The next big thing.....

I have fallen in love with numbers, at least for the last one month. For one, numbers don't lie, if it is a 10, it is a 10. Words and sentences, on the other hand, can present ambiguity, words like several, various, a few and many more can just give the idea without precision. I can feel that question in your mind, how did i fall in love with numbers??

I read a book , The money ball by Michael Lewis. Many a times in the past I have read books which have influenced my thinking, and general perception of events, and even issues. Books like Dangerous fortune by Ken Folleit, Robert Ludlum's Matarese Circle, the Barbara Kimenya series when i was a pupil and Max Cleland reaching for the Max motivated me a lot, but Money ball was a different thing altogether.

As a finance professional, I am used to numbers presented like okay, just as numbers. Statements of accounts in hard figures but rarely do we make sense of those figures. If a company posts a profit of , say, 5 billion, we rush to buy the share, to comment how  apt the management is, to say how that should be an example to aspiring mangers and so forth. We rarely look into the underlying reasons, like how are the employees paid? What portion of the profit is from operations? Could they have sold some PPE of a certain amount like 2 billion? How is the management?How is it compensated?

Now back to money ball, the book,  characterized by maily the two notable Billies, Billy James and Billy Beane, is an interesting oratory on how to use analytics. It easy easy to use the gut, to follow the crowd, to see a big political rally and say yeaah....that is our president and so forth. Billy James, however, chose not to believe his eyes, chose to quantify whatever he saw in a game of baseball. Incidentally, though, i can firmly say that even Billy James himself cannot quantify the effect his researches and analytics have had, in baseball, corporate world and other sports, in general.. He changed the way we view sports, the human eye is very biased.

The book imputes that we shun the convention. For example, in Kenya, the conventional agreement is that the problem with SMEs, recently branded GEMs by the CMA is insufficiency, and inaccessibility to capital. Has anybody ever gone to the length of knowing how these businesses keep records? How learned/skilled are the employees?The vision...mission and targets of the businesses? The efficiency of procedures, source of supplies, alternative sources? How long does their creditors take to settle their dues?How do they search for new customers? How do they sustain already existing ones? How do they invest their profits?

Some years ago, East Africa's largest company both by profits and revenues, Safaricom, went public. Banks offered loans, astonishingly at 17% P.a, tfor people to buy the shares. What followed was a massive over subscription, delays in allocating shares and millions of refunds to willful buyers. I could not understand the economies of buying the share at small scale, or even taking a short position. It dawned to me that the common Kenyan can't afford professional advisory services. Even if they come at a fee, they are worth it. Banks advertised loans, mainly to bolster their profits, while people remained in the darkness on what to expect. Since then, many people have serviced their huge loans (chunks of the money went to unplanned uses) while they have received MPESA dividends, of which, the most economical way to use them is to buy airtime for the same network.

Did anybody try to calculate the cost versus the benefit of borrowing money to buy the share? Did anyone look at the average return % on the listed company?Did anyone look at the  industry averages? Of course some people did, mainly seasoned investors. Most of them, however, stayed away from the shares. They knew that Kenyans would grow disillusioned and dispose the shares at throw away price. The smart investors waited, the likes of Chris Kirubi and his Centum Capital only bought Safaricom shares this year. Their decisions were mainly influenced by the positioning of the company as financially well-off, diversification of operations to include the robust money transfer and tele-banking services which leaves my friend wondering if the company is really in the telecommunications sector.

The above literature, is a backing to the accreditation of use of analytics. Deloitte analysts, in their first annual survey, showed how businesses have adopted the use of analytics. One of the senior analysts argues that analytics don't replace the gut decision, but they add to the accuracy of decisions. In an era where competitive advantage comes on grease-sweat and vanishes with great ease, analytics may be the solution. They have worked with Biily Beane's Oakland As in baseball, Everton in soccer and generally in rugby.

For our Kenyan companies, both listed and emerging, analytics still remain a dream. A marketing manager will send his/her salespeople to make sales, but doesn't analyse why the competitor is gaining market share, why the company is losing customers and so forth. In instances, institutions relax after making profits in a single year only to wallow in losses in the following year. Others recruit employees consistently for successive years only to find themselves caught up in big wage bills and start retrenching. Efficient management foresees these problems and makes realistic decisions based on data and examples from front-runners in the respective industries.

Others seek loans only to plunge more into debt. The bottom line is that Kenyan companies should awaken to analytics. The field is still at baby-step level, even in the developed world, but it is unquestionably the next big thing. Watch this space.