Competing on Analytics

by Erin McCune on January 18, 2006

in Caught My Eye

This month's Harvard Business Review is dedicated to decision making. There is an interesting article about companies that tap their analytic prowess a competitive advantage.

A brief summary:

We all know the
power of the killer app. It's not just a support tool; it's a strategic
weapon. Companies questing for killer apps generally focus all their
firepower on the one area that promises to create the greatest
competitive advantage. But a new breed of organization has upped the
stakes: Amazon, Harrah's, Capital One, and the Boston Red Sox have all
dominated their fields by deploying industrial-strength analytics
across a wide variety of activities. At a time when firms in many
industries offer similar products and use comparable technologies,
business processes are among the few remaining points of
differentiation — and analytics competitors wring every last drop of
value from those processes.
Employees hired for their expertise with
numbers or trained to recognize their importance are armed with the
best evidence and the best quantitative tools. As a result, they make
the best decisions. In companies that compete on analytics, senior
executives make it clear–from the top down–that analytics is central
to strategy. Such organizations launch multiple initiatives involving
complex data and statistical analysis, and quantitative activity is
managed at the enterprise (not departmental) level.
In this article,
professor Thomas H. Davenport lays out the characteristics and
practices of these statistical masters and describes some of the very
substantial changes other companies must undergo to compete on
quantitative turf. As one would expect, the transformation requires a
significant investment in technology, the accumulation of massive
stores of data, and the formulation of companywide strategies for
managing the data. But, at least as important, it also requires
executives' vocal, unswerving commitment and willingness to change the
way employees think, work, and are treated.

"Competing on Analytics"
by Thomas H Davenport
Harvard Business Review, January 2006

Reprint #R0601H
Available (for purchase) from HBR's website.

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