Data Is The How, Business Is The Why
It’s said that business is the why and data is the how.
Alright, it’s probably more like “technology” is the how, but this is a data newsletter.
Those of us that are more technically focused can often forget the why because there is so much to learn and get distracted by on the technical side.
But if you’re technical, the more you can understand the why, I find the more value you can drive.
The problem is every industry cares about different metrics and businesses are at different stages of their lifecycle. Thus, their why is also, well, different.
When I first moved to San Francisco, I came from the healthcare industry. Although I had worked under an accounting team for a while, there were many terms that I had never heard of. I was only familiar with ‘PMPM’ (per member per month), ‘average hospital stay’ and ‘readmission rates’, because that's what the business cared about.
So when I first heard the term ‘TAM’, I had no idea what people were talking about. It’s a simple term, but not knowing what it means can make you miss the entire point of the discussion, so I had to ask what exactly people were referring to.
So if you’re in the tech world, let’s talk about import terms and tactics that you can learn to one up your business side.
Capital Expenditures (CapEx)
Capital expenditures (CapEx) which are generally tangible assets. More broadly it refers to purchases of significant goods or services that can improve a company's performance in the future. This can include:
Manufacturing plants, equipment, and machinery
Enterprise Software Licenses
Operating Expenses (OpEx)
In comparison to Capex, Opex is generally related to expenses that are incurred by a company for running their day to day business. In addition, goods covered by OpEx often have a useful life of one year or less.
These expenses are ordinary and customary costs for the industry in which the company operates.
The following are common examples of operating expenses:
Rent and Utilities
Wages and Salaries
Accounting and Legal Fees
Leasing Software and Customizing Features
Pay Per Use Storage And Compute
Training Employees in Cloud Offerings
Costs for Cloud Support
Interest Paid on Debt
Why Is This Important?
Ok, but why do we even care which bucket money comes from as long as services are covered?
There are layers of corporate policy that can sometimes limit where certain spend comes from. For example companies may only allow for major IT goods or services to be purchased(CapEx), and not leased or “rented” other companies may highlight the opposite.
Furthermore, many companies have a difficult time switching from CapEx to OpEx, as finance teams and the C-suite appreciate the tax benefits of CapEx. As well as its predictability. Relying on pay per use storage and compute can lead to very different lows and highs when it comes to the expenses occurred. This can be unnerving for the C-Suite and can often be why they tend to prefer to purchase licensed enterprise software vs cloud services that are pay-per-use.
When I worked for a finance team, I recall our mandate was that we had to forecast within a 0.25% on a monthly basis. We were able to constantly forecast within the specified range and yet the CFO was still unhappy.
One final point to highlight the difference between CapEx vs OpEx. Especially since interests rates are on the rise.
Capital expenses tend to require a large initial outlay of money or capital. They are also often financed by debt, which requires the company to keep a close watch on CapEx debt levels and debt servicing costs. — Integrify
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Also known as cost of goods. This, as the name suggests, is the total costs that a company paid to create said goods. This may include products purchased for resale, raw materials, packaging, and direct labor related to producing or selling the goods.
COGS provides insight into a company’s current financial standings. No metric is perfect, but COGS helps you understand a company’s gross profit: Revenue - COGS = Gross Profit. In turn, that reflects how efficient a company is in managing its labor and supplies in the production process.
Earnings before interest, taxes, and amortization(there is also EBITDA) is another measure of company profitability. In particular it’s used by investors, often in comparison to other businesses in the same industry.
Why should engineers care about product? Because it ensures you’re building the right new features or analyzing the right data sets. If you don’t understand your product or general processes around product development you are forced to blindly follow a product manager and never push back when you may disagree with the current path being taken.
Product-led growth (PLG) is a strategy in which user acquisition, expansion, conversion, and retention are all driven through the product. You might also hear terms such as SLG and MLG(sales led growth and marketing led growth). Each of these strategies provide different benefits and challenges when implementing them.
Whether you’re a software engineer or data engineer understanding PLG can help you better understand how your product solves problems for your end-user. Meaning you will be better prepared to provide ideas and suggestions in meetings for future features, pricing discussions, etc. A great example of PLG is captured by Will Larson
Stripe’s initial product and their approach to product-led growth was exceptionally tailored to startups as well because every company needs payments from the very beginning, but they don’t need a comprehensive, broad payments solution until much later, self-service allows customers to start integrating immediately and Stripe’s approach to account approval further reduces friction relative to industry peers at the time. — Will Larson Stripe's model of product-led, developer-centric growth
TAM stands for total addressable market. This refers to the size of a market. More specifically its the overall revenue opportunity that is available to a product or service if 100% market share was achieved. Understanding the TAM can help businesses better understand how much they should invest into new products and features.
That being said, the current TAM might be increased by a new product. Sometimes you will hear people referencing a product that grew a market. This often occurs by making a product more accessible whether it be by lowering cost barriers or making it easier to purchase a service or product.
Another point about TAM is it can help you understand whether you should stay at a start-up or not. I was working with a start-up that was well funded and they asked me if I wanted equity.
At this point I had an understanding of the business and more importantly their TAM. Based on that I realized they, at best, would double their gross income over the next few years. With their current valuation the numbers just didn’t add up so I passed.
The truth is, start-ups rarely have exits so you’re already taking a risk by considering compensation in equity. If you believe in the product and believe that the product can take on the current market incumbents or that it can grow the market, then the risk may be worth it.
Go-to-market, an easy term to understand and a difficult strategy to execute. As the name suggests a go-to-market is the strategy that details how a company can engage with customers to convince them to buy their product or service and to gain a competitive advantage.
This can include but is not limited to strategies and tactics around pricing, sales and channels, the buying journey, new product or service launches, product rebranding or product introduction to a new market.
That’s enough business terms for now!
In school we are mostly taught about high-level concepts from the business side and the basics of programming. Some of this can be helpful, the rest is often useless without further context and direct application.
Like figuring out what actual work needs to be done when an executive comes to you with an ambiguous task or keeping projects flowing.
Although as engineers we may be partnered with PMs who can help wade through some of these problems. It’s always good to go beyond just understanding engineering. So here are a few tactics and tips.
Getting Projects Unstuck
Keeping projects moving forward is an important part of any business. It’s strange how a project that seems to be making progress can suddenly just stop.
Processes that used to be moving forward now start to circle and repeat. Part of this can be related to:
Loss of momentum,
Lack of knowing what to do next
Failure of alignment and communication.
My general rule of thumb is if a project seems to make little progress for a week and I am not the current blocker, that I might need to set-up a meeting to ensure everyone is still on the same page. Honestly, this has helped unblocked 80% of most of the projects I have ever seen start to circle.
Finding Business Value
When talking to engineers or managers you will occasionally get a hand wave-y statement about “driving value” as an engineer.
But this isn’t always clear in terms of what drives value.
Promotions are both about increasing the scope of your work and delivering a large impact which helps the business achieve its goals. At the same time, increasing your scope has more to do with changing your behavior to operate at the next level. -Pragmatic Engineer Facebooks Engineering Culture Part 2
The Pragmatic Engineer did a great job breaking down the promotion and engineering culture at Facebook in this series. Of course, if you read the term “large impact” you might pause and wonder what that is.
When working at Facebook, one of our axes we were judged on was this illusive impact. But this wasn’t always explained clearly. My manager did provide a decent example of impact that I like to use as an example.
Let’s say you know you constantly get 1000 of a specific task in a month or quarter. Simply completing said tasks is not highly impactful. Coming up with a solution to remove said 1000 tasks from existing is.
In general, you can take that into the start-up world too. If you keep running into the same problem over and over again and there isn’t a good solution, then it might be a good opportunity (depending on the TAM and GTM).
I find that many engineers have an underlying belief that the best product or project will receive proper acknowledgment. In fact I wrote this line, and then happened to stumble across another similar statement written by Julia Evans.
There’s this idea that, if you do great work at your job, people will (or should!) automatically recognize that work and reward you for it with promotions / increased pay. - Julia Evans - Brag Documents
The problem is this isn’t always the case.
Especially when you work at companies where there are thousands of other engineers and hundreds of other engineering teams, your work will be drowned out. And to add to that, as discussed in Julia’s piece, you will forget what work you did as will your manager.
That means you need to ensure that your work is being recognized by getting visibility and tracking your accomplishments throughout your various performance review cycles.
I was not always the greatest at keeping a “Brag Document”, but I did often post where my projects were, what the impact was for them, and when I would be completing them. That way it was a constant reminder to myself, other members of my team, and cross functional partners in terms of what my impact was. It’s nice to think that the world will reward you for your hard work simply because you did it, but communicating the importance of the work is unavoidable (even if you’re the only engineer).
In The End
If you work in a technical role, whether it’s a software engineer, data engineer, SRE, etc, then having some understanding of what the business cares about can help you drive value.
Yes - it’s always easy to get distracted by all the esoteric arguments about standards and where brackets should be and whether you should use tabs or spaces, but this can cause users to miss the bigger picture.
Instead of relying on PMs and managers to tell you what work you should take on next, you can define it. This not only leads to promotions but also allows you to work more on what you find important and enjoy doing because you can see the big picture.
What business terms do you believe are important to understand?
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Video Of The Week: Different Types Of Data Engineering Roles - You Don't Have To Have Data Engineer In Your Title
Join My Data Engineering And Data Science Discord
Recently my Youtube channel went from 1.8k to 46k and my email newsletter has grown from 2k to well over 25k.
Hopefully we can see even more growth this year. But, until then, I have finally put together a discord server. Currently, this is mostly a soft opening.
I want to see what people end up using this server for. Based on how it is used will in turn play a role in what channels, categories and support are created in the future.
Articles Worth Reading
There are 20,000 new articles posted on Medium daily and that’s just Medium! I have spent a lot of time sifting through some of these articles as well as TechCrunch and companies tech blog and wanted to share some of my favorites!
How Pinterest Leverages Realtime User Actions in Recommendation to Boost Homefeed Engagement Volume
The Homepage of Pinterest is the one of most important surfaces for pinners to discover inspirational ideas and contributes to a large fraction of overall user engagement. The pins shown in the top positions on the Homefeed need to be personalized to create an engaging pinner experience. We retrieve a small fraction of the large volume of pins created on Pinterest as Homefeed candidate pins, according to user interest, followed boards, etc.
To present the most relevant content to pinners, we then use a Homefeed ranking model (aka Pinnability model) to rank the retrieved candidates by accurately predicting their personalized relevance to given users. Therefore, the Homefeed ranking model plays an important role in improving pinner experience. Pinnability is a state-of-the-art neural network model that consumes pin signals, user signals, context signals, etc. and predicts user action given a pin.
The 7 Data Replication Strategies You Need to Know
Data replication makes data available on multiple sites, and in doing so, offers various benefits.
First of all, it enables better data availability. If a system at one site goes down because of hardware issues or other problems, users can access data stored at other nodes. Furthermore, data replication allows for improved data backup. Since data is replicated to multiple sites, IT teams can easily restore deleted or corrupted data.
Data replication also allows faster access to data. Since data is stored in various locations, users can retrieve data from the closest servers and benefit from reduced latency. Also, there’s a much lower chance that any one server will become overwhelmed with user queries since data can be retrieved from multiple servers. Data replication also supports improved analytics, by allowing data to be continuously replicated from a production database to a data warehouse used by business intelligence teams.
End Of Day 58
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