COMPETING ON ANALYTICS

COMPETING ON ANALYTICS

COMPETING ON ANALYTICS

Introduction

According to Davenport's Competing on Analytics, it's virtually impossible to differentiate yourself from competitors based on products alone. Your rivals sell offerings similar to yours. And thanks to cheap offshore labor, you're hard-pressed to beat overseas competitors on product cost. How to pull ahead of the pack? Become an analytics competitor: Use sophisticated data-collection technology and analysis to wring every last drop of value from all your business processes. With analytics, you discern not only what your customers want but also how much they're willing to pay and what keeps them loyal.

You look beyond compensation costs to calculate your workforce's exact contribution to your bottom line. And you don't just track existing inventories; you also predict and prevent future inventory problems. Analytics competitors seize the lead in their fields. Capital One's analytics initiative, for example, has spurred at least 20% growth in earnings per share every year since the company went public. Make analytics part of your overarching competitive strategy, and push it down to decision makers at every level. You'll arm your employees with the best evidence and quantitative tools for making the best decisions—big and small, every day(Davenport, 2006). 

Sources Of Strength For An Analytics Competitor

Today, many businesspeople don't really know what predictive modeling, forecasting, design of experiments or mathematical optimization mean or do, but over the next 10 years, use of these powerful techniques will have to become mainstream, just as financial analysis and computers have, if businesses want to thrive in a highly competitive and regulated marketplace. Executives, managers and employee teams who do not understand, interpret and leverage these assets will find it a challenge to survive.

When we look at what kids are learning in school, that is certainly true. I was taught mean, mode, range and probability theory in my first-year university statistical analytics course. Children today have likely learned those concepts in the third grade. They are taught them in a practical way. Learning about median, interpolation and extrapolation follow in short succession. We are already seeing the impact of this as Generation Y/Echo boomers enter the workforce - they are used to having easy access to information and are highly self-sufficient in understanding its utility. The generation after that will not have any fear of analytics nor will they look toward an "expert” to do the math(Davila, 2005).

There is always risk when decisions are made based on intuition, gut feel, flawed and misleading data or politics. In the popular book, Competing on Analytics: The New Science of Winning, author Tom Davenport makes the case that increasingly, the primary source of attaining a competitive advantage will be an organization's competence in mastering all flavors of analytics. If your management team is analytics-impaired, then your organization is at risk. Analytics is arguably the next wave for organizations to successfully compete and optimize the use of their resources, assets and trading partners.

Substantial benefits are realized from applying a systematic exploration of quantitative relationships among performance management factors. When the primary factors that drive an organization's success are measured, closely monitored and predicted, that organization is in a much better situation to adjust in advance and mitigate ...