At a recent CFO magazine conference I attended, Accenture’s Jeanne G. Harris, coauthor of the recently published book “Analytics at Work,” described a Hollywood movie star who successfully applied statistical analytics to improve his career. This celebrity wanted to increase the probability that he would appear in a successful film. Is this A-list celebrity Tom Cruise, Meryl Streep or George Clooney? Did this movie star rely on his publicist to perform the analysis?

The answer is “no” to all of these questions.

As Harris described it, the actor is Will Smith. Early in Smith’s career, when he was only on television shows, he and his business manager applied their own form of cluster analytics to pursue a cinema career. They analyzed the 10 highest money-grossing films of all time to uncover patterns. Here’s what they discovered: 10 out of 10 had special effects; nine out of 10 had special effects with creatures from outer space; and eight out of 10 had special effects with creatures and a love story.

The rest is history. Smith was in the blockbusters “Independence Day,” “Men in Black,” “I, Robot,” and “I Am Legend.” He is the only movie star whose films predictably earn more than $20 million. His movie “Hancock,” which did not receive favorable reviews from movie critics, still grossed $625 million worldwide. The application of statistical analysis improved Smith’s likelihood of being in a high revenue-generating movie. Therefore, you could call him an analytical competitor – a term that Harris and her coauthor Tom Davenport have coined for organizations that use analytics as a competitive edge.

What is Wrong with Doing Better by Being Smarter?

Analytics come in many flavors; they are not limited to only solving problems. Analytics can also create opportunities. For example, imagine you operated a social media website and you wanted to make more money by offering insightful information to a manufacturer or distributor. While monitoring the navigation patterns across the Web (similar to what Google does), you detect that women ages 24 to 29 who are teachers routinely surf from a schoolbook website to a teaching supplies site. And, while they are at the teaching supplies website, they often click on a jewelry website, especially earrings.

What value is there for you in knowing this navigation pattern? By using this fact-based evidence plus some profile information on site registrants, your social media website could offer and sell banner ads to the highest-bidding jewelry company. As a result, the banner ads would appear to any 24 to 29-year-old female school teachers when they log on. Page-view statistics, based on predictive analytics, could be contractually committed to the jewelry manufacturer or distributor to assure them of this proven and targeted traffic.


If a Hollywood Film Star Can Use Analytics, Why Can’t You?

By using statistics, Will Smith can determine what will likely lead to a desirable outcome (a blockbuster film). In a similar fashion, a company using business analytics can also ensure a successful outcome by generating accurate forecasts and implementing sound reporting practices.

Increased volatility is now the new normal in business. Examples of volatility include consumer preferences, foreign currency exchange rates and commodity prices to name a few. Trends can develop quickly, and unanticipated shocks can come from occurrences like the Asian tsunami, H1N1 flu or the current global credit crisis. This means that traditional practices - like detailed annual budgets and five-year plans - can quickly become obsolete.

To gain competitive advantage, better and longer-lasting forecasting accuracy is needed. By reducing current and future levels of uncertainty, action plans (e.g., production volume, required employee and spending-level capacities) can be more reliable and less unwieldy. For example, the source data to calculate the levels of resource capacity and spending come from a variety of other forecasts, such as demographics and sales plans. Predictive analytics are needed for each data source, and as a bonus they can all eventually be aggregated as financial projections, such as rolling financial forecasts. It’s also important to remember that risk management cannot be left out of the equation. The potential magnitude of an unplanned, undesirable event and its likelihood of occurrence dictate how many risk-mitigation projects are needed. These too are now increasingly included in financial projections.

Given the ever-increasing volatility, information reporting must evolve as well. Reports must be easily accessible, flexible, and quickly and easily generated. There needs to be a shift toward more agility, speed, frequency and visibility in reporting of information. More importantly, the reporting must contain information that allows users to rapidly gain insight, make inferences and draw conclusions.

Risk management cannot be left out of the equations. The potential magnitude of an unplanned and undesirable event and its likelihood of occurrence dictate how much risk mitigation insurance-like projects are needed. These too are increasingly included in financial projections.

It doesn’t matter if you are an A-list actor or an organization that’s looking to get one up on its competition - analytics provides you the insight needed to become an analytical competitor. Plus, you’ll be well-equipped to handle the uncertainties – and opportunities – that come your way.

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