With the emergence of applying business analytics as arguably the most reliable long-term sustainable competitive advantage, what is the “wrist” for business analytics? That is, what factor enables one organization in the same industry or government sector as another to get more value from applying analytics?
Factors Governing the Yield from Analytics
Here is my unscientific list of candidate factors that substantially influence how an organization derives relative improvement from applying analytics. I believe one of these factors is the most influential, and I’ll share that opinion at the end.
- Employee training: This is an obvious factor. No pain, no gain. Yes, it is true that relatively older employees have painful memories of their university statistics courses, but in the last decade statistics and analytics teachers have improved their methods.
- Context: The magnitude of problems and opportunities – both of which rely on analytics for insights – will obviously differ from industry to industry and also among organizations within an industry. For example, a strong and well-financed company can tolerate a relatively larger margin for error and making mistakes; hence it needs less analytics capabilities – but not forever.
- Analytical software: Spreadsheet software can provide analytical calculations up to a point. Beyond the limits of spreadsheets (e.g., columns-to-rows restrictions), you need robust commercial software. (In the interest of full disclosure, my employer, SAS, is an analytics software vendor.) However, analytical software is merely an enabler in the broader mission of discovery, investigation and solving problems. One needs to understand the concepts and methods of analytics and make assumptions. The obstacle is not the technology – which is proven – but the thinking. A fool with a tool is still a fool!
- Degree of desire, passion and fear: The emotional state of an organization can determine its appetite for applying analytics. If the organization is running into financial difficulties, it may need to dig deeper in understanding patterns and relationships, and establish more accurate forecasts, etc. I’ve witnessed two extreme types of customers along a spectrum of success that initially pursue improvement methods as early adopters: those that are desperate to solve their problems, and industry leaders that want to increase their lead.
- Leadership: The renowned professor of management John Kotter defines management and leadership as different things. The difference is that managers cope with complexity. Hence they use organization charts, budgets, spreadsheets, etc. In contrast, leaders cope with change that they accomplish by providing their workforce with vision and inspiration. It is leaders much more than managers who create superior economic yield and improved performance from applying analytics. Leaders do this by creating a culture for exploration and discovery, empowering workers with decision rights, and allowing tolerance for dissent and mistakes.
And the Award Goes to …
So to get the most from business analytics, which of these factors is my choice to be the winning edge for analytics success?
My choice will be no surprise to readers familiar with me – it is leadership. Poor leaders squander the opportunity to leverage analytics, while strong leaders apply analytics for robust results in unimaginable ways.
Gary Cokins is the founder of Analytics-Based Performance Management LLC, an advisory firm. He is an internationally recognized expert, speaker and author in advanced cost management and performance improvement systems previously a principal consultant with SAS. You can contact him at firstname.lastname@example.org. For more of Cokins' unique look at the world, visit his website at www.garycokins.com.