One of the common issues we see lenders face as they become more familiar with their data is analysis paralysis. Analysis paralysis happens when someone over thinks (or analyzes) a situation to the extent that no action is ever taken. This literally means the analysis is paralyzed. This problem is not exclusive to the banking industry, either. Many other industries with a Big Data focus face these same type of problems.
Most of these companies have so much data they feel overwhelmed by the sheer number of KPI’s (Key Performance Indicators) they can focus on. It’s similar to when you try out a new restaurant and after glancing at the menu you realize there are over 1,000 items listed as entrees that look good and you suddenly find yourself asking the waiter to give you a little more time to decide.(Sound familiar?)
With the hundreds of permutations you can make to your data and all of the KPI’s you hear about from your peers how can this problem be avoided? The solution is to start small, get trained on your loan management software (or lending software), and prioritize. You can use the following list to avoid falling into the paralysis trap.
1. Separate out “Need to Have” from “Nice to Have” metrics. Most of the time paralysis happens because you get introduced to more metrics than your brain can handle at one time. You might start focusing on one metric when suddenly you hear of another great metric so you move on to the great new metric without completing your original analysis. If you’ve ever seen the Disney show UP, this feeling is similar to the dogs in the show that get distracted every time they think they hear a squirrel. Don’t let the data squirrels distract you, stay focused. To make sure the data squirrels don’t start popping into your analysis try and focus initially on only 5-6 key metrics. Once you have a system to monitor those key metrics and you understand them thoroughly you can move on to more granular analysis.
2. Make sure you have a clean and friendly user interface so you don’t avoid doing analysis, design matters. Nobody likes working with a product that is outdated, difficult to navigate, or requires a degree in statistics to use. Make sure your loan management software is visually appealing and is easy to use, the more you like how it looks and the easier it is to use the more time you’ll spend on the analysis that matters. Your software won’t do you any good if you don’t use it.
3. Make sure you know how to use your tools. If you don’t, get training on them. Most companies have people to help you succeed but you have to ask for help. This might seem like a no brainer to most people but there are a lot of companies that don’t utilize the strengths of the analytic’s systems. Come up with a few questions you want to answer in your lending data. Do you know how to answer those questions with your software? If you don’t know what to do, sign up to get training. Training takes a small amount of time but often results in a large reward.
4. Visualize Your Data. Ok, what does that mean? This means you need to look at your data not just in the table format but also through graphs, charts and other visualization methods. Often times by visualizing your data you’ll be able to see areas in your lending that are being neglected. If you only focus on the columns and rows you might over look a trend that a chart will clearly point out.
5. Ask questions and then find the answers, not the other way around. What are we trying to solve? What assumptions are we making, if any? How do we improve our loan applications in credit cards? One of the keys to avoiding analysis paralysis in your lending is ask questions like these ahead of time. By asking questions ahead of time you’ll be forced to focus on answering the questions rather than wandering through your system trying to stumble upon a key trend.