September 21, 2007

Bacon, Lettuce and Tomato

Who hasn't enjoyed the sandwich popularly known as the "BLT" (Bacon, Lettuce and Tomato)?

You take three ingredients that, on their own merits, are acceptable. When you combine the three ingredients, however, you end up with a classic.

This effect is known as an "interaction". Interactions occur when elements combine to have a bigger impact than when evaluated on their own merits.

In the case of a BLT, imagine that each ingredient gets a score of "3".

The impact isn't additive ... 3 + 3 + 3 = 9.

The impact is multiplicative ... 3 * 3 * 3 = 27!

So often, we look at straight averages. We compare customers who did "x" (i.e. multichannel customers are the best customers), vs. customers who did not do "x". When we execute tests, we execute A/B splits, allowing us to learn if one factor is better than another.

We learn about the many opportunities our online, catalog and retail businesses have when we do A/B/C/D splits ... testing all sixteen combinations of four factors.

In real life, excellence occurs when factors "interact". We need to structure our jobs to find the factors that interact favorably.

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