Tom Davenport
Babson College
PBLS Hong Kong
13 July 2010
The Downside
DownsideProblems in Decisions
Decision
D i i processes and
d outcomes
t
are often
ft
bad!
The body of knowledge on what works is often ignored
Decisions take too long, get revisited, involve too many or few
Little measurement/progress/accountability
p g
y
Weak ties between
data/information/knowledge
g inputs
p
and
decisions
getting
g better at decision-making,
g
If were not g
much of ITs work is called into question
Data warehousing, analytics, reports, ERP, knowledge
management, etc.
Analytics at Work
WorkThe Big Picture
Analytical Capability
Organizational Context
Desired Result
Data
Enterprise
p
Leadership
T
Targets
t
Analytical
A
l ti l Culture
C lt
And Business
Processes
Better
Decisions!
Analysts .
Systematic Review
Stage 5
Analytical
Competitors
Stage
g 4
Analytical Companies
Stage 3
Analytical Aspirations
Stage 2
Localized Analytics
Stage
g 1
Analytically Impaired
5
Thomas H. Davenport Analytics at Work
Analytical Competitors
Old Hands, Turnarounds, Born Analytical
Marriott Revenue management
UPS Operations and logistics, then customer
HSBC risk, credit scoring, pricing
Harrah
Harrahss Loyalty and service
Tesco Loyalty and internet groceries
CreditCorp
C ditC
D bt collection
Debt
ll ti
Capital One
One information
information-based
based strategy
strategy
Google page rank, advertising, HR
ISM analytical services
6 | 2010 All Rights Reserved.
Data
Wine Chemistry
Optimized revenue
Smile Frequency
Enterprise
Leadership
In
In God we trust
trust, all others bring data
data
Is your senior
management
team
committed?
Targets
Pick
Pi k a major
j strategic
t t i target,
t
t with
ith a minor
i or ttwo
TD Bank= Customer service and its impact
Harrahs = Loyalty + Service
Google = Page rank/advertising + HR
Analysts
1%
5 10%
5-10%
15-20%
70 80%
70-80%
Analytical Champions--Own
L d analytical
Lead
l ti l iinitiatives
iti ti
Analytical ProfessionalsOwn/Rent
C create
Can
t new algorithms
l ith
Analytical
y
Semi-ProfessionalsOwn/Rent
Can use visual and basic statistical tools,
create simple models
Analytical Amateurs--Own
Can use spreadsheets, use
analytical transactions
Reports
Portals
D i i !
Decisions!
Scorecards
Drill-down
Identify
Inventory
Better
Decisions
Intervene
Institutionalize
Frequenccy Mentioning
0,6
0,5
0,4
0,3
0,2
0,1
0
Type of Intervention
Multiple Interventions:
Better Pricing Decisions at Stanley
Pricing identified as one of four key decision domains
Pricing Center of Excellence established in 2003
Adopted several difference pricing methodologies
Implemented
p
new ppricingg optimization
p
software
Regular Gross Margin Calls for senior managers
Offshore capability gathers competitive pricing data
Some automated pricing systems, e.g., for promotions
Center spreads innovations across Stanley
Result: ggross margin
g from 34% to over 40% in six years
y
Thomas H. Davenport Analytics at Work
Keep in Mind