Monday, May 14, 2007

Analytics Mainstream?

It seems that not only Geeks became the richest individuals over the last years but that analytics is so much mainstream nowadays that one might wonder what is left for us to do? Fortunately reading the recently published and already pretty popular book “Competing on Analytics” by Thomas Davenport, one can only realize how much analytics is still in its infancy stage in the corporate world. As Davenport describes only a small fraction of Fortune 2000 firms have reached a mature and successful analytical driven organization that creates superior value for its employees, customers, and shareholders.

Why is there still such a hesitance and conservatism by most organizations to apply even the most basic analytical best practices? Let me try multiple answers:
  • The sheer number of non-analytical people versus data driven employees creates an unbalanced situation where analytics will always play a minor role. Most organizations have less than 1% of their work force in data driven functions but over 50% in generic business processes that are mundane in nature. This will change only very slowly.
  • Analytical corporate individuals are still rather shy in fighting for the top position in large corporations. Unfortunately most of them are comfortable in their mid-level management positions or individual contributor roles instead of possessing the guts to “own” and lead the corporation.
  • Corporate Myths have an amazing staying power. It’s more difficult to understand the internal corporate myths of any given organizations. Only the analytical dissection of these myths enables the proliferation of more data and analytical driven attitudes and processes. And this is more work than most of us ever imagined.
  • Wrongly applied analytics are not just a detriment to positive results but a real set back for organizations in their quest to be more data driven. These wrong applications can reside in the belief that analytics are an automatically generated silver bullet instead of a significant guiding input for decisions, or analytics are used to stifle the creative process of innovation instead of inspiring new ideas by using fact based inputs. And there are many more ways of misapplying analytics and create a circle of backlash stories.

Only the positive and successful examples of “converted” companies into analytically focused organizations will bring additional pressure for anyone who remains on the sideline. It’s a slow moving conversion one company at a time. And it will take longer than most of us expect. But fortunately there is no way backwards.


Blogger Suzanne Obermire said...

Luckily most of our clients have embraced the power of analytics, at least in their marketing departments...

I would love to see an intelligence-based, analytical perspective drive an entire organization, and to your point, it's rare.

Great commentary (and I like the whole premise of your blog, too).

1:29 PM  
Blogger Le_Plan said...

I agree with your views, but want to add few more.

Most of the companies dont apply analytics because -
1. Analytical applications are more technical and are hard to understand for the business managers.
2. They are unaware of the products and the benefits that analytics can bring to business.
3. Analytics companies have very little flow of people with other industries, that makes knowledge transfer difficult. I would say, more business consultants for analytics company should be the managers from other industries.
4. The analytical applications are costlier due to less competition. Now, with the increasing competition the price is coming down paving the way for extended market.


8:09 AM  
Blogger Michael Fassnacht said...

I like your comment about the difficulty of knowledge transfer from analytics companies to industry outsiders. At least the cost of software solutions has decreased significantly over the last years due to the ever expanding Open Source movement.

6:33 PM  
Blogger Kishore said...

All these comments are spot-on. I will add other factors which reinforce this tendency. There is an extreme focus on data rather than insights. Many people presume that data speaks for itself and does not need to be interpreted.This is equivalent of a detective assuming that clues tell the entire story. There is reluctance to interpret data to prevent people from reading their biases into data. This kind of corporate culture as opposed to a more university type of an ambience is a killer

5:01 PM  
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