My Big Bet on Analytics
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I don't plan to talk much about my own books and articles in this blog, but this post is an exception. I have a new book out (with Jeanne Harris of Accenture's Institute for High Performance Business) called Competing on Analytics: The New Science of Winning. It's about companies who build their strategies around analytics, experimentation, and fact-based decision-making. In this post I will focus on why I think business analytics are a worthy candidate for "the next big thing."
I began to come across companies that compete on their analytical prowess in a research study sponsored by SAS and Intel in late 2004. I looked at Capital One, Google, Harrah's, Netflix – you get the drift. When I started to write and speak about the topic, the message seemed to be in tune with the zeitgeist more than any topic I'd undertaken in recent memory. From a business and leadership standpoint, the world seemed to be tiring of the "golden gut" school of leadership, and to be moving toward the more fact-based approaches that Bob Sutton and Jeff Pfeffer advocate in Hard Facts, Dangerous Half-Truths, and Total Nonsense.
From an IT standpoint, the world also seemed to be at an inflection point. For years organizations had been gathering various forms of transaction data without using it to change the way they managed. "Business intelligence" software firms like SAS, Cognos, and Business Objects were growing steadily, and were making it increasingly easy to analyze data and report on the analyses. When I heard that Gartner's 2006 survey of CIOs had ranked business intelligence as the leading category for IT spending that year, it was further evidence that analytics were getting big.
Finding analytical insights in data was a welcome change from what had gone on in the IT management world for the past several years. First we had the not-so-scintillating effort to avoid Y2K problems. Then recall all those e-commerce and IT-related ventures that went bust? Don't forget about Sarbanes-Oxley and IT investments that help CEOs and CFOs stay out of jail. B-O-R-I-N-G! It's been pretty bleak in the world of IT management, but analytics represent a rebirth of upside IT.
There was also corroboration from other sources that analytics were getting hot. Stephen Baker wrote a cover story in BusinessWeek called "Math Will Rock Your World." Last June, McKinsey identified analytics and more scientific approaches to business as one of "Ten Trends that Will Shape the Decade."
The only fly in this excellent ointment was Malcolm Gladwell, whose paean to intuition Blink remains on the best-seller list. Why do I think Gladwell is wrong? That's a question for another post. For now, I'm interested in what you think.
Will analytics or intuition triumph in business over the next few years?
HARVARD BUSINESS ONLINE RECOMMENDS:
Competing on Analytics: The New Science of Winning (Hardcover)
Are You Getting the Most from Your Knowledge Workers? (Harvard Management Update Article)
Diamonds in the Data Mine (Harvard Business Review Article)
Leading Creative People (HBR Article Collection)
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Tom Davenport holds the President’s Chair in Information Technology and Management at Babson College, where he also leads the 
Comments
Hi, Tom.
I featured your new book here
Regards,
Stan
- Posted by Stan Garfield
April 4, 2007 10:05 AM
I disagree.
The idea, or concept, of analytics, is a very good one. And the technology is getting there, but there are many problems, some that are intractable. Here are the obstacles:
1. Data Integrity and Unified Schema
There are many organizations that are working on this problem, but there are precious few enterprises anywhere in the world that have the right data infrastructure to actually know that their data is the right data that a manager is after, and even fewer that can tie data across the silos that are modern management systems. For instance, a company uses SAP for X and PSFT/ORCL for Y, and it will be yet another failed data warehouse installation that will solve the problem of how all the data in one system relates to the other.
There are small companies that are working on this problem, but it’s far from solved.
2. Behavior and Management skills
Even if the above problems were tackled and solved, and people could get access to the data they needed, there is a general paucity of good sense around what those numbers mean, and how they affect the business.
3. Lack of data on external benchmarks
Knowing what your company is doing, without an easy way to get access to external data to validate that position, leaves you with a limited understanding of the world and your place in it.
Regards,
Naisan
- Posted by Naisan Geula
April 26, 2007 2:58 PM
I think Prof. Davenport will win this bet.
All through the 1990s, organizations gained knowledge of how to capture and structure the vast information that lies within today's large multinational corporations. They made large IT investments, betting on the power of the captured information in helping them achieve synergies that would reduce costs and enhance revenue. Having well developed IT systems in place has allowed organisations to collect huge volumes of data from which it is now possible to get unique insights on the behavior of the customers through analytics. I do not think that organizations would pass on this wonderful opportunity to know their customers better and develop strategies focused on the customer. More so, because it presents a valuable proposition to grow both the top and bottom lines. The only missing piece in this is the short supply of analytically trained personnel. Luckily, many countries which have traditionally acted as attractive locations for out-sourcing like China & India, also have a very strong base of analytically trained manpower. Quite expectedly, KPO (Knowledge Process Outsourcing) operations are increasingly gaining momentum in these countries. These are all pointers that the 'next big thing' for corporations is their ability to compete on analytics.
- Posted by Dr. Arnab K Laha
July 23, 2007 5:50 AM
I'm placing my flag firmly in the analytics camp.
Anyone can grasp the concept of "look before you leap," so I'm surprised that anyone making business decisions would use gut instinct, female intuition and the like. The most successful entrepreneuers and leaders take calculated risks, based on information they have gathered somehow or maybe from analytics. Personally I hope my competitors rely on their intuition because I know the odds will be against them. Excellent book on the value of analytics, concise and to the point. Thanks.
- Posted by M Hussain
August 24, 2007 6:38 AM