Strategic Analytics

Yesterday I presented at WCBF's Global Lean Six Sigma Summit, discussing of the importance of strategic analytics (for slides visit my personal homepage). Lean Six Sigma, as you may know, is a data driven framework for reducing variation and defects in a process. The strategic focus on analytics is a concept that Tom Davenport and Jeanne Harris have been advocating for years. Many companies consider themselves "strategically focused" on analytics. In my view strategic focus is not being bogged down by metrics but focus on the strategic metrics. This is akin to Lean Six Sigma's motto: its not about doing things right but rather doing the right things right. Thomas Davenport offers a maturity model (similar to the project majurity model or CMMI) that places at the top of the pyramid companies whose large-scale ambition, senior management commitment, enterprise-wide use of analytics and ability to drive value out of distinctive capability offered by analytics has peaked. He considers these companies analytical competitors as they have turned analytics into a unique comptetitive advantage. Netflix is one such competitor:

They use analytics in their movie recommendation engine. They use analytics to throttle their fulfillment (a practice in which infrequent customers get priority over heavy users because they are more profitable). Netflix uses analytics to predict the commercial success of a film released to DVD to determine the number of copies they will need to license use for. Evidence to their strategic focus on analytics is the fact they awarded $1m dollars (through the Netflix prize) to the group that would develop a recommendation algorhythm that would improve their results by 10%. When was the last time your company offered the public $1m to the first individual(s) who would improve your product performance by 10%?

Google is another obivious analytical competitor as it is core to their financial success in keyword advertising. The focus on data is so strong that when Google's renowned designer, Douglas Bowman left the company 6 months ago he claimed the company's reliance on data was so extreme they would test the effect of 41 shades of blue to determine the impact on user searches.

Irene Au, director of user experience at Google says:

“Search is such a fragile interface. It’s humbling to see how the slightest
changes in design, just pixel-level changes or barely perceptible changes to
colours, can have such a dramatic impact on usage and revenue.”

Is your company an analytical competitor?