Proliferating data and fast-evolving customer segments,combined with the unprecedented volatility that exists today, demands a radical shift in business thinking. What's clear is that management can no longer risk betting the business on just one discipline. Their brave new world consists of ever more diverse consumers, who have become increasingly interconnected and demanding, with expectations that only rise as their loyalty to companies declines.
In this environment, decision-makers must be ready to target exactly the right price, product and/or service at each core customer segment. This means companies will have to adhere to a new competitive discipline in the form of predictive analytics.
Predictive analytics uses quantitative methods to derive actionable insights from the wealth of data we now have available online and offline, through private or public clouds, in-house or externally. And most importantly, because this discipline is enterprise-wide, it ensures that key decision-makers can instantly act upon these insights across the business.
The momentum behind this new competitive discipline is unstoppable. On the supply side, the raw material - structured and unstructured data - has piled up in enormous and rapidly expanding quantities. Indeed, according to Gartner Research, the amount of unstructured data is doubling every three months. The immediate priority for companies is to get their arms around the enormity of available data without becoming subsumed by its storage, manipulation and management. But that's just the first stage. The end goal is to move from insights to outcomes - from "So what?" to "Now what?"
The good news is that technology no longer lags our aspirations in this area. Sophisticated analytics tools are now integral to the latest enterprise resource planning, financial and customer relationship management software. On top of this, cloud computing has transformed the ways in which vast quantities of data are being stored and processed. Whether in the shape of public or private clouds, companies now have flexible access to massive computing power when they need it. And third, open source software has democratized the analytics capabilities needed to drive meaning and insight from data.
Just like supply, demand for analytic data is readily apparent. A new generation of data-literate executives is coming through, most of them accustomed to making real-time decisions based on instant access to data. The challenge for companies will be devising ways of delivering data-derived insights to these millennial-generation managers - effectively making their search and decision functions practically instantaneous.
In the post-financial crisis landscape, risk is becoming another powerful driver. Mandated by increasingly tough regulation, boards need to demonstrate that their decision-making is grounded in robust data. Beyond question, Sarbanes-Oxley was just the start of this push toward more rigorous compliance with data management and reporting regulation.
We know that winning companies - those that achieve a higher return on invested capital - exit recessionary periods as leaders and sustain their advantage over time. These organizations exploit the opportunities at hand, using the cash flow generated by cash reduction programs to reinvest in innovation and create their own upturn.
And as we enter the new economic cycle, leaders are increasingly focused on embedding a whole-business approach to analytics.
Many companies already use predictive analytics within the context of functional point solutions. But very few have taken this to the next stage of competitive advantage by joining these capabilities, moving analytics from the functional to the multifunctional.
With enterprise analytics capabilities embedded into the heart of their businesses, companies will be able to move from insight generation through insight validation, execution and value realization to performance monitoring, metrics and governance. This end-to-end engine will allow their businesses to answer questions such as, "Why did one promotion fail, while another succeeded?" Once they are doing that routinely across the business, instantly benchmarking results with the outcomes of competitor promotions while simultaneously crowd-sourcing shifts in consumer sentiment, they will have an enormously potent capability at their disposal.