How To Compete On Analytics

Strategic Thinkers: Thomas H. Davenport and Jeanne G. Harris

Credentials: Davenport is the President's Distinguished Professor Information Technology and Management at Babson College, and director of research for the School of Executive Education; he is the author or co-author of twelve books; Harris is Senior Executive Research Fellow and Director of Research at the Accenture Institute for High Performance Business

Big Idea: Leading companies are building their competitive strategies around data-driven insights

Book: Competing on Analytics: The New Science of Winning, published by Harvard Business School Press, March 2007

Blog: The Next Big Thing

Conference: Think! Analytics, Feb. 4-5, 2008, Four Seasons Hotel, Miami, FL; Discussion leaders: Davenport and Harris.

Some form of business intelligence has been around since inquiring minds started looking through their competitor's garbage. Today many companies put their energies into technology solutions-collecting and storing the reams of information that they gather on their customers and their transactions. But while they might succeed at this first data phase, they often fall short when it comes to using this data strategically. But companies that use analytics-sophisticated quantitative and statistical analysis and predictive modeling supported by data-can gain an important competitive edge. Davenport and Harris contend in their book, Competing on Analytics, that at a time when many companies offer similar products and use similar technologies, distinctive business processes offer one of the last avenues for companies to gain differentiation.

Since Chief Information Officers play a strategic role in data collection and storing, Davenport and Harris have some very pointed ideas about the role of the CIO in building an analytical organization: "CIOs wanting to play an even more valuable analytical role than simply overseeing the technology will focus on the I in their titles-the information. Analytical competition, of course, is all about the information-do we have the right information, is it truly reflective of our performance, and how do we get people to make decisions based on information?" To read more about the CIO's role in the strategic use of information, click here.

"The CEO will have the primary responsibility for changing the culture and the analytical behavior of employees. But CIOs can help in this regard too. They can work with their executive peers to decide what behaviors are necessary and how to elicit them. At least two CIOs we came across are clearly focused on changing the analytical culture of their organizations. Irving Tyler, formerly CIO of Quaker Chemical Corporation (now at IMS Health, Inc.), provided the results of data analysis and reporting through e-mail alerts for several years to Quaker employees. He believe that the more information was delivered to users, the more it began to shape their ability to solve problems and make decisions based on information rather than intuition. He also worked with other Quaker executives on how the organization made key decisions and solved business problems.

"At the telecommunications firm Verizon, the CIO's objective is to create a similar change in analytical culture. Verizon and other firms arising out of the "Bell System" have long been analytically oriented, but decisions were generally slowly and were pushed up the organizational hierarchy. CIO Shaygan Kheradpir is attempting to change this culture through continual exposure to information. He created a form of continuous scorecard in which hundreds of performance metrics of various types are broadcast to PCs around the company, each occupying the screen for fifteen seconds. The idea is to get everyone-not just senior executives-focused on information and what it means, and to encourage employees at all levels to address any issues that appear in the data. Kheradpir feels that he is beginning to see signs of cultural change from the use of the scorecard.

"The CIO may also provide a home and a reporting relationship for specialized analytical experts. Such analysts make extensive use of IT and online data, and they are similar in temperament to other IT people. Some of the analytical competitors where analytical groups report to the office of the CIO include Procter & Gamble, the trucking company Schneider National Inc., and Marriott. Procter & Gamble, for example, has recently consolidated its analytical organizations for operations and supply chain, marketing, and other functions. This will allow a critical mass of analytical expertise to be deployed to address P&G's most critical business issues. The group reports to the CIO and is part of an overall emphasis within the IT function on information and decision making (in fact, the IT function has been renamed "information and decision solutions" at Procter & Gamble).

"Of course, the most traditional approach to analytics for CIOs is through technology. This is certainly necessary for CIOs in analytical competitors-although, as the foregoing topics suggest, not sufficient…CIOs wanting to play an even more valuable analytical role than simply overseeing the technology will focus on the I in their titles-the information. Analytical competition, of course, is all about the information-do we have the right information, is it truly reflective of our performance, and how do we get people to make decisions based on information? These issues are more complex and multifaceted than buying and managing the right technology, but organizations wishing to compete on analytics will need to master them. Research from one important study (Information Orientation: The Link to Business Performance, Donald A. Marchand, William J. Kettinger, and John D. Rollins, Oxford University Press, 2002,) suggests that companies focusing on their information orientations perform better than those that address technology alone. The authors of the study argue that information orientation consists of information behaviors and values, information management practices, and information technology practices-whereas many CIOs only address the latter category. While that study was not primarily focused on analytics, it's a pretty safe bet that information orientation is highly correlated with analytical success."

Reprinted by permission of Harvard Business School Press. Excerpted from Competing on Analytics: The New Science of Winning by Thomas H. Davenport and Jeanne G. Harris. Copyright (c) 2007 Thomas H. Davenport and Jeanne G. Harris; All Rights Reserved.

Also of interest:

Stanford Graduate School of Business, Executive Education: Strategic Uses of Information Technology, April 20-25, 2008 (application deadline: March 24, 2008)
Program Tuition: $8,700
Recent developments in information technology have transformed the way organizations conduct business. Today, companies are slashing costs using real-time electronic communications, improving customer intimacy by leveraging the Internet, and taking advantage of new business models such as distributed auctions and trading hubs. Yet many senior leaders lack the tools to assess and communicate the business impact that information technology can bring to their organization. In this program, CIOs, CTOs, and senior general managers learn to identify, assess, and communicate the strategic competitive advantages enabled by information technology.

CIOZ Question: Has your organization's information strategy risen to a strategic advantage? What was the biggest stumbling block to getting employees to accept this strategy and how did your organization overcome resistance? Post your ideas in the comments below.

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