Analytic Maturity for Competitive Advantage     ~ Dr. Martin Ahrens, Vice President - Methodology, Inductis           In the internet age, it is increasingly commonplace to hear that business has been freed from the constraints of geography. A business operating from just about anywhere can serve customers located just about everywhere else. For companies located in this boundless niche, the biggest challenges are related to management of huge data flows - filtering it all to identify the truly useful portion and then using advanced analytic tools to use that portion intelligently. However, the situation for most companies, even very large ones, is substantially more constrained. Customers are served from fixed "brick and mortar" locations, goods need to be transported, marketing uses postal mail and print publications and business is constrained by a host of national and local regulations. Internally, most established corporations are constrained by legacy business practices and departmental organizations - their processes were not initially developed within the electronic age and their staff were not trained to function like those of a Yahoo or Google. While it is true that they need to adopt cutting edge techniques, it is even more imperative to answer the question: What should we do today given our current circumstances? This question can in turn be broken down into three component questions: What is the appropriate vision for an ideal Point of Arrival? Where does the company stand today relative to that vision? What actions can be taken to move forward toward the realization of the vision? Clearly answering all of these questions responsibly also entails assessment of costs and anticipated benefits. In this article, I will describe the approach we at Inductis take to answering these questions within our general Analytic Maturity framework. The Analytic Maturity Vision Any business can be viewed as a combination of three major processes: Information Management, Decisions and Operationalization. Information Management - Businesses run on the basis of vast quantities of information. Some of it is generated in the process of selling products and services. For example, how many products were sold, how much revenue, what costs were incurred. Other information is obtained proactively, including information about competitors, customer demographics, credit reports and so on. All of this information needs to be processed, stored and made available to decision makers to enable appropriate business decisions. Decisions - A business can be viewed as a decision-making entity. Even a manufacturing business is fundamentally driven by decisions - for example, how much product to produce, what raw materials should be included, what manufacturing processes should be employed, what balance should be struck between inventory and demand etc. Decisions cannot be made without information; so the Information Management process is essential to the success of the Decision process. But optimal decisions do not flow automatically from information, especially as the variety and volume of information increase. Also, when optimal decisions are made independently within separate functional units (product development, marketing, finance, customer service etc.), the overall impact on the company may not be optimal; coordination can lead to the identification of different optima for the company as a whole. Operationalization - Intelligent decisions need to be accompanied by flawless execution in order for the company to prosper. Products need to be produced according to spec, delivery needs to be on time, marketing needs to deliver the right message to the right customers and customer service needs to reflect both the intent of the company and an appreciation of customers' needs. Broadly speaking, operationalization refers to any such action in the marketplace. Beyond their obvious functions, all these actions generate new data. In fact the best way for a company to learn how effectively it is doing its job is to capture and interpret the data that flows from these marketplace interactions. And so the three major business processes can be viewed as a continuous loop. The Analytically Mature Business The Analytically-mature business is a continuous sequence of three major processes. In recent years, the evolution of technology and simultaneous growth in data availability have enabled a revolution in information management and customer-focused decision-making. In companies that have fully capitalized on these developments, decisions have become increasingly data-driven and the time frame for these decisions continues to accelerate. The drivers of change are largely analytical in nature (see illustration); so we refer to businesses that fully capitalize on these new tools and processes as Analytically Mature. These businesses have not only adopted new tools and processes - they have also effectively integrated them into an optimal closed loop business process. Drivers of Change Further insight into the nature of an Analytically Mature business can be gained by contrasting it with a more typical pre-analytic or "judgment-driven" business. As the following illustration makes clear, Analytic Maturity is reflected across all functional areas of the corporation. It cannot be accurately assessed solely on the basis of the presence of particular analytic tools (for example, business intelligence software or advanced IVR systems). Rather it is a measure of how those tools are incorporated into business processes and how they are integrated across the organization. Differentiating the Analytically Mature Business “Retooling” the business to make it analytically-driven rather than judgment-driven changes processes throughout the organization. Assessment of Current Status The above description of Analytic Maturity is intentionally quite generic - there are relatively mature companies in such diverse industries as credit cards, casinos, insurance, online cataloguers, internet service companies and consumer goods manufacturers. More precisely tailored descriptions would apply for each industry type. However, we do not recommend setting up the current industry leader as a model to be emulated by all its competitors. This is because a closer look at either the leader or those competitors will reveal contextual differences that define constraints on its situation and a possible action plan. Hence, it would be more appropriate for each firm to obtain a measure of its current status relative to a universal standard of excellence. From that point, corporate leadership could focus on identifying actions to move forward anchored within the specific context of the company. For that reason, at Inductis we have developed an Analytic Maturity Assessment Framework applicable across a very broad range of industries. Within the Assessment Framework, the three major process components discussed above are broken down into several sub-processes. Each sub-process is rated on the following five-level Analytic Maturity scale: Analytic Maturity Assessment We define five levels to help assess the Analytic Maturity of businesses. As the names of the levels suggest, "Typical" companies are quite far from the Master level that characterizes our vision of an Analytically Mature company. We have developed an Analytic Maturity Benchmark Survey™ to collect information that is used to generate scores for all the sub-processes and the firm's overall Analytic Maturity Score™. The Score provides a measure of overall Analytic Maturity status on a five point scale, providing a measure of the company's effective deployment and integration of analytic processes and tools. In our experience, only one or two companies at most in any particular industry would qualify for a score at the Master level. Firms who register and complete the survey receive our free Analytic Maturity Report™ that interprets their scores, benchmarks them relative to an anonymous group of peers and provides helpful advice about tactics to improve their performance. Action Plan for Moving Forward Two firms with the same overall Analytic Maturity Score may have quite different profiles across their component scores. Even if their component scores were the same, it is still likely that their specific circumstances might dictate different implementation plans going forward. For these reasons, it is clearly impossible to provide specific advice applicable to all firms. However, important general advice flows from general business principals: Analytic Maturity is not an end in itself. Businesses exist to provide high quality goods and services at reasonable prices, and to do so in a manner that optimizes shareholder returns and long-term corporate success. Analytic Maturity offers a framework and set of tools that substantially increase the likelihood of achieving these goals. As such, it needs to be assessed like any other investment proposal. We suggest a stepwise systematic approach: once the current state of analytic maturity has been identified, it would be appropriate to conduct a more in depth examination of possible next steps for moving further along the Analytic Maturity spectrum. Such an assessment would need to take into account the costs and anticipated benefits of the various options. If appropriate actions are identified, they should be implemented incrementally, with careful assessment of business impact incorporated in the implementation plan. Only after the impact of each improvement has been thoroughly understood, should the next appropriate step be identified and implemented. This strategy ensures stable progress towards the targeted achievement of optimal Analytic Maturity.           << Back