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Business Analytics - Gut Feeling to Competitive Advantage

Every organization has some decision capability and engine running internally that works for their specific context. One may call that engine as "Gut Feeling or the individual heroics", whereas few organizations try balancing "Gut Feeling" with some fact based inputs. However, the smarter organizations which stand apart and outpace their competitors eliminate the "Gut Feeling" culture and entirely transform themselves into Analytical organizations where every decision is backed by real facts and numbers, and every strategic decision gets challanged with an optmizing solution.

Such organizations have over a period of time evolved thru those stages of "Gut Feeling" to "Competitive Advantage" class of organizations, and Analytics has been the backbone for their success. Banking leverages Analytics to detect frauds, portfolio management, campaign management and risk management. Retail leverages Analytics to do cross-sell, optimized inventory in stores and warehouses, customer segmentation based discounting, catalogues management of their products, optmized quote-to-cash & order-to-cash cycles & effective vendor management. Manufacturing leverages Analytics for demand forecasting thereby reducing inventories, and shorter cash-to-cash cycles.

How should one approach towards being an Analytical Organzation?
The answer lies in the awareness/understanding of what the the biggest challanges for their organization exist today, e.g. customer attrition, profitability & revenue decline, competitors making inroads into business etc. The 3 Step approach to adopt Analytics into the organization is outlined below:

Step 1 - With the current challanges understanding, building a business case by providing numbers and the impact each of those challanges are making to the organization's overall profitability and growth. The simplest of example could be "We are losing our existing customer base by 5% every year, and out of those 5% there are over 40% of the top customers which contribute to 75% of the revenues for organization." Reasons can be multi-fold and each one if enumerated along with facts will help senior executive management accept and approve the business case.

Step 2 - Start small with localized approach and build analytical solutions for either a department or business process which in turn causes a major impact on the revenue stream of the organization. Enlist the issues which this business is not able to resolve, and provide right facts for taking effective decisions - tie those details with the objectives for this business process. There could be 2 outcomes of this exercise
a) Help figure out gaps in the facts being pushed in and out of the process touch points, can be data quality issues but process is still robust.
b) It's time to re-visit and refine the business process to the changing needs of organization and the economic changes demanding process change.

In either of the two outcomes the established fact is that it's hampering the visibility and effective decision making capability.

Step 3 - Once with Step 2 we are convinced that the analytical solution embedding in the business process works in a consistent manner, the same model has to be spread across to other departments or business processes. One important fact here would be to build priorities and plan accordingly, target bigger impact processes/deparments which have greater influence in the overall profitability, customer retention, revenue etc. This will help build a consistent and proven business analytical model across the organization.

At a more granular level for those 3 steps one would definitely need to look at following as well:

  • Enhance and build the skills/capability within organization both at Technical IT levels and Business Analysts levels
  • Data Integration strategies to provide clean, consistent and integrated data
  • Get the right tools and technology in place by doing appropriate vendor analysis and comparisions - those that fit the organization needs, and yet can scale for future needs
  • Relook at business processes/strategies is key, as competition and market situations will constantly keep changing
  • Setup enterprise level data quality, data management (governance being the key) principles to avoid any surprises

Thus, the maturity from a "Gut feel" organization to "Leverage Analytics for Competitive Advantage" organization is a gradual process and should be started at any point in organization, certainly well before your competitors do. We have grown past the age of accepting Analytics as key differentiator in the market today between Failed/Failing v/s Smarter organizations - its time to implement and reap the benefits.

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