When someone tells me that he wants to do analytics, I say it is easy. I can explain it in five minutes. However, if someone says that he want to transform an organization using analytics, my reaction is “how long do you have?”.
It is not easy. Let’s dissect how to do that.
There is a new buzzword in the block: digital business. What is that?
The idea stems from a few businesses that managed to rethink the world.
We call such a business a “Digital Business”. They use digital technologies to fundamentally rethink the way businesses are done. The path to becoming such a business is called “digital transformation”. ( I have no idea why it is digital transformation, not the digital business that has more attention).
Following are three good references. Like any other buzzard, each has a slightly different interpretation of “Digital Transformation”. At the same time, there is enough census to make it useful.
Why do we need this? New technology has amused us and connected us. Yet, not all are amused. 2102 MIT technology review headline ran “You promised me Mars Colonies, but we got Facebook instead”. Many have argued that despite amusement, new technologies have failed to lead us to fundamental advancements.
Technologies like the internet are omnipresent. However, critics argue that those technologies have failed to fundamentally change our lives. Nor they have added major efficiencies like the time of industrial revolution.
Hope is that redefining around the digital can bring in those missing efficiencies and leapfrog us to the future. Needless to say that, if any organization can do that, they will leave their competition in the dust. Hence, it is not much of a choice. Any organization who likes to be around in 10–20 years, will have to do that.
Companies like Uber, if done right, can change the way we live. For example, Uber provides a future where many of us can survive without a car, reducing traffic, and reducing cost.
Three classes of digital technologies can play a part in this transformation: Analytics and AI, Social Mobile and IoT, Crowdsourcing. This post explores the role of analytics ( and AI).
The following picture shows components of a digital business. This is by no means the only representation. Yet, the following picture captures most ideas discussed under digital business. Furthermore, it lists five areas where analytics can play a major role within a business.
Next sections explore each in details.
Key idea is to collect data about the organization and use them to improve operations. This is the most widely discussed benefit of analytics. The unstated assumption is that the organization has a lot of fiction and inefficiencies. I am sure most of you will agree that this is true.
There are many use cases that fall under this. Follow are a few.
Key for optimizations is knowing what to measure. We used the term KPI(Key Performance Indicators) to describe those measurements. KPI is a simple indicator that represents an important aspect of the situation.
A good example of a KPI is canaries in the coal mines. Years ago, miner took canaries and other small birds into coal mines. These birds are very sensitive to oxygen levels. If the oxygen levels are low, they will get knocked out. Then humans have an advance warning to rush out of the mine.
Following are other examples of KPIs.
Yet, given KPI will only see a part of the picture. Hence, a narrow focus on the KPI can lead to suboptimal outputs. To tackle this problem, Andy Grove (Intel) argued in his book “High Throughput Management” that KPIs should be used in pairs. The First KPI should measure the output (e.g. processed claims count) and the second should measure the quality (e.g. mistakes occurred). Together, two KPIs provide a holistic view of an organization.
Most domains have well defined KPIs. Defining new KPIs are hard work. Before optimizations, you must define the KPIs. Then you need to either measure them or find a way to approximate the KPIs. What you need to measure is not what is easy to measure, rather what is useful.
Facts do not cease to exist because they are ignored. — Aldous Huxley
When you have found the right KPIs, the rest is relatively easy. We can use KPIs to find problems, come up and apply solutions, and use the KPIs to find their effectiveness. We can apply the process in an ongoing basis to improve operations.
Analytics can optimize the organization’s interaction with customers and create new dynamics. This can happen in many forms.
Marketing is scouts and sales are hunters. Customers often start as visitors on the web site. Marketing brings in new visitors in several ways.
Then, Marketing identifies, keeps track, and nurture visitors through newsletters and other activities. Sales engage to make the sale when ready. Analytics can Identify and track leads as they move through the marketing and sales pipelines.
Following are some things analytics can do.
Under this topic, there is no limit to things you can do. Following are some flavors.
Some products need humans to tune it and it is hard to get them right. Machine learning can take away the burden. e.g.
Solve a problem
When you run a business, you create a network of many different people and entities. It is likely that this network can play a bigger role that part of the business and used to your advantage. This network, which connects customers, the organization, supply chain, and distribution chain is called a value network.
For example, Walmart provides detailed analytics about their products to suppliers, which let them improve products. This analytics act as value added advantage for a supplier for working with Walmart. The same idea can be used across many businesses where you can not only use intelligence but pass over intelligence to other parties.
A company value network might provide a great opportunity to create and distribute a new product. A good example is Nespresso Case study, where Nestle used their distribution chain to sell espresso machines and how they managed to defend the revenue stream through the coffee pods.
Moreover, there may be other products that sell together with your products. For example, many infant items go together (Diapers and wet wipes) or pizza crust and the cheese. Understanding them might give you several opportunities.
Finally, the information that can be collected through the value chain might be useful. For example, the distribution chain can provide data about the demographics of users or their reception.
It is easy to do analytics. However, it is hard to change organizations and in effect change the world using analytics. The idea of Digital Business brings this problem into focus.
This post tries to look at organization holistically and discuss how analytics can be used to rethink how to do business. Post intentionally does not discuss how to do it (technically), rather tries to cover what to do using some use cases.
Hope this was useful. If you have any thoughts or think of new use cases, I love to hear them through the comments.
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