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There has been a lot in the news about the faltering economy and the result of a series of spectacularly bad decisions and unreasoned assumptions made by executives in the financial services industry.
But it is not just financial services companies that have failed to analyze shifting market decisions and consider risks appropriately. It seems there is plenty of blame to go around. But an analysis of recent events shows that if business executives are going to make better decisions, they are going to have to become more analytical.
Analytics at Work explains how organizations can use data and analysis to make better decisions in their businesses and organizations.
Download the Analytics at Work Executive Summary
For too long, managers have relied on their intuition to make decisions. For too long it has been the prerogative of senior executives to rely on their “golden guts,” their experience and their unaided judgment to make important calls.
While many intuitive decisions have undoubtedly worked out well, they often go astray. Mergers and acquisitions that seem intuitively appealing don’t yield value for shareholders. Banks make credit and risk decisions on the intuition that housing prices will always rise. Governments make war on other countries based on the intuition that they possess weapons of mass destruction, or will otherwise be threatening. We know how many of those decisions have turned out.
Most companies today have massive amounts of data at their disposal. The data may come from transaction-oriented applications such as ERP (enterprise resource planning) systems from software vendors such as SAP and Oracle, scanner data in retail environments, customer loyalty programs of various types, financial transactions or clickstream data from customer Web activity. But what do they do with it?
Companies in both sophisticated and developing economies collect and store a lot of data, but they don’t use it effectively. They have information and they make decisions, but they don’t connect information and decision—making frequently enough.
If the early years of the information age were focused on automating business processes with transactions, the coming years will, we strongly believe, concentrate on making better decisions through information and analysis. This will mean not only gathering the information and making it available for decisions, but developing a closer linkage between information and decisions.
In some cases this will result in automated analytical decisions that ensure that information is applied to the decision process. In other cases the information will be used because the decision process will be more structured, with greater accountability and clarity on where information is to be applied in the process.
Analytical tools and methods can be employed anywhere in a business when the scope is limited and the impact is local. When the goal is to support one-time decisions, improve management information, or fine-tune operational procedures, management can get people on board by telling them to “just do it.”
But Analytics at Work is for when you’re after bigger game. It’s for when the ambition is to make a big difference—in business performance, competitiveness and marketplace differentiation. The decisions supported by analytics are recurring and strategic. The scope of such initiatives is often cross-functional, the impact is broad and it takes commitment across the organization to succeed.
What does it take to get any significant business analytics initiative underway? Five factors are required, which we group under the acronym DELTA (which, helpfully, is the Greek letter that signifies “change” in an equation):
The book also describes the additional elements necessary to institutionalize and sustain analytical orientation and processes across an enterprise. It concludes with a discussion of the analytical journey and how analytics are transforming business.
Buy the book:
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Learn more about the authors of Analytics at Work: Smarter Decisions, Better Results: Thomas Davenport, the President’s Chair in Information Technology and Management at Babson College; Jeanne G. Harris, an executive research fellow and director of research at the Accenture Institute for High Performance; and Robert Morison, an experienced business researcher.
Jeanne G. Harris is executive research fellow and a senior executive at Accenture’s Institute for High Performance in Chicago. Jeanne leads the Institute’s global research agenda in the areas of information, technology and analytics. In 2009 Jeanne received Consulting Magazine’s Women Leaders in Consulting award for Lifetime Achievement. She is the coauthor (with Tom Davenport) of Competing on Analytics: The New Science of Winning. During her 33 years at Accenture, Jeanne has consulted a wide variety of organizations in many different industries worldwide. She has led Accenture’s business intelligence, analytics, performance management, knowledge management and data warehousing consulting practices. She has worked extensively with clients seeking to improve their managerial information, decision-making, analytical, and information management capabilities. Jeanne has authored numerous book chapters and articles in leading management publications, including Harvard Business Review, MIT Sloan Management Review, California Management Review, and CIO. Her research has been quoted extensively by the international business press, including the Wall Street Journal, the Financial Times, and Nihon Keizai Shimbun.
Tom Davenport is the President’s Distinguished Professor in Information Technology and Management at Babson College, and the Research Director of the International Institute for Analytics. Tom has written, coauthored, or edited twelve other books, including the best selling Competing on Analytics: The New Science of Winning (with Jeanne Harris). He also authored the first books on business process reengineering and achieving value from enterprise systems, and the best seller, Working Knowledge (with Larry Prusak), on knowledge management. He has written more than one hundred articles for such publications as Harvard Business Review, MIT Sloan Management Review, California Management Review, the Financial Times, and many other publications. Tom has also been a columnist for CIO, InformationWeek, and Darwin magazines. In 2003 he was named one of the world’s “Top 25 Consultants” by Consulting magazine, and in 2005 was named one of the world’s top three analysts of business and technology by readers of Optimize magazine. In 2007 and 2008 he was named one of the 100 most influential people in the IT industry by Ziff-Davis magazines. His blog at Harvard Business Online is http://discussionleader.hbsp.com/davenport/.
Robert Morison is a highly accomplished business researcher, writer, thought leader, speaker and management consultant. He has been leading breakthrough research at the intersection of business, technology and human asset management for more than 20 years, working with more than 300 major organizations and writing or editing more than 150 research reports and management guides on topics ranging from workforce management and business innovation to business process reengineering, collaborative business models, and business analytics. He is coauthor of Workforce Crisis: How to Beat the Coming Shortage of Skills and Talent (Harvard Business Press, 2006), and three Harvard Business Review articles, one of which received a McKinsey Award as best article of 2004. He has recently been a commentator on workforce issues on Nightly Business Report on PBS. He has held research and business services management positions with The Concours Group, CSC Index, and General Electric Information Services Company.
October 13, 2009
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