On March 15 in San Francisco, Tom Davenport addressed a plenary session at Data Driven Business Week, calling his presentation The New Quantitative Era: Creating Successful Business Change with Analytics. SDC was there.
Davenport reflected on the long way we’ve come from “operations research or intuitive guiding” (as described by the CEO of UPS in 1945) to today’s world of examining digital data using Web analytics, HR analytics, actuarial, predictive, marketing and supply chain analytics.
We are now in a time of “convergence” as more sophisticated and prolific data meet advances in programming and data interpretation. The potential is there for helping managers make better decisions, but this convergence requires companies to re-engineer their business processes. And Davenport claims there’s “not much interest” in re-engineering in most large companies.
Based on his extensive experience studying and advising them, he stated flatly, “Most organizations won’t re-engineer.”
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Organizations must first be willing to ask themselves, “What decisions can be improved?” Analytics can help identify those decisions so mistakes can then be reviewed and improvements made..
In a study done with SAS, Davenport looked at 57 corporate decisions that led directly to improvements in business processes. He found that the most common intervention leading to those improvements was the use of analytics. Such use forces changes in culture and leadership. Analytics allows companies to work with better data, improve their business process and better educate their decision makers.
But analytics alone is not the answer, said Davenport. ”Don’t just bring analytics.”
From the SAS Decisions white paper Davenport offered the examples of Stanley Tools with its Center of Excellence and Chevron, which institutionalized a decision making process and developed a culture of honesty and self-examination.
“Analytics needs new relationships,” he said. These relationships – with IT, business decision makers and outside ecosystem members – require communications skills that are critical but rarely taught in schools.
“Relationship skills are the hardest to train,” Davenport said, suggesting that one approach could be to assign analysts to business unit leaders.
As Karl Kempf of Intel once said, “It’s not about the math.” Kempf set two relationship goals:
- Get the business person to have a little interest and respect for the math person.
- Get the math person to have a big interest and a lot of respect for the business person.
“The math person,” said Davenport, “must understand the intuition and speak the language of the business person.” Analysts must learn and adopt new skills, such as telling stories with data, standing firm when necessary, helping to frame decisions. “Don’t just identify the problem,” he said, “fix it.”
Much as it’s been tried, Davenport explained, analytical self-service for business managers has not caught on. A new analytics culture is called for. In this culture facts, evidence and analysis are the primary elements in decision making. Where there aren’t facts, the emphasis is on testing and learning. There is a “free pass for pushback” in decision making. In this culture, it’s important to demand, “Where’s the data?” and to never rest on your analytical models. Keep improving them.
On the management side, analytics culture demands new approaches, Davenport suggesting analytical leaders at every level. Analytics culture is not business as usual, but it offers an opportunity to transform the industry..
Speaking to Davenport after his presentation, SDC asked him if the cultural aspects of analytics are being taught in schools. “No and it’s too bad,” he said. In fact advanced degrees tend to further narrow the student’s perspective rather than broaden it. The need for this cultural integration is now and the big question is how to get business and government to address it.
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Tom Davenport co-founder of The International Institute for Analytics (IIA) is currently the President’s Distinguished Professor of Information Technology and Management at Babson College. He is the former director of research centers at SAS, Ernst & Young, and McKinsey, and has taught at Harvard Business School, Dartmouth’s Tuck School of Business, and the University of Texas at Austin. Davenport is a frequent contributor to Harvard Business Review and other leading journals. His recent article, “Competing on Analytics,” was Harvard Business Review’s most requested article reprint of 2006. He is the author or co-author of twelve books, including the bestsellers Working Knowledge: How Organizations Manage What They Know and Process Innovation: Reengineering Work through Information Technology. His latest book – Competing on Analytics: The New Science of Winning – has become a best-seller and is being translated into 10 languages.
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