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October 30, 2005
Competing on Analytics
Ready for the next stage in the evolution of business? Tom Davenport, director of research at Babson College and author of the new book Thinking for a Living, contends it is "competing on analytics" (COA). This is the point when data- and fact-based decisions become the primary basis of competition.
Speaking last week at the Better Management Live conference in Las Vegas, Davenport explained that analytics enable "the optimization of key business processes" -- whether in the realm of human resources, supply chains or customer relationships. As Davenport's research suggests, such moves are proving to be a key element of competitive differentiation and market growth.
In a study of 32 enterprises, Davenport found multiple organizations that are competing on analytics at this point. Among them: Marriott; Walmart; Mars; Dell; Procter & Gamble; Progressive Insurance; Harrah's; Gallo; Capital One; Amazon.com; Yahoo; Google; and Verizon. He also mentions sports teams -- such as the Oakland A's, Boston Red Sox and the New England Patriots -- that are thriving on statistical modeling and analysis. This suggests that analytical leadership has the potential to transform all industries and fields of endeavor in the coming years.
Davenport offers five stages of development in this regard:
Stage 5: Clearly competing on analytics (11 of 32) ;
Stage 4: Clear intent and almost there (6 of 32);
Stage 3: Have vision, but a long way to go (7 of 32);
Stage 2: Some local, non-strategic analytical activity (6 of 32);
Stage 1: Still wrestling with the basics (2 of 32).
Finally, Davenport offers some key factors associated with competing on analytics. He points to the importance of gaining senior management commitment, engaging in sophisticated analytics (such as predictive modeling) and being able to manage business intelligence at an enterprise level.
Harrah's, whose CEO has led the charge in this direction, is a triumphant exemplar of the approach. Indeed, the gaming giant is presently working on an initiative called "Project Moonshot" that would enable it to leverage cross-property intelligence to engage in real-time service interventions. Lose a bundle on the slots or at the craps table? You can expect an attractive host or hostess (who has just been flagged electronically) to step up beside you at the moment of disappointment and offer you a gift that reflects your personal preferences -- whether it's a spa day, a golf outing or tickets to Cirque Du Soleil. Now, every loyal and profitable customer -- who happens to be carrying a trackable "Total Rewards" card -- can feel like a high roller. Welcome to the future.
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