For Better Data-Driven Results, Don't Forget the Human Touch

A few weeks ago I received a box full of clothes even though I hadn't purchased them. This wasn't a fortuitous accident (although that would have been great). The clothes were sent by the company Stitch Fix. How it works is shoppers create a profile about their clothing size and style preferences and a stylist with the aid of algorithms selects merchandise that may appeal to each customer. Customers only pay for the items that they decide to keep and send the rest back (with free shipping).
Data Analytics

Stitch Fix's secret sauce is its data. According to Forbes, Stitch Fix has a team of 80 data scientists who build algorithms that crunch mountains of data including a customer's occupation and zip code to find clothing that the customer is likely to keep. For the record I purchased 3 out of the 5 items that were sent to me.

Data-driven businesses like Stitch Fix represent enormous opportunities to deliver more personalized products and services to customers. In fact, Forrester Research estimates that insights-driven businesses will grow eight times faster than global GDP.

"Companies like Netflix, Amazon, and Tesla use data and analytics at every point to differentiate products and customer experience," writes Forrester analyst Sarah Sikowitz in a blog post. "Any company that hopes to remain competitive over the next five years will need to do the same."

Companies are also locking in opportunities to use data competitively. For example, two years ago, Amazon obtained a patent for "anticipatory shipping" software that will pack and ship products that are in high demand based on order history and other data, even before customers have placed the order. It's not clear whether Amazon will implement anticipatory or speculative shipping, but the point is the company is uncovering innovative ways to leverage its data.

However, although data insights can help brands differentiate their business, it's not a panacea. Companies must take a balanced approach to any strategy, even one driven by data, notes Jay Wilder, director of product marketing at Datorama, a marketing analytics solutions provider.

"You should always question the data and reporting that you're looking at and make sure that it isn't just composed of vanity metrics," Wilder says. "Also, data is not an end in itself. Think of it as a guide on how to evolve the company versus just defending the data that you're looking at."

Therefore, data analytics can provide insights that give companies an edge over competitors, but even sophisticated algorithms need to be reviewed and supplemented with human oversight.