A managerial movement is now picking up steam: organizations are applying business analytics to gain insights to determine good decisions and best actions to take. This topic was once the domain of “quants” and statistical geeks developing models in their cubicles. Today, applying analytical methods is on the verge of becoming mainstream.
One way I draw my conclusion about this emerging movement is that there is much discussion about the topic. Articles in IT magazines and websites about analytics of all flavors, such as segmentation analysis, are increasingly prominent. Debate is always healthy, and some IT analysts view applying analytics as a fad or something that is way overvalued. Others, such as leading proponents of analytics like authors Tom Davenport of Babson College and Jeanne G. Harris of Accenture, claim that an organization’s achievement of competencies with analytics provide a competitive edge.
Predictive analytics is one type of analytical method that is getting much attention. This is because senior executives appear to be shifting away from a command-and-control style of management – reacting after the fact to results – to a much more anticipatory style of managing. With predictive analytics, executives, managers and employee teams can see the future coming at them, such as the volume and mix of demands to be placed on them. As a result, they can adjust their resource capacity levels and types, such as the number of employees needed or spending amounts. They can also quickly address small problems before they become big ones. They can transform their mountains of raw data into information to test hypotheses, see trends and make better decisions.
Analytics as the Only Sustainable Competitive Advantage
For the last few decades, many executives and strategic consulting firms have followed the framework of the popular Harvard Business School professor, Michael E. Porter. Porter has advocated three types of generic strategies. Notice that with today’s clock-speed and technology-driven markets and economies, each generic strategy is vulnerable.
1. Cost leadership strategy. This is accomplished via improving process efficiencies, unique access to low-cost inputs (e.g., labor and materials), vertical integration or by avoiding certain costs. But today, other firms using lean management techniques and data analysis methods can quickly lower their costs.
2. Differentiation strategy. This is accomplished via developing products and/or services with unique traits valued by customers. But today, there can be imitation or replication of products and services by competitors (e.g., smartphones) or changes in customer tastes.
3. Focus strategy. This is accomplished via concentrating on a narrow customer segment with entrenched customer loyalty. But today, broad market cost leaders or microsegmenters can invade a supplier’s space and erode its customers’ loyalty.
So, how will an organization gain a competitive edge? In my opinion, the best defense is agility with quicker and smarter decision-making. This is accomplished by achieving competency with business analytics that can provide a long-term sustaining competitive advantage. It means creating an organizational culture for metrics and analytics.
Some organizations may believe that because they hired or trained employees with analytical skills they have fulfilled the need to be analytical. But there are misconceptions as to what analytics is really about.
Geeks are Chic
The point of this article is not about quants and statistics jockeys being smart. The intended takeaway is that statistical analysis, data mining and forecasting with a goal of application and optimization is within reach – and some organizations that may think they are applying these methods are only just starting to develop them.
It may be that the ultimate sustainable business strategy is to foster analytical competency among an organization’s work force. Today, managers and employee teams do not need a doctorate in statistics to investigate data and gain insights. Commercial software tools are designed for the casual user. Anyone can be chic.
This blog is an excerpt from an article I authored. To read the full length article, click on this hypertext with the same title as this blog, “Geeks are Chic”.
