We've been hearing a lot about analytics these days. Explain what the term means.
By analytics we mean the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions. Analytics are a subset of what is now known as business intelligence.
How can the use of data to make business decisions lead to competitive advantage?
In today's global and highly interconnected business environment, traditional competitive differentiators--like geography, protective regulation, even proprietary technology--are no longer enough. What's left is the opportunity to execute a business with more efficiency and effectiveness than your competitors, and to make the smartest business decisions possible. Analytics can help do this.
Analytical competitors are organizations that select a few distinctive capabilities on which to base their strategies, and then apply extensive data, analysis and decision-making to support these capabilities. Whatever the capabilities, analytics can propel them to a higher level. We also want to point out that it is the human and organizational aspects of analytical competition that are truly differentiating.
Will readers find tools in your book to help them navigate this "new science," as you call it?
Competing on Analytics offers information on the topic, including key attributes of analytical competition. We also give examples of firms--companies like Netflix, Amazon.com, Google, E&J Gallo, and Procter & Gamble, and sports teams including the Boston Red Sox and New England Patriots--that are using analytics extensively within their organizations today. As well, the second half of the book is somewhat of a how-to guide that includes a roadmap for organizations wanting to compete on their analytical capabilities. We also devote time to discussing the two key resources--human and technological--needed to make this form of competition a reality.
You mention a few professional sports teams above, and in the book you discuss how analytics cuts across both industries--business and sports. What's the connection?
Think of what business and professional sport organizations have in common: both have large amounts of data; talented but expensive human resources; the need to optimize critical resources; and of course, the need to win. Many baseball teams--the Red Sox, the Oakland A's, the St. Louis Cardinals--and U.S. professional football teams are taking a more analytical approach and winning. In addition to the Patriots, we highlight the Tennessee Titans and Green Bay Packers football teams, both increasing their reliance on analysis and statistics to stay competitive. And it's not just a U.S. phenomenon: European soccer team AC Milan uses predictive modeling to prevent player injuries; and has even created the "Milan Lab" to identify risk factors. In fact, several members of the World-Cup winning Italy national team trained at the lab.
In the foreword to the book, Gary Loveman of Harrah's lists several reasons why common organizational thinking actually impedes "analytic management." Can you talk about this?
As you know, Gary is one of the pioneers in this industry and Harrah's successes have been widely documented. Gary cites four common factors that hinder analytical competition: deeply embedded conventional wisdom that has been around for so long, it's hard to reverse; decision making--especially at high levels--that fails to demand rigor and analysis; employees themselves who are not willing or equipped to do analytic work; and the power of ideas over data. It's our hope that this book will upend these barriers and help organizations start thinking of analytics as a framework for success.