The Value of Business Analytics E-Book

Evan Stubbs

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: SAS Institute Inc
• Sprache: Englisch

Seitenzahl: 464

Veröffentlichungsjahr: 2011

Beschreibung

TURN YOUR CHALLENGES INTO SUCCESSES – LEARN HOW AND WHY SOME TEAM STRUGGLE AND SOME SUCCEED

This groundbreaking resource defines what business analytics is, the immense value it brings to an organization, and how to harness its power to gain a competitive edge in the marketplace. Author Evan Stubbs provides managers with the tools, knowledge, and strategies to get the organizational commitment you need to get business analytics up and running in your company.

Drawing from numerous practical examples, The Value of Business Analytics provides an overview of how business analytics maps to organizational strategy and through examining the mistakes teams commonly make that prevent their success, author Evan Stubbs uncovers a four-step framework which helps improve the odds of success.

Built on field-tested experience, The Value of Business Analytics explains the importance of and how to:

• Define the Value: Link analytics outcomes to business value, thereby helping build a sense of urgency and a need for change.
• Communicate the Value: Persuade the right people by understanding what motivates them.
• Deliver the Value: Link tactical outcomes to long-term strategic differentiation.
• Measure the Value: Validate wins and deliver continuous improvement to help drive ongoing transformation.

Translating massive amounts of data into real insight is beyond magic—it’s competitive advantage distilled. Nothing else offers an equivalent level of agility, productivity improvement, or renewable value. Whether you’re looking to quantify the value of your work or generate organizational support, learn how to leverage advanced business analytics with the hands-on guidance found in The Value of Business Analytics.

Drawing on the successes and failures of countless organizations, author Evan Stubbs provides a reference rich in content that spans everything from hiring the right people, understanding technical maturity, assessing culture, and structuring strategic planning. A must-read for any business analytics leader and an essential reference in shifting the perspective of business analytics away from algorithms towards outcomes.

Learn how to increase the odds of successful value creation with The Value of Business Analytics.

Leseprobe

Table of Contents

Cover

Series page

Title page

Copyright page

Preface

HOW TO READ THIS BOOK

UNDERSTANDING THE STRUCTURE

SOME FINAL THOUGHTS

Acknowledgments

Chapter 1: Introduction and Background

THE POWER OF INFORMATION

MODERN-DAY MAGICIANS

THE SECRET OF SUCCESS

Chapter 2: The Importance of Business Analytics

INTRODUCTION

BUSINESS ANALYTICS: A DEFINITION

ROLE OF THE ORGANIZATION

REASONS BEHIND STRATEGIC PLANNING

BUSINESS ANALYTICS AND THE TRADITIONAL VIEW

BUSINESS ANALYTICS AND THE EXTERNAL VIEW

BUSINESS ANALYTICS AND THE INTERNAL VIEW

BUSINESS ANALYTICS AND THE CUSTOMER VIEW

FOSTERING INNOVATION AND INVENTION

DELIVERING VALUE THROUGH RENEWABLE RETURN

SUMMARY

Chapter 3: The Challenges of Tactical Delivery

INTRODUCTION

CORE VOCABULARY

COMMON TEAM STRUCTURES

ROLES AND RESPONSIBILITIES

CHALLENGES OF APPLYING BUSINESS ANALYTICS

FINDING THE PATH TO PROFITABILITY

SELLING THE VALUE OF ANALYTICS

MEETING AND OVERCOMING THESE CHALLENGES

THE FOUR-STEP FRAMEWORK

Chapter 4: Defining the Value of Business Analytics

INTRODUCTION

WHY YOU NEED TO DEFINE THE VALUE

DIFFERENT TYPES OF VALUE

ROLE OF THE BUSINESS CASE

IDENTIFYING TANGIBLE VALUE

IDENTIFYING INTANGIBLE VALUE

SIMULATING BUSINESS CASES

PRACTICAL EXAMPLE: REDUCING CHURN IN TELECOMMUNICATIONS

SUMMARY

Chapter 5: Communicating the Value Proposition

INTRODUCTION

WHY YOU NEED TO PLAN YOUR COMMUNICATION STRATEGY

NEED FOR A COMMUNICATION STRATEGY

AWARENESS AND INFORMATION RELEVANCY

ORGANIZATIONAL AND SOCIETAL CULTURAL CONSIDERATIONS

CONCEPTUAL RELEVANCY

THE PATH TO PERSUASION

PRACTICAL EXAMPLE: A FORECASTING MODEL FOR PLANNING

SUMMARY

Chapter 6: Creating the Execution Plan and Delivering Value

INTRODUCTION

WHY YOU NEED AN EXECUTION PLAN

ROLE OF THE EXECUTION PLAN

ESTABLISHING DIRECTION

DELIVERING TO THE PLAN

DEALING WITH RESOURCE CONSTRAINTS

PLANNING FOR SUCCESS

PRACTICAL EXAMPLE: SOCIAL NETWORK ANALYSIS

SUMMARY

Chapter 7: Delivering the Measurement Framework

INTRODUCTION

WHY A MEASUREMENT FRAMEWORK IS ESSENTIAL

ROLE OF THE MEASUREMENT FRAMEWORK

MEASURING WHAT IS IMPORTANT

ESTABLISHING A MEASUREMENT FRAMEWORK

DELIVERING THE MEASUREMENT FRAMEWORK

ADVANCED MEASUREMENT CONCEPTS

PRACTICAL EXAMPLE: THE ONGOING GROWTH OF AN ANALYTICS TEAM

SUMMARY

Chapter 8: Bringing It All Together

INTRODUCTION

SARAH’S CHALLENGES

THE LIGHT-BULB MOMENT

TRANSFORMING THE ORGANIZATION

SUMMARY

Glossary

About the Author

Index

Wiley & SAS Business Series

The Wiley & SAS Business Series presents books that help senior-level managers with their critical management decisions.

Titles in the Wiley & SAS Business Series include:

Activity-Based Management for Financial Institutions: Driving Bottom-Line Results by Brent Bahnub

Branded! How Retailers Engage Consumers with Social Media and Mobility by Bernie Brennan and Lori Schafer

Business Analytics for Customer Intelligence by Gert Laursen

Business Analytics for Managers: Taking Business Intelligence beyond Reporting by Gert Laursen and Jesper Thorlund

Business Intelligence Success Factors: Tools for Aligning Your Business in the Global Economy by Olivia Parr Rud

CIO Best Practices: Enabling Strategic Value with Information Technology, Second Edition by Joe Stenzel

Credit Risk Assessment: The New Lending System for Borrowers, Lenders, and Investors by Clark Abrahams and Mingyuan Zhang

Demand-Driven Forecasting: A Structured Approach to Forecasting by Charles Chase

Enterprise Risk Management: A Methodology for Achieving Strategic Objectives by Gregory Monahan

Executive’s Guide to Solvency II by David Buckham, Jason Wahl, and Stuart Rose

Foreign Currency Financial Reporting from Euro to Yen to Yuan: A Guide to Fundamental Concepts and Practical Applications by Robert Rowan

Manufacturing Best Practices: Optimizing Productivity and Product Quality by Bobby Hull

Mastering Organizational Knowledge Flow: How to Make Knowledge Sharing Work by Frank Leistner

Performance Management: Finding the Missing Pieces (to Close the Intelligence Gap) by Gary Cokins

Social Network Analysis in Telecommunications by Carlos Andre Reis Pinheiro

The Business Forecasting Deal: Exposing Bad Practices and Providing Practical Solutions by Michael Gilliland

The Data Asset: How Smart Companies Govern Their Data for Business Success by Tony Fisher

The Executive’s Guide to Enterprise Social Media Strategy: How Social Networks Are Radically Transforming Your Business by David Thomas and Mike Barlow

The New Know: Innovation Powered by Analytics by Thornton May

Visual Six Sigma: Making Data Analysis Lean by Ian Cox, Marie A. Gaudard, Philip J. Ramsey, Mia L. Stephens, and Leo Wright

For more information on any of the above titles, please visit www.wiley.com.

Copyright © 2011 by SAS Institute Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:

Stubbs, Evan.

 The value of business analytics: identifying the path to profitability / Evan Stubbs.

p. cm.

ISBN 978-1-118-01239-0 (hardback); ISBN 978-1-118-09338-2 (ebk); ISBN 978-1-118-09340-5 (ebk); ISBN 978-1-118-09341-2 (ebk)

 1. Business planning. 2. Strategic planning. 3. Decision making. 4. Industrial management–Statistical methods. I. Title.

 HD30.28.S787 2011

 658.4’01–dc22

2011012037

Preface

One of the most awkward conversations I have ever had was with someone who simply refused to believe that anything as abstract as “analytics” could possibly be real. The conversation culminated in his rather backhanded compliment that, and I paraphrase, “I was lucky to have ended up in an industry where it was so easy to make things up.”

Despite what I knew, it was hard to convince him otherwise. While that was possibly the most extreme example I have ever experienced, it is unfortunate how often we seem to struggle to convince the rest of the world of the value business analytics brings. This book is a response to that. I hope it will help others take advantage of what has taken me over 10 years to realize and understand.

HOW TO READ THIS BOOK

This book consolidates more than a decade of experience. In practice, success often comes down to understanding the role analytics plays in creating competitive advantage and the reasons why many teams fail. Given this groundwork, selling the value of analytics involves four key activities:

1. Defining the value

2. Communicating the value

3. Committing to the execution

4. Measuring success

This book provides guidance on each of these based on hands-on experience. When applied, these activities help managers strengthen their ability to sell the value of analytics within any organization.

While the chapters can be read in any order, readers will find it helpful to read them sequentially. This is because each chapter builds on the insights and terminology defined in the previous chapters. However, experienced managers may find it useful to skip ahead to their areas of greatest interest.

Although the subject matter can be highly technical, this book tries wherever possible to make the content as approachable as possible. What is important is not the technical detail but an understanding of how organizational dynamics can help or hurt success. Practical examples are provided wherever possible; the most effective learning comes from understanding how things work in practice, and not merely in theory.

UNDERSTANDING THE STRUCTURE

Our starting point is how analytics creates competitive advantage. Mapping tactical activities to strategic outcomes makes it is easier not only to create a vision but also to get management aligned with that vision. Chapter 2 focuses on the role analytics plays within strategic planning processes. Regardless of how planning is executed, analytics can almost inevitably play a significant role in creating sustainable competitive advantage. This chapter will be of most interest to those who are anxious to develop an understanding of the role analytics plays within the development of strategy.

From there, we consider how teams can understand and overcome tactical challenges. Setting a vision is critical. Equally important is delivering that vision and avoiding common execution issues. Chapter 3 focuses on the tactical application of analytics and why teams often struggle. It introduces the core vocabulary used throughout this book and outlines common organizational structures and team roles. It outlines the most common challenges faced by a business analytics team. This chapter will be of most interest to those who need to understand the practical side of business analytics without getting into the numerical detail.

Chapter 4 focuses on how to define the value of analytics. Decisions and commitment are made based on projected outcomes. When the value is unclear, commitment is hard to obtain. Chapter 4 focuses on a variety of strategies to help define the value of business analytics. It outlines the different meanings of value and provides a number of ways of quantifying the value created through business analytics, paying attention to both tangible and intangible value. This chapter will be of most interest to those who want to build an understanding of how to quantify the value of their planned work.

The next chapter focuses on how to communicate the value of analytics. Defining the value is not enough; not only does it need to be quantified, it needs to be communicated. Chapter 5 focuses on the elements managers should consider when communicating the value of their work. It outlines why communication breakdowns occur and identifies how to overcome such challenges. It pays specific attention to how organizational culture, environmental culture, and personal psychology impact understanding, helping managers to build a holistic communication strategy. This chapter will be of most interest to those interested in building a tailored communication strategy to help generate organizational support.

From there, we discuss how to create a delivery plan. Once commitment has been obtained, managers must deliver the value they have said they will deliver. Chapter 6 focuses on building a successful execution plan and delivering returns. It outlines the various activities most analytics teams are involved in and how to effectively plan around them. It also introduces the concept of tactical revolution, an invaluable tool that assists managers to overcome often significant resourcing challenges. Finally, it provides managers with various essential planning considerations. This chapter will be of most interest to those who must overcome a lack of resources or who are tasked with creating delivery plans.

The penultimate chapter focuses on how to establish a measurement framework. Because trust requires history, Chapter 7 focuses on how to measure the team’s successes and activities. This gives the team the ability to demonstrate value, build trust, and optimize processes. It focuses on a variety of useful measures, how they can be used in practice, and the benefits from establishing a dedicated measurement platform. It also provides some guidance on building best-practice measurement processes. This chapter will be of most interest to those trying to optimize their existing activities or quantify the value of the work they are doing.

Finally, we consider a hypothetical example of how to bring everything together. Chapter 8 synthesizes a variety of real-world examples into a single narrative, demonstrating how the lessons learned in this book might be applied in practice.

SOME FINAL THOUGHTS

Analytics is one of the most exciting fields available today. History has conspired to create an opportunity like no other for those skilled in selling the value and executing on their findings. It is rare for any discipline to offer such a significant strategic impact and deliver such substantial tactical efficiencies. Because of the renewable value that analytics offers, people who are skilled in acting as change agents with the ability to transform their organizations into analytically enabled competitors will be among the most sought after in the market.

While reading this book, you should remember the following:

Although executive management commitment is important, change often comes down to the effectiveness of the manager responsible for execution.Quantifying the value that business analytics brings is the first and most important step and, when effectively communicated, overcomes most challenges.Trust and credibility overcome whatever is left, but unless you deliver and can measure what you have delivered, it is unlikely you will get them.

Acknowledgments

This book would have been impossible without the phenomenal support of so many people. Every author says that, but it is hard to appreciate how much people are willing to give until you have been humbled by their generosity. Without Shelley Sessoms’s kind help in putting together my pitch and supporting the idea, it is unlikely anything would have happened in the first place. Stacey Hamilton’s help throughout the writing process was invaluable in making sure I actually finished everything on time!

Thanks are due to Natalie Mendes, Peter Kokinakos, and Annelies Tjetjep for putting aside their valuable personal time to review content as it was written. Greg Wood deserves special recognition for his enviable ability to ask such simple and yet poignant questions that they led to a relatively substantial rewrite of certain chapters. I would especially like to thank Anne Milley for her support and excellent recommendations on research material, much of which greatly expanded the scope of this book.

Two people are owed such gratitude that I question whether I will ever be able to repay them. The first is Sarah Agius for her extensive, critical, and priceless feedback. Not only did she repeatedly go through the entire manuscript with a fine-toothed comb, she correctly pointed out innumerable ways the content could be improved. Without her help, I sincerely feel the book would have been a pale version of its final form. The second is Vicki Batten. Despite not having any background (or, possibly, interest!) in the topic, she happily read the manuscript from cover to cover in record time, helping me to no end by providing a much-needed sanity check on whether what I had written actually made any sense!

Most of all, I would like to thank my wife, daughter, and son: my wife, Vanessa, for tirelessly trying to make sense out of what I was writing and picking up a multitude of things I would never have thought of—words cannot describe the effort she put in to support me in what must have seemed like a fool’s errand at times; my daughter, Amélie, for making sure I didn’t work too hard; and my son, Calvin, for joining us halfway along our journey.

Chapter 1

Introduction and Background

THE POWER OF INFORMATION

Revolutions come and revolutions go; while their influence may be obvious in retrospect, it is rare that we appreciate their impact at the time. The one thing they have in common is disruption at all levels of society. First, the agricultural revolution; then the industrial revolution; and now, 60 years into the latter, we have the information revolution.

Information has always been power, but the past few decades have seen a subtle shift occur, fundamentally altering the way we perceive it. It has been only relatively recently that the amount of data available to us has outstripped our ability to investigate that data. At one point in time, it was arguably possible to have read every written word ever set on parchment or papyrus. While the true number will never be known, it is said that King Ptolemy II Philadelphus set the Library of Alexandria a target of 500,000 scrolls. At the time, this represented the largest collection of knowledge in the known world.

Things change. At the time of this book’s publication, the United States Library of Congress had over 33 million books (including other printed material) and 63 million manuscripts. The Internet Archive, capturing only a subset of all the information contained on the Web, has already cataloged almost 2 petabytes of text and is growing at approximately 20 terabytes a month, in itself a larger amount of information than that held by the Library of Congress.

A little over 2,000 years have passed between King Philadelphus and now. Things are accelerating at such a rate that in another 20 years our staggering statistics will probably be considered equally quaint.

This tsunami of information is a real challenge at every level in society. At a personal level, we struggle to keep on top of everything that is happening around us. Alvin Toffler coined the term “future shock” as early as 1970 to describe the overwhelming and disorienting impact of information overload.1 And, at a professional level, where we once struggled with a paucity of information we now struggle to pick which pieces of information are important out of the millions of measures at our fingertips. Regardless of where you start, this ever-increasing amount of information has changed the way we view the world, the way we live, and the way we do business.

Dealing with this data deluge requires being smarter. It requires developing the ability to selectively process information based on value, not sequence. It requires, more than anything, the realization that brute force and manual effort are, in the long run, an imposs­ible solution. Quite simply, it requires the effective application of analytics.

Getting to this point has not happened overnight—it has taken decades of research and thought. Among others, Claude Shannon led the charge when he published his seminal work, “A Mathematical Theory of Communication”: His proof that information could be quantified and measured was both innovative and revolutionary.2 Without his research, our world would be vastly different. Among other things, it is unlikely that Voyager would have launched or that the Internet would exist.

Treating information as a measurable quantity has changed the world. While statistics had always been concerned with extracting useful knowledge from raw data, information theory helped encourage the perception that information was more than just insight. Instead, it could legitimately be seen as an asset in its own right, something of real (and comparable) value.

This intersection of statistically based insight and the realization that information can be an asset has had and will continue to have serious reverberations in the business world. Being smarter has always meant being successful; as far back as the nineteenth century, analytics was already generating competitive advantage.

William Gosset, employed by Guinness, had been struggling to identify the varieties of barley that had the best productive yield. Like medical researchers and biometricians, he was forced to deal with extremely small samples, often as little as 30 or fewer observations. Through a combination of rigorous research and trial and error, he identified a new distribution to help model likely population means, something that gave Guinness a significant competitive advantage through optimizing production efficiencies. By using his distribution to better predict crop yields, Guinness was able to gain a cost advantage over its competitors.

An interesting side note is that despite Guinness having prohibited employees from publishing their discoveries (given their understanding of the importance of analytics as a competitive advantage), Gosset published his work anyway. However, in the interests of keeping his job, he published it under a pseudonym, giving us the well-known “Student’s t-distribution” that we work with today.

MODERN-DAY MAGICIANS

Today, we face the opposite of Gosset’s challenge. While we still sometimes have to deal with fewer observations than we would like, the growing challenge is working out how to deal with the massive amounts of information we do have. As Moore’s law suggests, we have seen the number of transistors we can fit inexpensively on an integrated circuit double roughly every two years. Although it is not an exact relationship, we have seen roughly exponential growth in processing power since the early 1950s.

Importantly, processing power is not the only area that has grown by leaps and bounds. Kryder’s law suggests that disk storage density doubles annually, a pattern that has largely held true since the mid-1990s, when it was first suggested. And Butters’s law suggests that the amount of data carried by a single optical fiber doubles every nine months.

Combined, these create our future. We have the storage capacity to track ever-increasing amounts of information, often referred to as “big data.” We have the bandwidth to support the transfer of this information as needed. And, we have the processing power to extract insight from this data.

Because of this, we are drowning in data. For the first time ever, we have more data than we have storage capacity. In 2008, International Data Corporation (IDC) estimated that the amount of data being generated exceeded our total aggregate storage. Organiza­tions such as eBay have repositories in the petabytes, and there are no signs that this accelerated rate of data retention is going to slow.

The answer does not lie in better processes. Enterprise resource planning (ERP) systems play a critical role in standardizing operational processes, but they do not create competitive advantage or insight. Their focus is instead on establishing process efficiencies. There are obvious advantages to this, one of the biggest being that it reduces cost in the long run. However, because they rely on standardizing processes between organizations, at best they simply set a minimum benchmark. It is impossible to differentiate yourself if you use exactly the same processes as everyone else.

Instead, competitive advantage comes from capitalizing on what makes you unique. Every organization is different, and every organization has the potential to exploit that exact uniqueness in a way that no one else can match. Doing this means taking advantage of their single biggest resource: their data.

The people who know how to manage this data deluge are our future. Hal Varian, Google’s chief economist, summed it up best: “I keep saying that the sexy job in the next ten years will be statisticians.”3 Being able to translate massive amounts of data into real insight is beyond magic—it is competitive advantage distilled. Nothing else offers an equivalent level of agility, productivity improvement, or renewable value. Being “smarter” than your competitors is not just hyperbole; it is a real description of how significant the impact of applied analytics can be. If yours is an organization like Zappos.com, trying to understand what over a million people are telling you every day through social media, it is simply impossible to do business without leveraging advanced analytics for text mining and sentiment analysis.

Today, we stand on the cusp of transformation. The organizations that successfully extract the maximum amount of useful information from their ever-increasing data repositories and act on their insights are on the path to success. Those that do not are inevitably set on a track toward mediocrity at best, and abject failure at worst. Much as Henry Ford’s assembly line forced handmade production into a niche, the organizations that successfully apply business analytics will increasingly reduce the relevancy of those that do not.

However, success requires more than just knowledge of statistics or ways of dealing with big data. Execution is essential, but without a plan and commitment, little happens. It also requires an understanding of how analytics translates to competitive advantage. It requires an ability to enact change within an organization. And, it requires managers to sell the value of analytics.

While analytics has a long and hallowed history of creating organizational value, it remains a relatively opaque discipline. For many organizations, the insights created by advanced analytics are often tied to individuals, not processes, making it hard for them to extend the value to other areas of the business. While there is rarely any disagreement that any organization should be smarter in its decision making, the linkage between numerical analysis and value creation is rarely understood. When it comes to investing in building these capabilities, many organizations are reluctant to take the leap of faith that is apparently necessary.

It does not need to be that way.

THE SECRET OF SUCCESS

When one looks globally, some organizations seem not to mistrust analytics. Somehow, they seem to create renewable value through applying their competencies across many different business problems. Somehow, they succeed, not once, but repeatedly. And somehow, they translate their experience and skills into sustainable competitive advantage. Whether one is looking at Marriott, Canada Post, Sainsbury’s, or Telstra, some organizations consistently manage to deliver significant returns through their application of business analytics.

Possibly the best-guarded secret in business analytics is that in practice, their success comes down not only to organizational culture but also to the ability of their managers to successfully sell the value of analytics. As researchers such as Thomas Davenport and Jeanne Harris have rightly pointed out, overall success can often be linked to a variety of factors, including organizational structure, management commitment, and successful strategic planning. However, it is often “where the rubber hits the road” that the greatest impact can occur.

Change comes from two directions: top down or bottom up. If the organization already has the right management culture, using insight as a competitive advantage is relatively straightforward. As Jack Welch is reputed to have said, “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”

In these organizations, applying business analytics is relatively easy. There is management commitment to the use of insight, there is an understanding of the role analytics plays in creating competitive advantage, and there is often a culture of continuous improvement. For those of us lucky enough to work in this context, life is easy.

Unfortunately, most of us do not work with these types of organizations. Instead, we work in environments that are unfamiliar with the use of analytics. Environments that struggle to differentiate between intuition and fact, often taking pride in making decisions based on “gut feel.” Environments that, as frustrating as it can be, cannot understand the value that business analytics provides.

This book is written to help those who want to change the environment in which they operate.

Analytics is a multidisciplinary activity: The value from insight comes not from the activity but from the execution. Often, this crosses a variety of departments within an organization. Few analytics groups have responsibility for both the insight creation and the execution of that insight. Because of this, selling the value of analytics is not just an aspirational goal for managers; it is a necessary criterion for success.

For many managers, this can be challenging. Despite broad interest in business analytics as a discipline, there exist few useful sources that help managers with the practicality of getting organizational commitment to using business analytics. This book aims to fill that knowledge gap.

NOTES

1. A. Toffler, Future Shock (New York: Random House, 1970).

2. C. Shannon, “A Mathematical Theory of Communication,” Bell System Technical Journal 27 (July–October 1948): 379–423.

3. J. Manyika, “Hal Varian on How the Web Challenges Managers,” McKinsey Quar­terly (January 2009), www.mckinseyquarterly.com/Hal_Varian_on_how_the_Web_ challenges_managers_2286.

Chapter 2

The Importance of Business Analytics

INTRODUCTION

Business analytics, when successfully executed, plays multiple roles within an organization. It:

Supports strategic planningCreates competitive advantageDelivers tactical value

Everything needs a starting point. While we will get into detail of how to successfully overcome common barriers in later chapters, this chapter is primarily focused on giving a basic grounding as to why business analytics almost inevitably forms a cornerstone strategic enabler.

Within this chapter we will examine the key driver of market success: the ability to develop competitive differentiation. To do this, we will review four different perspectives on how organizations create competitive advantage through strategic planning:

1. The Traditional Perspective: SWOT Analysis