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Analytics Magazine

Viewpoint: Embracing analytics a rush to judgment?

November/December 2013

Gary CokinsBy Gary Cokins

Allow me to take a contrarian view to the rapid interest in applying analytics. Have we seen this kind of story before? Is there a rush to judgment that analytics is the elusive cure-all magic potion or panacea that management has been seeking to achieve extraordinary high performance?

Don’t misinterpret me. I am a big advocate of analytics and excited that it is enjoying a big buzz. My 1971 undergraduate degree was in operations research, so I have been waiting more than 40 years to witness attention and attraction to analytics as a vital capability and discipline. However, during my career I have observed past management fads appear and managers’ desire to jump on new bandwagons only to see them fade away as a temporary craze rather than to have sustained use.

Some journalists are already questioning one big aspect of analytics: big data. For example, a recent New York Times article was titled, “Is Big Data an Economic Big Dud?” [1].

Management Loves Fads

Imagine if we reviewed the titles and content of New York Times best-selling business books or Harvard Business Review articles from the last 20 years. For how many of them might we react with a chuckle and say, “Oh, that one”? Do you remember any of these that rose in prominence only to become relatively obscure? (Warning: some advocates or book authors may be offended.):

  • Quality circles (for total quality management, TQM)
  • One-minute managing
  • Business process reengineering (BPR)
  • Management by objectives (MBOs)
  • Six Sigma
  • Matrix management
  • Core competency
  • Intrapreneuring
  • Search for excellence
  • Best practices
  • Management by walking around (MBWA)

This is not to say that the practices listed above served no purpose. They did introduce useful ideas, but they did not live up to their promises as they ascended. Many organizations jump from improvement program to program hoping that each new one may provide that big yet elusive competitive edge like a magic pill only to discover with hindsight it was just a method du jour. Most managers would acknowledge that pulling one lever for improvement rarely results in a substantial change – particularly a long-term sustained change. And the business media has not helped. They hype what is fashionable at the time in large part because that is their role.

Is Analytics a Temporary Fad or a Real Deal?

For many reasons my bet is that analytics is a keeper with staying power. The standard reasons from advocates involve the recent recognition of big data characterized with its three “Vs” of volume, velocity and variety. Another reason is that quantitative analysis has demonstrated benefits in non-business areas like medicine or oil and gas exploration.

I believe there are other reasons that analytics will be embraced. One is that the obvious low-hanging fruit opportunities for improvement have already been picked. Organizations have to be more clever about identifying chances to gain a competitive edge. Another reason is that gut feel and intuition are no longer sufficient given the increasing complexity, volatility and uncertainty involved in managing an enterprise. Fact-based information is needed. Another reason is the computing power, data and software is now available to dig deeper to gain insight and foresight.

A final reason is that the margin for decision errors is getting slimmer. In the past an organization could make a few bad decisions and survive. There were usually enough buffers to get by, such as carrying excessive inventories and long order lead times to cover mistakes. In 1985 the Coca-Cola Co. survived its ill-fated experiment with New Coke. Two Clairol shampoos, “Look of Buttermilk” and “Touch of Yogurt,” were decisively rejected by consumers who did not relate to putting something in their hair that might be food, but the company recovered.

Will Analytics Live Up to its Promises and Endure?

I do not have a crystal ball. I am often a skeptic. I wonder if analytics will stand the test of time. It is the shiny new toy now. Will it last?

There are barriers that are slowing the adoption rate to apply analytics. They mainly involve natural resistance to change with people. People like the status quo. The main barrier to the acceptance of applying analytics is no longer technical but rather is behavioral and cultural. The software tools are proven. The use of analytics by casual users, not just a team of trained statisticians, is becoming widespread. We now hear the term “data scientist.”

Consider these remarks from Jane Griffin, a principal with Deloitte Consulting LLP from a Deloitte “debate” on this topic:

“The executives I talk to every day are wrestling with business decisions where a better understanding of data at a very deep level can make all the difference. … Low-level analytics just won’t get you there. Work your way through the list of ground-shaking developments in business today – none are areas where companies can continue to shoot from the hip. Pricing. Workforce trends. Health reform. Even security and terrorism threats. These are all complex challenges where advanced signal detection capabilities are critical. … Analytics is no fad. It’s a serious competitive advantage.”

The key for improving is integrating and balancing multiple enterprise and corporate performance management improvement methods and spicing each of them with analytics of all flavors – particularly predictive analytics. In the end, organizations need top-down guidance with bottom-up execution and analytics for insights and foresight.

Gary Cokins (gcokins@garycokins.com) is the founder of the advisory firm Analytics-Based Performance Management LLC. He is an internationally recognized expert, speaker and author in advanced cost management and performance improvement systems, as well as a member of INFORMS and a frequent contributor to Analytics magazine. He previously served as a principal consultant with SAS. For more of Cokins’ unique look at the world, visit his website at www.garycokins.com . A version of this article appeared in Information-Management.com.

Reference

  1. http://www.nytimes.com/2013/08/18/sunday-review/is-big-data-an-economic-big-dud.html?pagewanted=all&_r=0

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