Decoding Data: The Art of Asking Questions That Transform Business

Introduction

In the world of data analysis, the ultimate goal is to uncover insights that have the power to guide, drive, or even change the direction of a business. However, without a clear focus, an analysis can easily result in useless findings. By categorizing business questions into three distinct groups, Analysts can guide their work toward generating valuable insights.

In this article, we will explore the three types of questions that lead to business-changing insights:

• Known-Knowns
• Known-Unknowns
• Unknown-Unknowns

Known-Knowns: confirming existing knowledge

Known-Knowns refer to business questions or information that we already understand or have a strong hypothesis about. These questions focus on confirming what we already know or believe to be true. When working with Known-Knowns, it is essential to ask:

• What is the key decision at stake during this analysis?
• What is the most important stakeholder trying to achieve?

By addressing these questions, Analysts can establish a solid foundation and ensure that the analysis aligns with the key objectives of the business.

Examples of known-knowns in an e-commerce business include:

1. Conversion Rate: What is the current conversion rate of the website, and how does it vary across different traffic sources or user segments?
2. Average Order Value: What is the average value of orders placed by customers, and how does it differ based on factors like product category, customer location, or marketing campaigns?
3. Customer Lifetime Value: How much revenue does the average customer generate over their entire relationship with the company, and how does it vary based on their purchase history or engagement with loyalty programs?
4. Churn Rate: What is the rate at which customers stop making purchases or become inactive, and what are the common factors associated with customer churn?
5. Product Performance: Which products are the best sellers, and how does their performance change over time or during specific promotions or seasons?
6. Customer Satisfaction: What is the overall satisfaction level of customers, as measured through surveys or feedback ratings, and what are the key factors influencing customer satisfaction?
7. Return Rate: What percentage of products purchased are returned by customers, and what are the primary reasons for returns?
8. Traffic Sources: Which channels or marketing campaigns drive the highest volume of website traffic, and what is the quality and conversion rate of traffic from different sources?

These questions represent areas where the company already has some understanding or hypotheses, and the analysis can focus on confirming, refining, or gaining deeper insights into these aspects of the business.

Known-Unknowns: answering guiding questions

Known-Unknowns encompass the unanswered questions within the business or related to the specific project. Unanswered business questions should be presented as “guiding questions” to the Analyst, along with enough business context to help them properly answer the question.

Guiding questions are focused on discovering, learning, or understanding something new. To uncover these insights, Analysts should ask:

• What are the unanswered questions within the business or related to this project?
• What business hypotheses do we have that we’re uncertain about?

Domain Experts should have a good understanding of their business area’s Known-Knowns and Known-Unknowns. This is even worth recording in a central document, such as Notion or Google Sheets. Addressing the Known-Unknowns provides Analysts with a roadmap for exploration and allows them to delve into areas where valuable insights may be waiting to be discovered.

Here are some potential examples of Known-Unknowns in an e-commerce business:

1. Customer Behavior: What are the key factors that drive customers to make a purchase or abandon their shopping carts? How can we optimize the user experience to increase conversion rates?
2. Competitive Analysis: What strategies are our competitors implementing to attract customers and gain market share? How can we differentiate ourselves and stay ahead in a competitive landscape?
3. Pricing Optimization: What is the optimal pricing strategy for our products? Are there specific pricing tiers or discount strategies that resonate better with our target audience?
4. Customer Segmentation: How can we effectively segment our customer base to tailor marketing campaigns and promotions to specific groups? What are the characteristics and preferences of different customer segments?
5. Product Recommendations: How can we improve our product recommendation algorithms to provide personalized and relevant recommendations to customers, thereby increasing cross-selling and upselling opportunities?
6. Customer Lifetime Value (CLV) Prediction: Can we develop models or predictive analytics to estimate the future CLV of customers and identify high-value customers who are likely to have long-term relationships with our brand?
7. Mobile Optimization: How can we enhance the mobile shopping experience and address any specific challenges or barriers that mobile users may face?
8. Social Media Influence: What is the impact of social media on our brand perception and customer engagement? How can we leverage social media platforms to drive brand awareness and customer loyalty?

These examples represent areas where the company has recognized gaps in knowledge or areas where they want to explore further to gain valuable insights. By addressing these Known-Unknowns through data analysis and research, the company can uncover new opportunities for growth, optimization, and customer satisfaction.

Unknown-Unknowns: shifting perspectives with novel insights

Unknown-Unknowns represent the realm of novel information that the analysis brings to light. These insights have the potential to challenge existing perspectives and reshape the way business domain experts understand and make decisions.

To uncover Unknown-Unknowns, Analysts should ask:

• What new information can we provide that can impact the understanding or decision-making within the business?
• What unexpected information do I see my analysis? Does this counter our previously established Known-Knowns?

By addressing the Unknown-Unknowns, Analysts can generate groundbreaking insights that have the power to transform the business landscape.

Unknown-Unknowns represent novel information or insights that the analysis can bring to light, challenging existing perspectives or assumptions. Potential examples in an e-commerce business include:

1. Emerging Customer Segments: Through data analysis, the company may discover previously unidentified customer segments that exhibit unique behavior or preferences, providing opportunities to tailor marketing strategies or product offerings accordingly.
2. Unforeseen Market Trends: The analysis may uncover unexpected market trends or shifts in consumer behavior that were not previously recognized, allowing the company to adapt its strategies and offerings to capitalize on emerging opportunities.
3. Hidden Customer Needs: The analysis might reveal previously unrecognized customer needs or pain points that the company can address through new products, services, or improvements to the customer experience.
4. Cross-Category Insights: By analyzing customer purchase patterns, the company may discover untapped opportunities for cross-selling or bundling products across different categories, leading to increased sales and customer satisfaction.
5. Disruptive Technologies: The analysis may uncover emerging technologies or innovative solutions that could disrupt the e-commerce industry, prompting the company to explore partnerships, investments, or adoption of new technologies to stay ahead of the curve.
6. Untapped Marketing Channels: The analysis might reveal alternative marketing channels or platforms that have the potential to reach untapped audiences or drive higher engagement and conversion rates.
7. Unexplored International Markets: Through data analysis, the company may identify international markets with high growth potential that were previously overlooked, prompting expansion strategies into new regions or countries.
8. Synergistic Partnerships: The analysis may reveal unexpected synergies or partnership opportunities with complementary businesses or industries, opening up new avenues for collaboration and revenue generation.

These examples demonstrate how strategic analysis can uncover hidden opportunities, insights, and possibilities that were previously unknown to the company. Identifying Unknown-Unknowns often requires a combination of internal and external data (provided by the Analyst) and a deep understanding of the market (provided by the Domain Expert).

Conclusion

By using the framework of Known-Knowns, Known-Unknowns, and Unknown-Unknowns, Analysts can distinguish the types of insights they are generating, determine how to present them effectively and identify the appropriate stakeholders to share them with.

Understanding the different categories of questions and their corresponding insights allows Analysts to provide focused and impactful analysis that can truly drive business success. By aligning their work with the business's key objectives and exploring the unknown, Analysts become valuable partners in shaping the organization's future.