Street Smarts

I’ve been asked a few times what I meant by the phrase “Street Smarts” that I mentioned in Action #3 in the note titled “Your next 5 months as CEO” so I am going to go into more detail below given its importance…

I’ll use a version of the DIKW Pyramid that I modified to illustrate.  I find that looking at the pyramid in this way bridges the gap between Information and Wisdom given the wide use of CRM and Machine Learning solutions available today (Note that I added 3 new categories to the Pyramid: ‘Background Knowledge’, ‘Prediction’ and ‘Intuition’).

Regarding the weather example in the graphic below: Machine learning can be used to ‘Predict’ the weather but this is not really ‘Wisdom’ (knowing the right thing to do) and we are also likely a few years away from a computer having ‘Intuition’ (something that one considers likely from instinctive feelings rather than conscious reasoning).  The key differentiator, and what I have referred to in the previous article as ‘Street Smarts’, is the ‘Background Knowledge’ that encompasses a general understanding of how the physical world works, how human motives and behaviors work and knowledge of common facts that an average professional working in this field possesses.  It’s the experience and knowledge of success, and potential difficulties and dangers of the vertical. This usually requires a lot of experience and it’s why your best employees almost always have great situational awareness.

Now, let’s relate the Pyramid to the case study outlined in the previous article.

Getting ‘Data’ on the housing market such as After Repair Values (ARV), tax and mortgage records is quite easy.  Overlaying where your company has been successful on to that data turns it into ‘Information’ and provides you with the ability to build Algorithms that you can easily program into your CRM and Marketing Automation systems as ‘Foreground Knowledge’.

As the new CEO you must grow the business and that requires you to choose new markets to push into.  Can you rely on ‘Foreground Knowlege’ analytics to predict those markets? Maybe, but you won’t know how to be successful in those new markets without a thorough understanding of the ‘Background Knowledge’. As a side note… This always reminds me of the following quote:

Everyone has a plan until they get punched in the mouth

– Mike Tyson

As a new CEO it is very important for you to separate the ‘Foreground Knowlege’ from the ‘Background Knowlege’ used to make decisions at every stage of the real sales process. 

In our case study, the ‘Foreground Knowlege’ was straight forward… If there was a low probability of recession in next 6 months, and a property’s ARV was between 150k and 500k, and the property had been owned for more than 10 years, and the owner was behind on their mortgage or tax payments then the property may be good to purchase, fix & flip. This would be very easy to code into a simple formula to program into the CRM. The data was also very easy to come by given all the history available on past transactions. As an example:

However, what criteria for decisions were the employess really making? When asked, they were considering items such as — If the property was in an area that they had worked in before, would the job require permits, would there be a lot of capital at risk, was the location within 50 miles of a disposition manager, would it be fixed and listed in early summer or spring (best times to sell), was the owner temperament pleasant, and was the property vacant — only then would they consider it a good purchase, fix & flip.

These items are a bit more difficult to assess from available market data, but required if you are to have any ‘Wisdom’ about the items required to grow the market or to succeed in a new market.

This example outlines only one of the many decision points that needed to be understood to determine if a new market was appropriate and how to setup that new market for success.

Warning: If you leave it entirely up to the data people in your company to guide decisions you will likely fail. Only you can get the company to truely understand the ‘Background Knowlege’ (Street Smarts) required for success by asking a lot of questions. Consider using the ‘Five Whys’ technique.

As you deconstruct each of the stage gates in the company’s real sales process you will hopefully gain the ‘Intuition’ required to know when the market is changing and how to react to those changes.

Good luck! —a bit of luck never hurts when you are a new CEO.