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Business Analytics – Opposition or Proposition?

by Gary Cokins, Consultant, www.sas.comMonday, October 28, 2013

Metaphorically, belief and disbelief in business analytics as a competitive edge - and not just a passing fad - meet at a door. On one side is passion, and on the other, fear. Passion always lives with fear. Those with passion for a methodology, like embracing analytics to support decision, have fear that others will reject them and their ideas. What position for analytics will come out ahead? Opposition or proposition?

Technology is no longer the barrier to analytics

What is it about accepting a new idea like applying analytics? There is a lot. And it mainly has to do with the natural resistance to change with people. People like the status quo. The main barrier to the acceptance of applying analytics is no longer technical but rather is behavioral and cultural. The software tools are proven. The use of analytics by casual users, not just a team of trained statisticians, has become widespread.

Consider these remarks from Jane Griffin, a Principal with Deloitte Consulting LLP from a Deloitte “debate” on this topic:

“The executives I talk to every day are wrestling with business decisions where a better understanding of data at a very deep level can make all the difference. … Low-level analytics just won’t get you there. Work your way through the list of ground-shaking developments in business today – none are areas where companies can continue to shoot from the hip. Pricing. Workforce trends. Health reform. Even security and terrorism threats. These are all complex challenges where advanced signal detection capabilities are critical. … Analytics is no fad. It’s a serious competitive advantage.”

Analytics as the only sustainable competitive advantage

The popular Harvard Business School Professor Michael Porter’s defined accepted, generic strategies for a company (i.e., cost leadership, differentiation and focus), however they are all vulnerable today because competitors can more quickly take actions (such as reduce costs), imitate a company or invade a company’s market niche. An organization’s best defense against the competition is the ability to quickly make smart decisions – which can easily be accomplished by implementing business analytics. Organizations that achieve competency with business analytics are able to sustain a long-term competitive advantage.

A similar case can be made for adopting analytics-based enterprise performance management methodologies. The early adopters are already well ahead. Their executives have properly communicated their strategy to employees through appropriate key performance indicators (KPIs) and achievable targets to align behavior. They have robust predictive analytics that reduce uncertainty and allow them to take smarter and quicker actions. These organizations understand their cost and profit margins by product, service, channel and customer – as well as optimal actions needed to retain and grow customers, and acquire the best target customers. They have driver-based budgets and rolling financial forecasts using modeling techniques.

I suspect that passion (and common sense) was present to overcome fear of trying something new, like advanced analytics, to improve organizational performance.

About the author

Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and book author in business analytics and enterprise performance management systems. He is the founder of Analytics-Based Performance Management LLC, an advisory firm located www.garycokins.com. He began his career in industry with a Fortune 100 company in CFO and operations roles. He then worked 15 years in consulting with Deloitte, KPMG, EDS, and SAS. He has authored several books, and continues to write articles and blogs on EPM, managerial accounting including activity-based costing (ABC), and business analytics. His next book is “Predictive Business Analytics” due out in October 2013, published by John Wiley & Sons.

Article originally posted on SmartData Collective

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