Getting the Most out of Business Analytics

             The expanding managerial movement to adopt analytics is being spurred by the needs for improved organizational performance and a sharpened competitive edge. Now that the benefits of applying analytics for insights and better decisions are being accepted, the next question is: How should an organization get the maximum yield and benefits from business analytics?

Carlson’s Law: Bottom-Up versus Top-Down Ideas

A trend with applying analytics is a demonstration of “Carlson’s Law,” posited by Curtis Carlson, the CEO of SRI International in Silicon Valley. It states that: “In a world where so many people now have access to education and cheap tools of innovation, innovation that happens from the bottom up tends to be chaotic but smart. Innovation that happens from the top down tends to be orderly but dumb.” As a result, says Carlson, the sweet spot for innovation today is “moving down,” closer to the people, not up, because all the people together are smarter than anyone alone, and all the people now have the tools to invent and collaborate.

A generally accepted way to drive the adoption of analytics is with executive team sponsorship and formally establishing a competency center for analytics. Unfortunately, the conditions are not always right for these. Executives are often distracted with fire-fighting or office politics. And creating a competency center requires foresight and willpower from executives, which can be a limiting factor.

I am a believer in Carlson’s Law because I have observed it in the adoption of enterprise performance management methodologies. These methodologies include strategy maps, balanced scorecards, customer profitability analysis, risk management, and driver-based rolling financial budgets and forecasts. Passionate middle-management champions drive change involving analytics more often compared to executives. Why? Middle managers ask themselves, “How long do we want to perpetuate gaining understanding and making decisions the way we do now – with little or no analytical insight or hypothesis testing?”
Pursuing Unachievable Accomplishments

Leadership does not only exist at the top of the organizational chart. Leadership can be present in individuals below the C-suite positions. This is possible because a key dimension of leadership is the art of getting a group of people to accomplish something that each individual could not do alone. Leadership does not require formal authority and command-and-control behavior.

There are hundreds or maybe even thousands of books and articles about leadership, yet some highly respected people believe there is a shortage of leadership. For example, in “Where Have All the Leaders Gone?” former Chrysler CEO Lee Iacocca describes with anger the sad state of leadership in the U.S. today.

My simple model of leadership has three components:

Care: Followers believe that leaders care about them and their organization.
Trust and hope: Followers believe that supporting a leader will improve things.
Mission: Followers want leaders to answer the question “Where do we want to go?” so that they can help answer “How will we get there?”

Executive leaders must communicate the third component; however, middle-manager champions can exhibit the first two.
Analysts Can be Leaders

Experienced analysts realize that applying analytics is not like searching for a diamond in a coal mine or flogging data until it confesses the truth. Instead, they first speculate that two or more things are related, or that some underlying behavior is driving a pattern to be seen in various data. They apply business analytics more to confirm a hypothesis than to randomly explore. This requires easy and flexible access to data, the ability to manipulate the data, and software to support the process. This is a form of leadership.

Leaders require moral, not physical, courage. An example of physical courage is rescuing someone from a fire. That is noble, but is not leadership. Moral courage is almost the opposite of a rescue. It is doing something not immediately highly valued and potentially perceived as sticking your nose in other’s business. Ultimately it is seen as a helpful contribution to organizational performance improvement.

There are hundreds of examples of applying analytics. One is to identify the most attractive types of customers to retain, grow, win back or acquire. Others involve risk management, warranty claim analysis, credit scoring, demand forecasting, clinical drug trials, insurance claims analysis, distribution route optimization, fraud detection, and retail markdown and assortment planning. The list is endless.

The investigation and discovery of what will align an organization’s actions with the executive team’s strategy for execution will not come from a CEO with a bullhorn or a whip. Better insights and their resulting decisions will come from analytical competency. Analysts can demonstrate leadership with the passion and desire to solve problems and discern answers – the power to know.