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Insights

Decision-making Leveraging Technology


- Komal Jain
In the five decades that management and business literature has evolved, numerous studies have been conducted on
what really separates successful companies from the rest. These studies highlight multiple reasons for their success
ranging from the presence of a visionary leader, ability of an organization to adapt to ever-changing conditions and
seizing opportunities at the right time. However, one of the most important factors that stands out is the ability to make
right decisions on a consistent basis.
According to Jim Collins, the author of best-selling book Good to Great,
Breakthrough results come from a series of good decisions diligently executed and accumulated on top of one
another. Great companies make many more good decisions and these decisions are based on brutal facts.
Given that making the right decisions consistently separates the leaders from the rest of the pack, the real question for any
business leader is how can information, across the organization, be leveraged to make the right business decisions and
create differentiation for the organization.
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On the one hand, we have seen many significant technological
changes in terms of innovation ranging from widespread
availability of mobile Internet, across both developed and
developing countries, to enterprise mobility, availability of
cheap computing power through Cloud and significant growth
in the arenas of Big Data and analytics.
On the other hand, companies can capture a great volume
of structured and unstructured data from multiple sources
such as customer searches, preferences, order history, social
networking sites, online forums, call records, photo archives,
video archives, blogs and such like. According to some
estimates, Wal-Mart handles more than 1 million customer
transactions every hour, which are imported into databases
that are estimated to contain more than 2.5 petabytes of data
the equivalent of 167 times the information contained in all
the books in the US Library of Congress! Facebook handles
more than 40 billion photos from its user base. In terms of
cheap computing power, decoding the human genome
originally took 10 years to process, and now it can be done
in a week at significantly lower costs. All these changes have
provided companies the opportunity to leverage technology
and data to obtain insights that, in turn, help them improve
customer satisfaction, identify opportunities for new product
introduction, improve customer conversion rates, focus on
premium customers. Here are some interesting examples:
Here are some more tales from the business side.
Amazon
The global leader in e-commerce was one of the first few
companies to customize its website and provide personalized
recommendations on the basis of users buying behavior,
search and browsing history. This personalized experience
enabled Amazon to maintain customer stickiness and led
to Amazons fast growth. Now, Amazon has made pricing
extremely dynamic by leveraging yield management software.
The company can analyze a large volume of data gathered from
multiple sources including competitive pricing information.
Today, Amazon can very quickly change its product pricing
and offer best deals to its customers in a matter of minutes -
something that would take a traditional retailer dayseven
weeks.
Google
Each week, millions of users around the world search for health
information online. As part of Google Flu Trends, Google
has diagnosed a close relationship between the number
of people searching for flu-related topics and the number
of people actually exhibiting symptoms of flu. Google Flu
Trends currently reaches a number of countries around the
world and is updated every day. For epidemiologists, this is
an exciting development, because early detection of a disease
outbreak can reduce the number of people affected. Such real-
time estimates may enable public health officials and health
professionals to improve response to seasonal epidemics and
pandemics.
Capital One
Capital One leverages its advanced data analytics expertise
to discover, target and serve its most profitable customers;
it runs more than 300 tests every day towards this end. The
company effectively uses data on interest rates, rollover
incentives, special promotions, and such like to decrease
the cost of customer acquisition and increase its customer
retention rate. According to a study, Capital One increased its
customer retention by 87% and lowered the cost of acquiring
a new customer by 83% over a period of 2-3 years by using
advanced data analytics.
Marriott
This leading hospitality organization employs fact-based
decision-making to optimize its pricing model and increase
occupancy levels. Marriotts revenue-management system,
One Yield, identifies its most profitable customers through its
loyalty program and targets special marketing offers at them.
Marriott realized an increase in revenue from leisure customers
and an annual profit increase of $86 million. Marriott attributes
these results, in part, to One Yield.
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As is evident from these instances, companies are constantly
mining large volumes of data to obtain deeper insights and
make improvements across a wide range of operations. If
you consider these examples, few common themes emerge:
1) Availability of Relevant Data and Cheap Computing Power
The availability of relevant data and the organizations ability
to capture it economically is primary and most significant.
The advent of sensors has facilitated data availability.
Similarly, Internet forums and social media platforms, like
Facebook and Twitter, have turned into invaluable data
sources of customer preferences and buying behavior.
In addition, open source frameworks such as Apache
Hadoop have enabled companies to process petabytes
of information cost effectively. This combination of
information being readily available and low cost computing
power has accelerated the pace of data analytics.
2) Use of Right Skills and Processes
Many companies spend millions of dollars on the latest
software and hardware to get them the best data analytics
engines. Having the right processes and the right talent is
equally important to analyze aggregated data and turn it
into actionable results. At times, not having the right talent
(core skills like data scientists) could potentially slow the
complete program.
3) Close Monitoring of the Feedback Loop
A closely monitored feedback loop is important to fine-tune
models and improve the accuracy of data-based analysis,
which becomes significant when companies are trying to
correlate multiple factors impacting their environment.
That being said, technology alone cant do it all.
There are numerous examples of companies having invested
millions of dollars in the latest technology and still falling short
of accurately forecasting market needs. When it comes to
path-breaking innovation or new market entry, data analytics
can often fall short. Henry Ford once said, If I had asked my
customers what they wanted, they would have said faster
horses! More recent, is the example of Apples launch of
the iPod and iTunes - online music store. While conventional
research predicted that such a product would fail as customers
download free music from the Internet and would be unwilling
to pay for music, Apple co-founder Steve Jobs ignored the
findings and said: It isnt the consumers job to know what she
want. That is Apples job. Our job is to figure out what theyre
going to want before they do.
iPod and iTunes went on to completely revolutionize the music
industry by providing consumers a viable option to counter
pirated music. Its clear that sometimes it is essential to create
a vision of the future and build the required product lines,
ignoring historical data if need be. While prior data analysis
can provide some insights, it takes vision to conceptualize
something new.
Technology has its own limitations when it comes to identifying
the sources of long-term business impact. What can companies
do to overcome this? There is merit in focusing on the following:
Asking the right questions
Companies are succeeding in leveraging big data not only
because they have the right tools, but also because they
are asking the right questions. In every company, it is the
leaderships responsibility to define vision, identify success
parameters and set the right priorities. Business analytics
cannot replace the power of human vision and insight. Efficient
business leaders are invaluable assets to the company
because it is they who provide vision, spot great opportunities,
understand market trends, and motivate both consumers and
employees to embrace change.
Effective decision making
Successful organizations provide decision makers the right
information at the right time. Business analytics and big data
can provide insights at a much faster pace than ever before.
The organization structure should be flexible and agile to
harness these opportunities. Leaders need to open their minds
to out-of-the-box ideas and insights. They need to consciously
look at minimizing the Not-Invented-Here Syndrome.
Openness to change
Business analytics calls for change in the decision making
culture of companies. The first question a data-driven
organization asks itself is What do we know and what do
we not? and not What do you think? Becoming such an
organization requires a company to move from a culture of
relying on raw instinct to adopting a very data-centric view.
Leaders should promote an unbiased, methodical approach
towards data analytics and right decision making; they must
avoid focusing on what cannot be done and instead make a
conscious effort to emphasize what can be done to realize
the companys vision.
Avoiding selective use of data
Organizations need to break the bad habit of pretending to be
more data-driven than they actually are. Many unnecessarily
spice up presentations with a lot of data in support of decisions
that have already been made. Others make decisions and
solicit the help of consultants to validate or support them.
Economic cost
Economic cost is an important factor in defining technology
investments. Companies go to great lengths to build the best
decision-making engines possible, spending millions of dollars
in the process. The availability of technology does not imply that
it should be used. Apart from considering the cost of software,
services, hardware, and ongoing maintaining costs, companies
also need to consider the management time required for such
initiatives. They should define the level of information required
for decision making for instance, is it a broad trend or granular
customer information thats needed?
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In summary
The evidence is clear: Effective understanding
of data leads to better decisions. Leaders
of successful organizations are already
embracing this mindset to create competitive
differentiation. They are combining data with
vision and foresight, and changing the structure
and culture of their organizations to become
truly data-centric. And hugely successful.
REFERENCES




Big Data Management Revolution in
HBR
NY times article
Competing On Analytics by Thomas H.
Davenport and Jeanne G. Harris.
http://www.google.org/flutrends/
About the Author
Komal Jain
Associate Vice President and Head of Semiconductor Sector - North America, Infosys
Komal joined the company in June 1998 and since then has played a variety of leadership roles in client services,
sales & operations. Komal has been instrumental in helping clients develop and implement their Business Transformation
programs, Global Sourcing strategy and IT initiatives. Komal participates in the steering committees of many of the
key client relationships.
Komal holds a Bachelors degree in Electronics Engineering from Kurukshetra University and an MBA from the Indian
Institute of Management, Kolkata. Komal also is a marathon runner and lives in the Dallas, TX.
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