Revisiting averages…

I was listening today to a podcast from the Mckinsey Quarterly titled “The Granularity of Growth“. The basic idea is that in an industry, not all companies, segments and products have the same growth rate. Which is of course, obvious. However, when so many times we use the term “average growth rate of an industry” in the decision mechanism, this realization holds many implications. Not only does the range of the growth in the industry vary, but it is also internally skewed across the segments, a fact that could lead to different decision regarding acquisitions and new ventures & products.

That made me think – where have I heard this concept before? And it immediately came to me – Hans Rosling’s amazing talk about statistics, where he takes Africa’s average GDP and breaks it into different countries that are so varied and different from each another, that just talking about “the problems of Africa” becomes immediately inaccurate. And again, this has many practical implications.

This led me to what companies do all the time. Look for the average customer. I already discussed some of the implications of such thinking. But a few of the discussions in our latest marketing classes and a case we are working on, crystallized it even further for me. “Our average customer”. “The average satisfaction rate”. Very dangerous concepts. Because by responding to the average, we are missing the different groups that have different characteristics.

Average is easy and convenient to use. It is intuitive for us to grasp. However, whenever you see an average, you should be suspicious. You should ask yourself – does it really represent the full picture or does it create a middle category that does not really exist?

Beware of the average, I know I started to.

Elad

Advertisements

One Response to “Revisiting averages…”


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: