Statistical ThinkingHave you ever wondered why big companies such as Apple, GE, Google, Target, Starbucks, hedge funds and banks, and many others hire individuals with a background in engineering, physics, mathematics, or chemistry to run their businesses? The answer is simple – statistical thinking.

What is statistical thinking? For one, it enables us to recognize that our views, observations, and understandings of the world can never be one hundred percent correct. There is always some degree of uncertainty. People who think statistically tend to be highly analytical, skilled and trained to avoid making generalizations and quick or emotional decisions. They realize that jumping to conclusions could be catastrophic if the stakes are high and the situation is unfamiliar.

Why are we talking about this? What does statistical thinking have anything to do with you? Well, if you are a student pursuing a degree in business administration, business management, or an MBA, it is important to know the importance of this type of thinking, the potential benefits it can bring to your professional career, and how courses such as business statistics can help you develop this type of thinking.

At Grantham University, I often hear students question why statistics is a required course in their degree program. They question its value, and aren’t sure how it will help their career. Some go as far as to say they will never use statistics in their lifetime, which isn’t exactly correct. After all, we all use some form of statistics almost daily, even when we aren’t always aware. In our day-to-day activities, we find ourselves counting, measuring, observing and comparing … and these are <em>all </em>tied to statistics.

Sometimes I hear from students that they just don’t like statistics. But why, when statistical thinking is such an extremely valuable skill? Well, there are many reasons provided, with some of the top ones being:

  • I haven’t been in school for a long time and math was never my strength.
  • I feel like I should have taken statistics at an on-ground campus, in a physical classroom.
  • I will never use statistics at my job or in my professional career.

I get a bit discouraged when I hear these comments; I believe they impede intellectual growth. So, let’s address each of these excuses in more detail to determine if they have any merit:

1. I haven’t been in school for a long time and math was never my strength.

This may sound like a legitimate excuse to those who haven’t been in school for several years. However, Grantham offers a variety of resources that can familiarize students with statistics, including some classes I suggest taking before any statistics course, to help prepare students who struggle with the subject matter. Grantham offers several mathematics courses designed to improve one’s statistics skills. MA101 Consumer Math is a beginner’s course that introduces students to mathematical operations linked to retail, banking and accounting. In this course, students learn about decimals, fractions, bank services and interest rates, among other topics.

Another course worth taking before statistics is MA105 College Algebra, which deals with equations, rational functions and exponential functions that are extensively used in statistics. If students want to ace statistics, they should take College Algebra first. The last class I strongly recommend students taking prior to statistics is MA170 Finite Mathematics, a course that provides an introduction to linear equations, probability and statistics, and how it all applies in the business world of finance. Improving one’s knowledge in mathematics foundations should make it easier for him/her to understand and enjoy statistics later.

Now, let’s look at the second comment:

2. I feel like I should have taken statistics at an on-ground campus, in a physical classroom.

Those who believe taking a statistics course at a traditional brick-and-mortar campus is easier than taking it online, are often mistaken. Grantham offers as many, if not more, resources to our students than any on-ground school out there. Textbooks, course materials, technological tools and free one-on-one tutoring are all available. Our instructors typically respond to students within 48 hours, are flexible with students’ schedules, and offer office hours via phone, Skype and email. Furthermore, online courses offer an opportunity to address statistical topics in the discussion forum, which allows students to learn from each other – something very hard to do in a physical classroom.

Finally, we arrive at one of the most widely-used justifications for students:

3. I will never use statistics, much less statistical thinking, at my job or in my professional career.

Students pursuing a business degree because they want to become a manager at their current job, or run a department or a company, will most certainly need a background in statistics. The most important job of a manager is making sure the business is continuously profitable and competitive in the market. To keep a business profitable, one must learn how to develop budgets, market products or services, develop a strategy for success, and forecast a company’s future. These are all tasks that require strong statistical thinking.

Let me share a story of how statistical thinking helped Target gain competitive advantage in one untapped market – pregnant women.

In the early 2000s, a guy by the name of Andrew Pole, a statistician and data expert, got a job at Target to run their data and crunch numbers. One afternoon, a couple of marketing managers walked into his office and asked him the following question: Can you find out which customers are pregnant, even if they don’t want us to know?

But how would Pole determine if a customer was pregnant without asking her? Well, the idea was to start collecting data on Target’s female customers’ shopping patterns and record everything they purchased. So, that’s what the retailer did, assigning “Guest ID numbers” in the process. The ID code kept tabs on all customers who regularly shopped at Target, and linked every product they bought to their ID number. The system worked even better when customers used Target credit cards or coupons because the store could access even more information about them, all legally.

So, by the time these pregnant women realized they were pregnant, Target already knew. But how did they know? Because the company was able to determine the type of products pregnant customers purchased in the early stages of pregnancy. You see, that is what Target wanted – to be the first to know that women were pregnant so the company could gain competitive advantage. It allowed Target to get into a lucrative, untapped market before Wal-Mart or others could do so.

Needless to say, within few years, the number of pregnant women shopping at Target grew exponentially and the company made quite a bit of money before any other retailer could figure it out. This wouldn’t have been possible without the help of statistics and statistical thinking!

I can go on and on about the benefits of statistics, but the truth of the matter is that 21st century organizations are always looking for individuals with strong analytical skills to lead departments or companies … perhaps now more than ever. And taking additional math courses to prepare a student for a statistics class should not be viewed as a cost, but rather as an investment for a brighter future.

For more information on the kinds of courses that can help you start thinking statistically – or to learn more about Grantham's career-relevant degree and certificate programs – click the blue bar below!

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Dr. Elhan Durguti

About Elhan Durguti

Elhan Durguti is a Senior Business Faculty member for the Mark Skousen School of Business and has been with Grantham for the better part of a decade.  He holds a bachelor's degree in Political Science from the University of Kansas and an MBA from the University of Phoenix. As far as statistical thinking is concerned, he is proficient in four languages to better his odds of business teaching success.