they have a very different approach to content than other places I’ve published. They are on a high volume, short attention span schedule, so content must be punchier, tighter, and very focused.
I had a conversation with a respected analyst a while ago where 90% of the time was spent on questions that were not part of the original list for the discussion. Those were the questions that led to the most interesting dialog on her topic.
It led me to think more deeply on the nature of decision making and how asking the right questions leads to better decisions. (Yes, I do think about this stuff for fun.) With the coming explosion in data availability, the ability to ask good questions will only increase in importance.
What’s the problem? Quantity vs. quality. The underlying task of using information to generate insight and of using insight to making good decisions still takes skill and talent. Many people have never had to think through how to enable good decision making, and more data won’t change that.
One way to solve this problem is a simple two-part test for any information gathering and decision making process. It’s not rocket science. But I see surprisingly few people pay this much attention to the process.
The basic approach has two components:
Applying these two tests to any inquiry help isolate useful and interesting questions from the merely interesting. It’s not really meant for a casual conversation, but more for the preparation stage of a presentation or discussion.
Let’s take a simple example. “Who is your core customer?” is a pretty typical question in my business. But it’s not a terribly useful question, since the response will likely be a generic description of the largest customer segment, and there isn’t much you can do with the information, since the answer tells you nothing of why they are core or what the opportunity is among the group.
A better way to frame this is to work backwards. I want to, for example, improve top-line revenue and profitability with minimal incremental spending. So understanding core customers will lead to decision making around marketing targeting and allocation. Based on that, what I really want to know is which customers have the highest potential for ROI given increases in marketing investment. And since that investment will be different depending on their demographics and spending patterns, I really need to look at several segments, not just one.
Given this need, a better way to ask the question is, “Which customer segments have the potential to grow with reasonable marketing investments?” Which, of course, means you need to figure out your segments, not just your core segments…which leads to more questions. You get the picture
