“Without data, you’re just another person with an opinion.”

W. Edwards Deming

In the increasingly competitive digital-age, there is a growing trend for companies to adopt data-driven processes and business cultures. In this post I will discuss what it means for companies to utilize data-driven processes, and how this might work when applied to forest management organizations.

What does it mean for companies to be Data-Driven?

At first glance, data-driven sounds like the new management fad-of-the-month, such as Total Quality Management, Six-Sigma and Lean. But in the era of “Big Data“, companies are devoting millions of dollars in capital and human resources toward understanding and using the large amounts of data generated from daily transactions to aid decision making and competitive advantage.

For example, companies like Amazon and Kroger are using data to create personalized shopping experiences. Netflix uses data to provide subscribers with personalized entertainment experiences. PepsiCo uses data to manage warehouse supplies and to restock retail shelves. Companies like these rely on data to develop new products, to attract or retain customers, to analyze risks, and to get a better handle on supply chains (J. Kopanakis, Mentionlytics). In other words, they are finding creative ways to monetize their data.

I like how Stefaan Verhulst explains this trend.

“We are still living in the knowledge economy, and organizations are still trying to figure out how to unlock under-utilized assets. But the currency has changed: Today’s Rembrandts in the attic are data.”

Stefaan Verhulst (May 15, 2020), Unlock the Hidden Value of Your Data, in Harvard Business Review.

So, how does this translate to the modern forest company?

My guess is that the larger forest products companies are already using some form of data-driven processes to track and manage supply-chains, or to evaluate macro and micro-economic trends. Some companies are even starting to utilize Machine Learning (ML) and Artificial Intelligence (AI) in their core business workflows. But what about traditional forest management companies (e.g. TIMO’s and REIT’s)? Are these business models supportive of a data-driven culture, and what data are they harvesting to generate tangible value for the clients they serve? This is a question I’ve yet to answer.

Personally, I don’t have an insiders view into how most companies operate, but if I had to guess, I’d say they are using whatever they can get by with. All companies rely on information, but to what extent are these companies developing solutions around data, advanced algorithms and other automated data pipelines. As a manager of a small forest ownership, I rely on data regularly to make decisions, to evaluate previous decisions, and to identify trends and opportunities for improvement. In a small setting, the problem we face is that there is relatively little data to work with, and it can take years to accumulate enough data to be meaningful for advanced modeling and analytics. Not to mention that data comes at a high cost.

In short, the data-driven movement is about making smarter business decisions. However, it’s also about looking at new ways to extract value from the business to gain a competitive edge. This is a process that involves learning from both good and bad decisions, while being open-minded to the outcome. In the next part of this series I will give some examples of how I’ve employed simple data-driven methods in a small forest operation.

Categories: Forestry Apps

JwL