HBR Paper Review

1421021

Nitish Agarwal -

Introduction: Traditional businesses during the 1990s, especially the large scale
production houses collected Business Intelligence by deploying an array of
spread sheets across its various departments and collected data in-house for
analysis. Thomas H. Davenport in his paper titled Competing on Analytics,
explains the numerous applications of Analytical Science in todays cut throat
business environment and how far Business Intelligence has come from the
1990s. Thomas Davenport uses real life examples of companies like Amazon,
Capital One, Boston Red Sox, etc who have grown leaps and bounds in their
respective industries by rigorously deploying analytics in almost all aspects of
their business.
Body: Davenport goes on to explain how analytical science can provide
alternative data and viewpoints from the same data traditionally used to gather
basic information. For example, companies can know what kind of
products/services their customers desire by studying the product movement.
But, with the help of analytical tools companies can now have information like
how much a customer is worth to the company in the long run, what will trigger
the customer to buy more, and what prices customers are willing to pay for the
product/service. Companies across varied industries are overhauling their
processes, organisational structure and culture to facilitate analytics in at least
their core functional area, if not all areas of operation. Davenport highlights three
main attributes among successful analytics competitor:
1. Widespread use of modelling and optimisation: Analytical competitors look
beyond traditional/basic statistics; they use predictive modelling to
generate information that will help companies in optimising the ROI from
each aspect of operation.
2. An enterprise approach: analytics competitors employ a centralised group
of analytics who ensure effective management of critical data and other
resources as well as share relevant data with each functional team in the
organisation without any inconsistency.
3. Senior executive advocates: To be a successful analytics competitor the
organisation has to enforce its application in its culture, processes,
behaviour, and skills of majority of its employees. Therefore, this kind of
substantial change has to be driven by the top level of management to
ensure effective execution of the policy.
Davenport also points out the limitations of analytical approach to decision
making. Personnel management, recruitment and selection of employees still
need instincts, personality and character analysis by observation. Numbers can
help a manager only so much, the last step has to be taken based on the gut
feeling.

Some of the factors contributing to the success of analytics competitors like

Capital One, Amazon, Dell, etc are also pointed out by Davenport in his report,
there are:
1. The right focus: application of fact-based decisions policy in all areas of
operation may not be possible for all business types. Therefore, companies
evaluate and pick functions that will help the overall growth of the firm by
application of analytics. For example, Dell uses analytics in enhancing its
supply chain management to reduce inventory expenditure and increase
profitability. It is also important to share the data gathered and analysis
inferred with all the stakeholder or links in the supply chain to facilitate a
holistic development of the industry.
2. The right culture: It is paramount that company establishes a culture
where each decision taken, whether at the top level or lower levels, are
backed with solid facts and statistical analysis. Even functions like Human
Resource which relies on observation and intuition to take decisions should
use metrics to frame employee compensation and appraisal policies. Yet,
practically there may be situations where managers do not have enough
time to conduct a detailed analysis of data before taking a crucial decision.
In such cases a manager should trust his/her instincts and take a leap of
faith.
3. The right people: People make processes work. If the right kind of people
is not engaged for the right job, however well structure your plan and
team maybe, the process in bound to fail. An analyst should have a very
specialized skill set covering areas like engineering, mathematics, finance,
statistical/analytical, etc to be even considered for recruitment.
Practically, it is not possible to find employees exhibiting excellence all the
fields, therefore, companies must either train and develop the employees
in areas of concern or hire professionals for each aspect of process,
depending on the nature of enterprise.
4. The right technology: companies must be ready to invest in innovative
technologies to ensure that data collected is churned and analysed
effectively. Companies must ensure that data critical to their enterprise is
collected meticulously over time; there is never enough data. The data
collected must be analysed using the best software and processes
available in the market, it should help the managers in segregating
relevant from irrelevant information and then facilitate the data in
meaningful reports and presentations. Hardware to store and process such
substantial volume of data must be the best available in the market.
All these put together formulates into a successful business enterprise that take
decisions based on solid scientific research analysis.
Learning and views: Analytics based business mentality and culture is the way
forward for all enterprises. The easy availability of data online and the
disappearance of geographical boundaries due to globalization facilitate modern
business enterprises to collect crucial data over time and derive meaningful
inferences from the same. India as a service oriented country, finds itself well

placed in the global market thanks to easy availability of qualified technical

professionals. Yet, small and medium sized enterprises will find it very difficult to
enter the analytics competition. This is because companies will need to invest
considerable amount of time and resources in collecting data and making
meaningful information from the same. Also, considerable amount of investment
will be required in technology innovation, both in software and hardware.
Analytics science is the new wave of change in todays business environment.
Companies need to start investing now to reap its benefits in the long run.
Conclusion: Thomas H. Davenport gives a very detailed and vivid report on the
nuisances of analytics based business enterprise. He explains how analytics can
be deployed in almost all aspects of a managerial decision making process, be it
related to finance, marketing, production process, inventory management and
even human resource. Yet, he also explains that sometimes managers will have
to use common sense and intuition in day to day work. Also, the time necessary
to conduct a meaningful research and analysis is not feasible for all types of
businesses. The analytics based pursuit of efficient strategies and plans is being
considered by almost all businesses regardless of nature of industry. Yet, it has a
long way to go before it is embraced by all enterprises, regardless of its size.