Monday, January 16, 2006

How Math Is Rocking Your Auto World (Or Why The New Bean Counters Will Soon Win Everything)

Those who are not regular readers of Business Week probably missed a feature story that at first glance might easily be dismissed as having nothing to do with cars and trucks and the industry that designs, builds, sells and services them.

Think again, wing nut!

"Some 18 months ago, 30 blue-chip companies, from Procter & Gamble Co. (PG ) to Walt Disney Co. (DIS ), underwent a series of tests promoted by the Interactive Advertising Bureau, an industry group.
"These studies crunched consumer data to measure the effectiveness of advertising in a host of media. The results came back in hard numbers. They indicated, for example, that Ford Motor Co. (F ) could have sold an additional $625 million worth of trucks if it had lifted its online ad budget from 2.5% to 6% of the total."

You think that pair of numbers didn't get Ford's attention?

"Ford responded vigorously: Last August it announced plans to move up to 30% of its $1 billion ad budget into media targeted to individual customers, half of it through online advertising. Such moves are sure to generate even more data, giving greater clout to the numbers people."

But it's not just in marketing and advertising that the Business Week story has tremendously important implications for the auto industry, as well as every other industry. The point of the piece is to show the present and possible future impact of the empowerment of mathematicians by the digital revolution.

That's right, mathematicians. Not software jockeys. Not programmers. Math people. AKA "numbers crunchers," "bean counters" and "most boring professor on campus." Is this the ultimate revenge of the ultimate nerds?

Imagine new math majors graduating with a choice among competing offers of six figure starting salaries with generous stock options from major companies like Google and Yahoo. That's now. Soon enough those offers will be commonly tendered by firms like Ford, IBM and Shell Oil.

The key to understanding why this is happenning is grasping the significance of the fact that mathematicians need nothing more than data to "map" anything in the world, including people, buildings, cars, concepts, words and relationships. Being a math whiz has never been more valuable.

Not only can they map things, they can project important stuff like potential sales of a proposed new model, based upon the billions and billions of bytes of data already amassed on auto consumers likes, dislikes and demographics.

So you can easily imagine this conversation taking place during a new products approval committee meeting at GM in the near future:

Lutz: Accounting says we have to sell 150,000 new Camaros a year in order to justify making the upfront investment. I don't see any reason why that won't happen. Did you see the jaws drop in that press preview when we took the wraps off the Camaro Concept?

Waggoner: That's great, Bob, but the numbers projected by the Marketing Department's cyber-graphics staff don't look good.

Lutz: Excuse me? What the heck is cyber-graphics?

Birdhead (Recently lured away from Stanford Math Department to head all GM Marketing): Well, Lutz, we did a multiple stochastic regression analysis of product factors required to motivate additional buying decisions among our target consumers and the Camaro Concept hardly moved the needle.

Lutz: Multiple depression analysis? Since when are Camaro customers depressed? They live on adrenalin highs from burning rubber.

Birdhead (Laughing nervously): "No, no, I said multiple stochastic regression analysis." It's one way we can model future sales based upon current customer preference data. Quite elementary actually. The model says the new Camaro will sell about 75,000 in its first year, then decline at a steady rate for the following four years until it is cancelled.

Waggoner: Sorry, Bob, but we just don't have the resources to waste on your dinosaur muscle car illusions. Next project? Ah yes, the Buick Electraflow ....

You think I am kidding? Go read the whole Business Week piece here.

HT: Jeff Jarvis at BuzzMachine