Intelligent Economy

Tom Davenport's doing a free webinar titled: Competing On Analytics: Move Faster, Accomplish More, and Avoid Mistakes by Learning From The Best on October 31.

The agenda:

- What data-driven marketing is (and isn't)
- How marketing visionaries are using analytics for competitive advantage
- What specific tactics these early adopters believe are essential to their success (and what they'd do differently next time)
- How you can personally succeed as a marketer during these tumultuous times

What are you waiting for? Go sign up!

Posted by Christian Sarkar at 07:52 PM | Permalink | Comments (0) | TrackBacks (0)

The Economist Intelligence Unit and Accenture researched the key factors behind high performance in finance and accounting functions.

While the survey results make sense, what does not is Accenture's take on what the survey means.

Their findings:

Over half of the respondents felt that the high-performance finance function was defined by an ethos of service and strategy. Fifty-nine percent included the creation of a service-oriented culture; 55 percent included the development of a strong capacity for strategic analysis; and 53 percent expressed a belief that there should be a clear linkage between the work of the finance department and the overall company strategy.

Significantly, these attributes are primarily outward facing. Inward-looking attributes—to do with the composition of the finance function itself—were not seen as contributing explicitly to high performance. No fewer than 69 percent of respondents felt that enabling senior management to make the best business decisions was the most important role of the finance function. But the traditional, tactical role of finance comes through strongly as well—68 percent felt that managing cash flow efficiently was of high importance in the success of the business.

Perhaps the most notable characteristic is the gap between the ideal and performance:

- Only 14 percent rated finance’s contribution to the attainment of organizational strategy highly, with just under half (45 percent) giving a “good” rating.

- While 69 percent saw enabling better decision-making by senior management as a key finance goal, only 37 percent saw actual performance as good.

- Only 19 percent rate their finance function’s management of risk as good.

Cash flow management, while ranked as important by 68 percent, is rated as good by only 45 percent.

One reason for this lack of performance is the reliance on traditional measurements—if measurements are used at all. Measurements oriented towards strategic goals remain the exception—for example, only 22 percent conduct user surveys to measure internal satisfaction with the finance department.

Barriers to progress include cultural resistance to change and the lack of clearly defined metrics for directing improvement. While it is agreed that CFOs must take the lead in overcoming the barriers, there is no consensus on what their ideal skill set should be.

The conclusion?

According to Accenture:
For CFOs, the message is clear: outsourcing finance is one route to high performance.

This is NOT what the survey said.

Rather, this is Accenture's view of how companies can become better at strategy- outsource the day-to-day work and focus on strategic finance.

But what if the next strategic advantage comes from analysing the day-to-day intelligence, looking for early trends, customer preferences, and spending patterns?

What if you had to "compete on analytics" ?

What Accenture should do next is hire the EIU and survey companies that have already outsourced their operational finance functions to see if there is a correlation between outsourcing and getting more strategic.

I'm willing to bet there won't be a significant positive correlation...

And what qualities do you want in your new CFO? You want them to think strategically and critically. You want them to question reports like this one.

Read the full "report" here>>

Posted by Christian Sarkar at 10:56 AM | Permalink | Comments (1) | TrackBacks (0)

Interesting stuff uncovered by the research folks at CFO magazine.

They sought to explore finance executives' views on their ability to report and analyze financial information. What do their companies do well? Which stakeholders are well- or ill-served with information and analysis tools? And what barriers do companies face when trying to improve their financial reporting and analysis capabilities?

CFO Research executed an electronic survey to readers of CFO magazine in November 2005. They gathered a total of 164 responses from senior finance executives — more than half from companies with $1 billion or more in annual revenue.

The respondents' titles breakdown:

- chief financial officer (30 percent),
- vice president or director of finance (33 percent)
- controller (16 percent)

Here are two snapshots of what they uncovered:

and

Looks like the intelligent economy still has a ways to go. A majority of survey respondents say their processes and systems to allow what-if scenario analysis and to give end users flexible desktop access to additional information needed improvement.

Read the report here >>

Posted by Christian Sarkar at 01:54 AM | Permalink | Comments (0) | TrackBacks (0)

Employees in finance, sales, marketing, and customer support are the leading users of business intelligence applications, according to a new study by Ventana Research. The study suggests that customer-focused initiatives and operations are a key driver of today's analytical investments.

The research, sponsored by CMP Publications and Siebel Systems, was based on the responses of 437 executives -- 73% of whom were in IT organizations while 27% had line-of-business roles. "The main features respondents look for in BI solutions are simplified integration of data and metadata across multiple BI applications and central management of metadata," states Eric Rogge is VP and research director at Ventana Research in Optimize Magazine. "Stovepiped BI applications aren't acceptable. Companies stitch various BI applications together to weave larger information fabrics, creating a seamless, consistent view of the customer and other key business entities."

Further, he pointed to a growing interest in Operational BI. " It's not designed to support strategic planning, but to gather and analyze operational BI and deliver this actionable information to front-line workers," he explains. "Operational BI enhances corporate performance by improving day-to-day, minute-by-minute decision making and the performance of critical business processes."

The trouble is that that too many Operational BI applications are "addressed with a task-specific application to support a defined set of decisions. Unlike general-purpose BI tools used by business analysts, these point-solutions historically were created one at a time by in-house development teams, which often can't keep up with the organization's burgeoning need for information."

The demand is attracting vendors, of course. They promise to put together more comprehensive packaged applications -- some of which are already being deployed. Unfortunately, not everyone's happy with their deployment experiences. "Areas for improvement cited by study participants include shorter time to deploy, more interactivity, faster query performance, better data integration from multiple sources, and more complete customer views," noted Rogge. "Deployment times varied: About half of the respondents say it took longer than a year to deploy vendor-developed BI applications. A third said the deployments were available in less than one year."

Posted by Britton Manasco at 09:03 PM | Permalink | Comments (0) | TrackBacks (0)

I should've posted this a while back, but forgot. Hey, I'm human. That said, let's explore what all the fuss was about...

Trendpointe's Roger Meyer reports on the recent Competing on Analytics Symposium presented by Harvard Business School Press. He says that BI is evolving- from technology to strategy to brand attribute!

"The net takeaway of the symposium - aside from the lesson that if you can afford to hold an affair at the Metropolitan Club, you should - is that analytics can make a difference. The big remaining question is this: How far into the organization can you reasonably expect an analytics strategy to penetrate before running into a wall of resistance from people who just don't get it?"

The "Quick Takes" sidebar of Meyer's article contains a gem from Irving "Bubba" Tyler, the former CIO of Quaker Chemical: "I do have a problem with companies that miss the opportunity to use BI as part of their everyday process," he said. "You don't have to be a rocket scientist to contribute small but important incremental improvements. Every individual in a company is already making decisions."

Jim Davis, the chief marketing officer of SAS tells Meyer not to expect "analytics to march "out of the backroom and into the boardroom" in the next couple of months. "But the strategic power of business intelligence is more and more in the forefront of executive thinking -- even if they don't fully understand it."

Davis' view is that "we need to push out information to the greatest number of users in an organization and create a culture that bases strategy on fact-based decisioning." He suggests the creation of Business Intelligence Competency Centers which function as a central location and collective memory for driving and supporting an enterprise-wide information strategy, coordinating current efforts, and ensuring that information and best practices are shared throughout the organization.

Like any initiative requiring behavioral change, BI "implementations" are going to succeed or fail based on the human factor. As Laurence Haughton might say, you gotta get around the CAVE people.

BTW, another report on the symposium comes to us from the good people at BI Review. Read all about how P&G got analytics!

Posted by Christian Sarkar at 04:48 PM | Permalink | Comments (0) | TrackBacks (0)

One company that is certainly competing on analytics these days is Britain's supermarket giant, Tesco. The company gathers most of its data from its successful Clubcard. With 12 million cards in use in the UK, Tesco can closely watch what its shoppers are purchasing. It then explores linkages between the products people presently buy and the ones they might be persuaded to buy next. “We believe we have one of the largest databases anywhere in the world,” says Martin Hayward of dunnhumby, which handles data management for the company.

Now, Tesco is bringing these capabilities to America. The company plans to launch new stores on the U.S. West Coast in 2007 with a convenience-store format and intends to annually invest £250 million ($436.1 million) on the expansion. In fact, half of Tesco's shelf space is now outside the UK. It has already set up shop in China and other emerging market.

The interesting thing to watch, however, is how the company will use analytics to determine how to localize, not merely globalize, its offerings. As Bain consultants Darrell Rigby and Paul Rogers pointed out this week in the Wall Street Journal (subscription required), Tesco is among the retailers that now recognize "regional market share is even more important than national scale if they are to grow profitably. An industry built on the principle that success requires standardization is now widely adopting strategies of localization."

Why is that? As the writers put it:

"Local communities are growing more diverse in age, wealth, ethnicity and lifestyle. Moreover, many locales are saturated with big-box outlets and customers are rebelling...In response, some leading retailers are customizing their offerings to appeal to neighborhood tastes and needs. It hinges on getting the balance right: Too much localization can cause costs to spike; too much standardization leads to stagnation. Industry leaders have focused on understanding which elements of a business should be considered for localization, how costly they are to customize, and how much impact they'll have from store to store."

The authors point out that retailers can and should now leverage their knowledge -- drawn from shopper cards and other information gathering resources -- to better understand local tastes and desires -- just as Tesco has done in the UK and elsewhere. "Downtown Tesco Metro stores, for example, often provide sandwiches at lunchtime, and create prepared dinner meals for customers to pick up on their way home," they explain. "The smaller Tesco Express store concept aims to appeal to convenience shoppers with a mix of groceries and household items. No surprise, then, that Tesco Express provides a model for the American convenience stores that Tesco plans to open in 2007."

WalMart, which has experienced the real brunt of the Big Box Backlash also is onboard with this localization strategy. It calls its new initiative "Store of the Community," tailoring formats, products and other services to local clientele. For example, readymade meals are provided at stores near office parks; pharmacies are expanded at stores near hospitals.

"Through its Retail Link program, Wal-Mart works with suppliers to tailor store merchandise with precision," the Bain consultants write. "Retail Link provides both local Wal-Mart managers and vendors with a two-year history of every item's daily sales." Explaining the analytical aspects of Retail Link:

It then creates maps of local customer demand, indicating which merchandise should be stocked when and where. For example, Wal-Mart stocks about 60 types of canned chili in the U.S. but carries only three nationwide. The rest are allocated according to local tastes. Five years ago, Wal-Mart used just five planograms -- diagrams showing how and where products should be placed on retail shelves -- to adapt its soup selection to local preferences. Today, Wal-Mart and its suppliers use more than 200 finely tuned planograms and have raised soup's growth rate by several points.

As Rigby and Rogers conclude, such retail localization leads to "a host of operational advantages -- higher sales productivity, fewer markdowns and faster inventory turns, among others. Just as meaningful, localization has kicked off a new round of innovation among retailers, by forcing executives and store managers to ask, "What if each store was our only store?" Indeed, the growing momentum of localization is a counterpoint to the assumption that the world will be packed with indistinguishable big boxes selling the same goods and services to everyone."

Posted by Britton Manasco at 09:04 AM | Permalink | Comments (0) | TrackBacks (0)

The market for online travel and reservations is about as competitive as a market can be. How does one differentiate and grow? Well, Travelocity -- which is owned by Sabre Holdings and also happens to be the home of the gnome -- expects to grow 40% this year. One key element of its smart growth strategy: business intelligence.

Mamie Jones, SVP of strategic sourcing at Travelocity, tells Optimize Magazine that intelligence-driven actions have dramatically enhanced its marketing and merchandising. As she explains, "[W]e know that as we increase the personalization of our marketing and target campaigns to be more relevant to customers, booking rates can exceed as much as eight or 12 times the standard methods [of outreach]. Our data warehouse plays a key role in assuring that our merchandising efforts pay off."

Over the coming year, the company intends to move to "an active data warehouse" that enables much more real-time data gathering and action. "It will help us make better, more accurate, and automated business decisions and offer more timely updates to consumers. We want to use data to improve our products and learn more about which promotions, experiences, and services customers find valuable," she adds. "Our merchandising objective is to increase customer value and offer a richer online experience."

Finally, she contends that Travelocity's investments in its Teradata data warehouse platform competitively differentiate the company to some degree. "We think we're out in front on this," she concludes. "Having current data will help us retain customers by building loyalty and satisfaction. It also leads to better predictive modeling."

That should get the attention of Priceline, Expedia and Orbitz -- not to mention the airlines themselves. If it doesn't, they just might fall right out of the sky.

Posted by Britton Manasco at 05:10 PM | Permalink | Comments (0) | TrackBacks (0)

From time to time, we're going to take a look at what various vendors are up to in the Intelligent Economy.

In this case we'll take a look at HP's vision for Business Intelligence.

Yale Tankus spells it out for us in his blog. It's all about "synchronizing strategy & execution."

But how?

If you look beyond the sales-talk, you'll see there is flesh on the bones. HP has built an enterprise management framework around "process aware" business intelligence. Admittedly it's still somewhat IT-centric, but they're headed in the right direction, with partnerships with SAS, Cognos, and Hyperion among others.

What's going to tie all of this together in a manageable way? SOA. And according to HP, their SOA Manager product.

Let's watch the fun. The first step will be getting HP consulting up to speed on SOA. The challenge is not in the vision, but in the execution. The first integrator to get their talent base up to snuff is going to win this game.

Are you listening, IBM Global Services?

Posted by Christian Sarkar at 12:17 PM | Permalink | Comments (0) | TrackBacks (0)

Tom Davenport gives us 10 characteristics of businesses that compete on analytics. Can you think of more?

Tell us about it, or better, post them on his blog!

Posted by Christian Sarkar at 12:10 PM | Permalink | Comments (0) | TrackBacks (0)

Here's some "intelligent economy" thinking from the folks at MercerMC.

The article is called "Uncovering the Hidden Drivers of Demand" and presents a good example of how a data-driven business model works to maximize profit.

Here's how they describe it:

"It's not enough to know what makes demand happen. Executives also need to know the variable costs of acting on that information so that they can determine whether a given move will make or lose money. Linking the information about each demand driver directly to the variable costs of the business answers questions such as: If the brand matters most, where should we invest to improve brand equity and what will it cost? If external influencers matter, should we shift the marketing mix away from golf tournaments and toward better relations with trade journalists? If customer acquisition cost determines most of the lifetime value of that customer, how do we adjust our channel mix to ensure a profitable relationship? If customer service matters, what exactly merits investment--a shorter wait on the phone, the knowledge of call center representatives, or the speed of technician response? If the customer is asking for 24-hour delivery of a turbine, what are the economic implications?"

Decisions are based on data and "profound knowledge" (hat tip to the late, great Deming) to embed the key value drivers and business economics data into a graphical representation of a company's business model, an Interactive Strategy Model, they call it.

Here's a "dashboard" of how this might look:

Doesn't that make you want to read the whole article?

Posted by Christian Sarkar at 11:27 PM | Permalink | Comments (0) | TrackBacks (0)

Is "competing on analytics" a management innovation worthy of Gary Hamel's "standards"?

Let's see... in his article "The Why, What, and How of Management Innovation," Hamel says:

"A management innovation creates long-lasting advantage when it meets at least one of three conditions:

1. It is based on a novel principle that challenges the orthodoxy
2. it is systemic, involving a range of processes and methods
3. it is part of a program of invention, where progress compounds over time"

Check, check, check.

Looks like "competing on analytics" meets all three conditions.

Hamel lists a dozen of the most noteworthy management innovations from 1900 to 2000:

1. Scientific management (time and motion studies)
2. Cost accounting and variance analysis
3. The commercial research laboratory (the industrialization of science)
4. ROI analysis and capital budgeting
5. Brand management
6. Large-scale project management
7. Divisionalization
8. Leadership development
9. Industry consortia (multicompany collaborative structures)
10. Radical decentralization (self-organization)
11. Formalized strategic analysis
12. Employee-driven problem solving

Losing out are the following:

- Skunk Works
- account management
- business process reengineering
- employee stock ownership plans.

Says Hamel: "There are more recent innovations that appear quite promising, such as knowledge management, open source development, and internal markets, but it’s too early to assess their lasting impact on the practice of management."

Let's add "competing on analytics" to the list.

The Intelligent Economy is, of course, not just about management innovation. Rather, it's about the process of continuous innovation - sometimes incremental, sometimes radical - with a fundamental focus on results. Not simply measurement, but the right measurements, often in real time... Decisions made not just on data, but on data models (David Maister has one we'll ask him to share with us one of these days).

Now let's apply this notion (competing on analytics) to every field, from branding to business activity management, from communities of practice to talent development, from physical (geographic) clusters to online global ecosystems.

Tom Davenport, you have a winner.

Posted by Christian Sarkar at 10:03 PM | Permalink | Comments (0) | TrackBacks (0)