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Business Analytics Imperative
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Business Analytics Imperative
Six questions to ask about information and competition
Corporations today are awash in information yet short on tools, methods, and talent for using it. Information about the most important facets of the business - customers, processes, employees, competition - is gathered but not analyzed, reported but not understood, guessed about rather than acted upon. As a result, the status quo prevails and opportunities to improve performance, often dramatically, go unnoticed. And corporations fail to face the "truth about today" with respect to customer and employee attitudes, process performance, and competitive shortcomings and exposure.
There are exceptions. Smart organizations have always tried to make the most of the information in hand. But recent technological breakthroughs have provided the ability to manage and make sense of vast amounts of hitherto unrelated data - and in the process have redefined what it means to be a smart organization. Aggressive competitors recognize these new capabilities and put them to work. They don't just gather and report information - they leverage it through business analytics:
- Capital One, which grows organically at 20% per year by analyzing 60,000 product configuration experiments a year and following through on the most promising.
- Progressive, which analyzes specific market sub-segments to "skim the cream" and profitably insure customers in traditionally high-risk categories.
- Harrah's Entertainment, which uses a customer loyalty program and predictive modeling techniques to identify and retain the most profitable customers.
- Marriott International, which has modeled its business and distributed analytic tools so that every property can maximize revenue not only from hotel rooms and rates, but also from conference facilities, catering, and other services.
- Procter & Gamble, which has drawn 100 analysts from across the enterprise to address the most complex cross-functional issues, such as maximizing growth in existing markets and optimizing supply networks.
- UPS, which expanded its statistical expertise in logistics and package tracking to anticipate and influence customer actions and minimize attrition.
These progressive companies have many things in common with how they operate:
- They use sophisticated data-collection technology and analysis methods to wring every last drop of value from their most strategic business processes.
- They understand what motivates customers and makes them profitable.
- They understand what motivates employees and keeps them engaged and productive.
- They don't just track their business - they model it, anticipate how proposed changes will play out, predict and prevent bottlenecks.
- They don't just conceive and enact business changes - they experiment to determine the best changes to make and the best implementation methods.
- They don't just provide managers with reports - they distribute information and analytic tools to decision-makers at every level, so employees can act upon evidence and make better decisions day-in and day-out.
- In short, they compete on the basis of their analytical capability.
Business analytics involves using sophisticated technology to bring information together and sophisticated algorithms to filter and analyze that information. The outputs can include deep understanding of the workings of the business and its connections to the marketplace, key performance indicators to drive business decisions, dramatic improvements in the performance of the most critical business processes, and insights and innovations that can change the basis of competition.
Business analytics, the new frontier of management science and practice, is a simple idea with complex ramifications - leverage the wealth of data being collected today to create powerful new ways to perform and compete. This Business Analytics Imperative discusses six key questions that senior executives should be asking about capturing the learning form successful and unsuccessful business experiments, and embedding the learning into ongoing and automated business processes. They include questions to help focus your resources where the business demands analysis, where the business is prepared to act upon the results, and where actions will make a difference in the marketplace:
- Where should we leverage business analytics?
- Why now?
- What's the payoff?
- What information and technology do we need?
- What kinds of people do we need?
- What roles must senior executives play?
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