Book Review: Competing on Analytics

I recently read an interesting book that resonates with the soul of Indus Insights – “Competing on Analytics: The New Science of Winning” by Tom Davenport and Jeanne Harris. The essence of the book is that analytics is the cornerstone of sustainable competitive advantage in today’s business environment. The authors foresee fact-based decision making playing a central role in future business competition; and I couldn’t agree more.

Overall, the book is divided into two parts – one addresses the “Who”, “What”, and “Why” and one discusses the “How” of analytical competition. Part One exemplifies the nature of analytical competition and illustrates how it is key to business success in today’s economies. The authors persuasively put forth their argument through existing research, success stories and the results of their own surveys. Part Two highlights the ingredients and recipe for developing analytic sophistication. Picking on themes from the book, this article is a glimpse inside the toolkit of an organization that embraces analytics:

An Enterprise Approach - The authors champion the use of Analytics through success stories of Capital One, Harrah’s, Marriott, Progressive Insurance, Amazon, Vertex, Cemex, Netflix, UPS, etc. Rigorous quantitative techniques pervade all business functions within these organizations, including Human Resources and Marketing. As referenced in “Good to Great”, the power of "breakthrough results come about by a series of good decisions, diligently executed and accumulated on top of another".

The Right People – You are your people. The culture of analytical thinking has to be inculcated in employees across all rungs of the corporate ladder. Executive sponsorship is key to spreading analytical orientations throughout the company. Senior executives need to be passionate about fact-based decision making and lead by example; Managers need to emphasize the value of analytical problem solving by basing decisions on hard facts; and Talented employees with strong analytical skills are required to drive the development of analytical programs.

Core Competency – Large US Airlines were “pioneers in adopting analytical approaches”, but were unable to overcome other hurdles, such as obsolete business models. An organization cannot outperform its peers based solely on its systematic and extensive application of analytics. The analytics have to be in support of a strategic, distinctive capability – because without one, there is no clear activity for analytics to support.

Technology – Competing on Analytics is often seen synonymous with competing on technology. Now that data has become such a commodity, the frontier for using data has shifted dramatically. Now, having data to analyze is a start, but it needs to be harnessed through business intelligence software, computing hardware and reliable data warehousing tools to squeeze out more insights.

The book makes a compelling argument for adopting fact-based decision making; but more discussion on some pitfalls would have been welcome:

1. Managers must keep sight of the tradeoff between the cost of gathering evidence (such as time to market) and the evidence's importance to the decision making process.
2. The value of “Gut Feel” must not be undermined in light of the broad generalizations or concrete examples accompanying the book. Analytic strategy is not a fact-versus-intuition debate. Rather, leaders need to consult their experience to understand the evidence in all its forms.

Most of the supporting anecdotal evidence is that of large companies. However, mid-sized, small-sized and entrepreneurial businesses can also leverage analytics to drive business strategies. Of course, building in-house capabilities is a demanding initiative that comes with high fixed costs and can distract from key priorities. This is why business leaders are increasingly partnering with consulting firms to address the challenge.

Some companies have built their very businesses on their ability to collect, analyze and act on data. Every company can learn from what these firms do. – Thomas H. Davenport

Police Department uses Analytics Technology to combat crime

Canada’s Edmonton Police Services (EPS) is deploying business analytics technology to prevent crime and increase public safety. Crime data analytics is a powerful tool that enables law enforcement officials to sift through historic incident, offense, arrest and call-for-service records to accurately pinpoint crime rates and patterns. The quick access to relevant information allows commanders and frontline officers to be better equipped and intelligence-led when problem solving and dealing with day-to-day responsibilities.

The initiative that began as an effort to provide accountability of public dollars has now amassed enough data to identify crime trends and locations. The agency’s investment recently helped them deal effectively with a potential increase in arson activity. By quickly comparing new information with data from previous years, the police service was able to ascertain that the trend was likely to increase from March to July. Police efforts were ultimately successful in nearly eliminating arsons in that particular area during this period.

In the future, the force hopes to take advantage of mobile devices to directly disseminate relevant information to officers, regardless of location. The end goal is the ability to place resources in advance, to put police into certain areas of the city because they predict crime will take place in that area and be able to mitigate that crime with the police presence, said John Warden, BI project team lead for EPS.

Today, the EPS is better trained, better educated and more diverse than at any other time in history. Our technological capabilities allow officers and support staff to be better equipped and intelligence-led when problem solving and dealing with day-to-day responsibilities.

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Edmonton Police Services is a leading police organization that is responsible for over one million residents in Alberta. They are well respected and highly regarded across Canada for their members’ professionalism and integrity.

Indus Insights is a specialized consulting firm that assists organization in leveraging analytics to drive business performance. They use state-of-the-art mathematical and statistical techniques to unlock game-changing insights hidden in data; and then translate these insights into actionable strategies.

Marketers find comfort in numbers

The days when marketers could get away with trusting their gut feelings are coming to an end. The data-driven marketing revolution is upon us. Marketers are overwhelmed by the need to use data to make marketing more effective and efficient. Data has become the lifeblood of all organizations, according to a new white paper published by Aberdeen “Data Driven Marketing”. The study identifies exactly how the Best-in-class organizations are using data to impact marketing.

Top performing companies are predominantly using data to segment and target the market to develop more impactful delivery of multi-channel campaigns. These companies saw a 13% growth in customer profitability, while Industry Average companies had an increase of 1%, and Laggards had a decrease of 12%! Ian Michiels, Research director at Aberdeen, surveyed 272 organizations from all industries and company sizes to benchmark the current use of data-driven decisions in marketing. How do organizations use data, and what are some of the biggest challenges facing the market today?

Identifying return on marketing investment was rated as the top pressure for 49% of all respondents with respect to data-driven marketing. The difficulty in properly allocating sales to marketing investments leaves many marketers wondering which combination of marketing channels deliver he biggest bang for the buck. For many marketers, the challenge with data-driven marketing is not the lack of data, but the lack of actionable insight that can be derived from that data. An inability to translate data into business insight was one of the top three challenges for 47% of all respondents. Data quality issues and disparate data silos were also cited among the top hindrances to fostering a data-driven approach.

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Aberdeen Group, a Harte-Hanks company, is the leading provider of fact-based research and market intelligence. Having queried more than 30,000 companies in the past two years, Aberdeen is positioned to educate users to action. Founded in 1988, Aberdeen has established the market leading position as the “voice that matters”.

Indus Insights is a specialized consulting firm that assists organization in leveraging analytics to drive business performance. They use state-of-the-art mathematical and statistical techniques to unlock game-changing insights hidden in data; and then translate these insights into actionable strategies.