The Opportunities are in the Outliers
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“Normal is merely average… if we study what is merely average, we will remain merely average.” - Shawn Anchor
The opportunities are in the outliers is a phrase I came up with recently to summarize one of the important concepts when it comes to data. I love working with data and numbers. Over the past number of years, I’ve been involved with several digitalization projects and analyzing data is something that has been part of my entire career.
You see, for some of us, we may need to reframe how we think about outliers. For those that have been trained in statistics, outliers are sometimes simply viewed as bad data points. They can make the data analysis messier, cause the standard deviation to be wider than we would like, and make it more difficult to come to a statistically significant conclusion. This can often be the case, especially when we are dealing with controlled experimental conditions.
However, when we get into the less controlled world of people and even manufacturing or other types of data, we need to be careful of looking at the data through this framework or mindset. Instead of being “bad” data points, outliers can be gold mines. Here are two examples, one from operations and the other related to people.
- In manufacturing, the best batches are called golden batches and they are often positive outliers. These need to be studied to find out what operating conditions created these batches so that they can be replicated in the future.
- If you are trying to improve the performance of your sales team, where can you look to gain insight into how to improve the performance of the organization? Study your best salespeople. If you are trying to grow sales, then look for those that have increased their year-over-year sales by the largest amount. Ask what they do – but don’t be surprised if sometimes they cannot tell you. When people are very good at what they do and it comes naturally to them, they can be unaware what they are doing well. So how can you find out? Watch what they do and compare this against your lowest performers – look at these outliers also. The opportunities are in the outliers.
Practical application: When we are really trying to understand something, we can’t just look at the average. The average does not tell us very much. At minimum, both the average and the standard deviation are needed. When we are trying to unlock opportunities, scatter plots are needed because they allow us to see all the data, including the outliers. Have you heard of The Dinosaur Dozen? This is a fun dataset that illustrates why sometime the average and standard deviation alone are not sufficient.
If you have 12 minutes to spare and want more inspiration, listen to this TEDTalk by Shawn Anchor.
If you really enjoy this topic and are looking for a good read, pick up Malcolm Gladwell’s book, Outliers.