Granularity - Smart Choices to Grow Your Business in Good Times and Bad
By Patrick Viguerie, Sven Smit and Mehrdad Baghai (Marshall Cavendish)
"[CEO Mark Zuckerberg] said that as Facebook offered more granularity in its privacy choices, the settings have become too complex."
"Our client, a global investment bank, seeks an experienced Business Analyst for a project that requires data analysis and testing regarding P&L granularity..."
"In IT, the services we manage are usually comprised of a number of components: a software application, a server, storage, a network and so on. Traditionally, we've managed them separately, and at ever increasing levels of granularity."
As these quotes culled from recent Google News stories suggest, 'granularity' is a term that has found favour with many, especially in technology and finance sectors. Derived from the field of physics, granularity is now more often deployed as a buzzword used to describe a complex situation where many options are open.
In business technology it refers to segmentation and the ability to slice and dice data to the nth degree to gain insights, identify micro markets, understand which geographies and products to push hard on and which to rein in on, and ultimately gain that most elusive of targets, competitive differentiation.
Part of the reason for this resurgent usage comes from a book called The Granularity of Growth, published in 2007 by a group of McKinsey consultants. Now the book has itself gained in granularity through this second edition, published this month in paperback in the UK.
The original, written in a relatively buoyant economy, built an argument for there being lucrative pockets of opportunity if you know where to look and have the structure to capitalise on the granularity of your view of seas of data. The new edition adds a challenge: does the granularity opportunity still exist amid the ruins of the economy?
The inevitable answer is 'yes'. In short, the authors advise business owners to act with discrimination, only cutting in "cells", and to take advantage of rivals' weaknesses for example through selective acquisitions.
Certainly, it is fair to argue that as globalisation advances yet further, the competitive landscape will only become more crowded. Being able to spot sleeper trends and those buried deep within inventory, supply chains and elsewhere will become critical and best practice will emerge to spread the word. Going one step further than your rival in this field will very often be the difference between success and failure, spotting an opportunity early or detecting a warning sign and anticipating a negative.
Of course, you could argue that even companies with the greatest view of granularity in the world still screw up. After all, billions of dollars of risk management processes, people and code didn't prevent the banking crisis. But the authors are correct to suggest that granularity matters in markets that are good, bad or (more correctly always) granular:
"We are even more convinced about the power of more granular approaches to performance management, market selection, and resource allocation. The reason? The weight of the evidence clearly demonstrates that the global financial crisis is itself a highly granular phenomenon. Discussing the crisis in the aggregate fails to appreciate that for pharmaceutical companies, the crisis has different repercussions than it does for banks and automotive players. It has also been different for different parts of the US and different parts of China. House prices have gone up in some areas while they have plummeted in others!
"In fact, the variance in growth rates increases significantly as we go from the overall economy to the sectoral and further down to the company level. This phenomenon is even stronger when one looks at profit growth rates. Therefore, while much of the commentary is about the duration of the downturn (such as six months to two years), the more interesting questions are about which pockets are managing to turn around faster than others."
The authors make a convincing case for the importance of applying a thorough methodological approach in pursuit of growth. Where many modern business books appear to reach for a catchy theme and then rally a small number of case studies around to support this, the authors' McKinsey-ism provides numerically dense (sometimes too dense for this dense reader) examples of the role of independently small insights in M&A, market share gain and so on.
The trend clearly offers opportunities for developers of business intelligence software and other tools that support strategic decision making. It's no surprise that many of these have been acquired in big deals such as SAP's purchase of Business Objects, IBM's combination with Cognos and Oracle's buyout of Hyperion. BI could grow further as more staff gain access to the technology. Soon, many of us will have the ability to identify tiny but sometimes significant trends and, as ever, those who will be able to separate wood from trees will be successful.