Tuesday, October 30, 2012

Viewpoint: Big data and big analytics means better business

Decision-making is the essence of management.

Careers and companies are built or buried by the judgments of a few, even a single individual. Decisions mould company strategy - which markets to enter or what products to develop, for example - and impact company resources.

Today, as the world globalises and the pace of change quickens, managers must make high-pressure decisions faster.

In fact, 74% of the global executives SAS recently surveyed with the Harvard Business Review stated they "feel under pressure to achieve results in less time than ever before".

Savvy managers turn to analysing data - on their customers, operations, risk and more - for guidance.

They are bringing ever-larger amounts of "big data" - from traditional databases as well as unstructured text from call-centre logs, social media and more - into their decision-making to achieve competitive insight.

Like the amount of data that organisations store, the value placed on data by firms has grown rapidly. According to new research by Dynamic Markets, for example, one in five of the UK's largest companies now quantify the value of corporate data on their balance sheets.

Better decisions

Today's mobile phone companies exemplify using analytics to drive decisions.

An emerging analytical concept in the industry is customer link analysis, which helps determine an individual customer's influence among his or her peers, friends and community.

Customer link analysis works by examining the type, length, frequency and timing of inbound and outbound calls.

By analysing the call data, phone companies can visualize social networks of callers to identify the most influential.

The companies can use this analytical insight to better target these influencers with focused marketing and retention efforts, making better decisions about which offers to make to which customers. Entire marketing budgets are now based on this type of analytical insight.

SAS recently examined the acceptance of analytical decision-making in businesses worldwide.

Working with the Harvard Business Review's analytic services team, we surveyed 700 senior executives for a study titled: The Evolution of Decision-Making: How Leading Organisations Are Adopting a Data-Driven Culture.

The findings show that acceptance of analytics has grown and is delivering tangible improvements. Almost three-quarters of respondents said their division or department relies on data to make decisions today; 40% percent felt that analytics have improved the importance and standing of their functional areas.

One group of respondents stood apart in its use of data to inform decisions. This group has integrated analytics across the whole company, and is characterised by:

A data-based decision-making culture.
Decision-making transparency.
Company-wide decision-making processes.
Emphasis on managerial insights as a supplement to data.
Continual refinement and testing of new ideas.
Eleven percent of the responding organisations have integrated analytics across the entire organisation, rather than using it ad-hoc.

What, why, how

Strikingly, among all the benefits of analytics, respondents most frequently cited faster decision-making.

"Analytics accelerates our decisions because everyone is now looking at the same reality," said Filippo Passerini, Procter & Gamble's chief information officer.

"Decisions come down to 'what,' 'why' and 'how'," he added.


It is a challenge, Paul Kent says, to balance data-drive decisions with traditional gut instinct
"Many organisations spent a lot of time debating the 'what' because different people had different data. Once everyone has the same version of truth, you can shift to the how—and you are able to do more and more, better and better."

While moving beyond instinct alone is definitely gaining acceptance, the research shows that significant challenges remain:

37% of respondents said their managers relied on "gut feeling" rather than data and analytics to make decisions.
44% think their organisations have little or no transparency into how key decisions are made.
One-third of respondents believe their companies lack the skills to derive the benefits of analytics.
A quarter have no formal decision-making processes.
Weighing quantitative insights against the experienced judgment of managers is difficult.

Skills shortage

Michael Pierce, customer service manager at Bosch Security Systems, says: "Personally, I run with analysis first, and during the research I will listen to my intuition. When my gut does not agree with my decisions - and all analytics show it is the correct one - I pay closer attention to the results."

Managers see that making the right decision in a timely manner is a matter of balancing data analysis with judgment and experience, not exclusively relying on one method over the other.

As the volume, variety and velocity of data increase, opportunities for firms that embed analytical insights into decision-making will continue to grow.

But so too will the challenges. There is a global analytics skills shortage, with too few students graduating with degrees in math, science and technology.

The effects are already being felt in the workplace: 52% of managers surveyed said they needed to re-train to be able to use analytics in their decision making. Furthermore, one-third of respondents couldn't find the right skills mix at all.

As companies compete globally and technological change accelerates, decision-making windows become ever smaller. Businesses need to instil a culture of data-driven decisions, supported by the people, processes and technology - especially analytics - to ensure success.

Otherwise, they'll be left merely guessing.

Paul Kent is the Vice President of Big Data at SAS, a leading business intelligence and analytics firm.
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