Pricing

Pundits vs. Big Data: Which are you relying on?

By Ben Blaney
November 7, 2012

A man did something tremendous last night, here in the United States, and with worldwide implications. Groundbreaking and exciting as this event was, most media coverage today is about another event – the one about who gets an architecturally-unusual workplace for the next four years. The man I’m talking about is Nate Silver, author of the NY Times 538 blog (http://fivethirtyeight.blogs.nytimes.com/).  Nate Silver came out of sabermetrics, an area of baseball statistics that we’ve talked about previously in this blog.

Vote-resized-600In recent years, Nate has been working on political analysis. His experience at working with large data sets lends perfectly to a segue into political analysis – and specifically making sense of the myriad of opinion poll results, accounting for demographic information, and the pollsters’ historical accuracy. In the 2008 presidential election, he correctly predicted the winner of 49 of the 50 states. Last night, he got all 50. But the last seven days haven’t been easy; he predicted from a 75% chance of an Obama victory, up to 91% yesterday morning – while all the professional pundits were saying “too close to call.”

What does this mean for those of us in pricing? I think it’s huge. It’s mainstream awareness of the power in hard data, and that robust analysis of big data will beat the prediction of the “expert” working on gut-feel and experience (and unable to isolate and remove their own bias and hope).

In B2B pricing, we have the equivalent of Nate Silver’s raw data – it’s called Enterprise Big Data. And it’s the cold hard facts of every line item of every invoice ever produced by an organization – it tells us who buys what products and what prices, what correlation there is between the sales of one product and another, what happens to volume when the price changes, the extent to which different customers pay different prices for the same product. This serious information, unquestionable and firm will continue to gather momentum and strength against those who want to continue to rely on yesterday’s technique of instinct and preference.

The question that readers of this blog should be asking themselves is: “in my organization, do I have a Nate Silver with the systems and data to support him, or do I have pundits giving opinions which turn out to be wildly wrong?”

– Ben Blaney

    Ben Blaney

    Ben has 10 years experience in the pricing space, managing people, processes, and projects, delivering operating income improvements in excess of $50MM. He leads Commercial Excellence at a division of Colfax Corporation. Prior to that, Ben led pricing for a division of General Electric, worked at Vendavo, and ITT Corporation. He is a Certified Pricing Professional, a Six Sigma Black Belt, and holds both major project management certifications (PMP and PRINCE2).