Date posted: 1/12/2016 5 min read

Martin Lindstrom: Small data key to effective leadership

Big data, lies and statistics — how can we be sure we are dealing with truth? One of the masterminds behind LEGO’s rejuvenation shares his insights

In brief

  • The power of big data is false when not coupled with ‘small data’ — observation and intuition
  • Intuition makes a business leader stand out from another — not the ability to mine data
  • Modern leaders have a tendency to adopt technological advances for the sake of it

The whole world has gone too far on big data, believing that it gives you answers to everything about consumers, says Danish business consultant Martin Lindstrom.

“We need a more complete picture.”

A bestselling author, Lindstrom was named one of the 100 most influential people in the world by TIME magazine in 2009, and in 2016 he was listed as one of the top 20 business thinkers by Thinkers50. He has been helping global businesses since the age of 12, when he joined a LEGO advisory board.

His latest book, Small Data: the Tiny Clues that Uncover Huge Trends, puts forward the idea that the power of big data is a big lie — useless unless you have small data (based on experience, observation and intuition) through which to filter the macro numbers.

In fact, a reliance on big data can obscure truths about human existence that it is necessary to understand in order to be successful in business, he says.

“Walmart has the biggest data centre in the world, it is twice the size of the CIA and FBI combined. Its share price went down 11 per cent last year.”

Big data, says Lindstrom, needs a hypothesis in order to be mined. You can’t just look through millions of data points and then come up with conclusions.

“You need to have a hypothesis that you are testing to verify. Who is coming up with the hypothesis? Today it is the data miners and the analysts, which is really far removed from the consumer.

“They sit in air conditioned rooms with their theories of what consumers want and then they start to mine data. It’s incredibly comfortable to sit before your screen and look at big data because you do not come into conflict with the real world.”

To create a useful hypothesis about the real world, he says, you need experience and intuition. Without them, it is impossible to be an effective business leader.

“It is the intuition from dealing with human beings and learning from life that makes one business leader stand out from another. Business leaders have forgotten that they are employed because of instinct, not because they can mine data.”

Blame technology

“If everyone has access to the same data, they mine it in the same way, using the same software, and they come up with the same conclusions,” Lindstrom says.

“Quite often these are what are called linear conclusions — a hypothesis that seems obvious and which you are basically concluding to be true or not true.”

Where you really find breakthrough ideas is where there is a non-linear path, he says.

As an example, he brings up the Roomba robotic vacuum cleaners. The company suffered a decline in sales after changing the navigation sound on the robot from a cute tone to an electronic tone.

“For people who used the robot as a replacement for kids moving out of home or not having a pet, suddenly the Roomba was out the window,” Lindstrom says.

“There is no way big data could have discovered that insight.” As the business community is waking up to the importance of creativity, a generation is emerging among whom creativity is a rare gift.

Lindstrom blames technology.

“The issue is that you and I were bored when we were children. Boredom forces you to be creative.

“The difference today is that we are never bored. I was sitting in business class the other day on a plane and there were five businessmen sitting all playing candy crush. This generation has never tried being bored.”

A second challenge facing emerging business leaders — millennials — is that online communication, online shopping, online lives have left them used to instant gratification.

“Anticipation as a concept doesn’t exist for them anymore. You get straight to the point, you get that climax straight away. You order that book online and you get it right now.

“Anticipation, studies show, is much more valuable than the climax in its own right.”

A third issue, not restricted to millennials, is that we are not “present” anymore, he says.

“By present I mean not observant around you. There is typically a screen in front of everyone and the screen is a filter between you and the world.

“It’s not just the younger generation, this is everyone who is guilty of this. You go to a bar, you are waiting for someone and the first thing you do is grab your phone and do something with it — anything with it so you are not looking like a loser.”

If everyone has access to the same data, they mine it in the same way, using the same software, and they come up with the same conclusions.

The tech trap

Modern leaders have a tendency to jump on the bandwagon and adopt technological advances — such as big data — for the sake of it, he says.

“I remember back in 1994 when I was partly responsible for bringing LEGO online, we realised very quickly that the strength of LEGO (see opposite) is not digital play it is the physical interaction with toys and your fingers.

“Most parents will agree that we don’t want kids who are purely digital. Stimulating our senses is essential for us in our lives. As tech has taken over, the few brands holding on to that are in fact becoming more popular.

“Where I think a lot of companies are failing is they are following a fashion, a trend, that may at this moment seem right because the whole world is talking about big data. But time may show they have gone too far.”

Chartered Accountants ANZ is developing a multi-platform tool to assist SMEs access and manage big data effectively. Find out more about CA Kairos here.

This article was first published in the July 2016 issue of Acuity magazine.

LEGO connection

  • The Lego story: How it all started

    As a child, Martin Lindstrom was a LEGO nut. He built a bed out of LEGO. He built his own Legoland. And at the age of 12, LEGO noticed and put him onto their advisory board.

    Two decades later, with a successful career as an author and business consultant behind him, in 2004 Lindstrom was advising LEGO during one of the worst downturns the company had faced. Turnover had dropped 30 per cent in 2003, and dropped another 10 per cent during 2004.

    The experience of working with LEGO to turn around the decline provided many examples of how Lindstrom conceives of small data, and the power it can wield.

    “Every big data study LEGO commissioned drew the exact same conclusions: future generations would lose interest in LEGO,” Lindstrom says.

    What changed their minds was feedback from an 11-year-old German boy, who owned a battered pair of sneakers.

    “Asked at one point which of his possessions he was the most proud of, he pointed to a pair of beat-up Adidas sneakers with ridges and nooks along one side… Holding them up so everyone in the room could see and admire them, he explained that one side was worn down and abraded at precisely the right angle. The heels were scuffed and planed in an unmistakable way. The entire look of the sneakers, and the impression they conveyed to the world, was perfect: it signalled to him, to his friends and to the rest of the world that he was one of the best skateboarders in the city,” Lindstrom notes.

    From this small piece of data, the LEGO team realised that children gain kudos by being good at something that is difficult. And LEGO could meet this need by providing LEGO fans with evidence of their skill.

    “For users, it seemed, LEGO was all about the summons, the provocation, the mastery, the craftsmanship and, not least, the hard-won experience — a conclusion that complex predictive analytics, despite their remarkable ability to parse ‘average’ scores, had missed.”

    LEGO’s turnaround over the following decade was astonishing. By the second quarter of 2014 it had surpassed Mattel to become the largest toymaker in the world.

    Read Lindstrom’s full analysis of the LEGO story at goo.gl/OfllXU

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