Publications

DM Direct Newsletter, April 20, 2007, By James Taylor

Tom Davenport and Jeanne Harris' book, Competing on Analytics, discusses a number of what they call "analytic competitors," that is to say companies that use their analytic prowess not just to enhance their operations but as their lead competitive differentiator. The authors' formal definition of an analytic competitor is, "The extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions."

The book has two parts - one on the nature of analytical competition and another on building an analytic competency. The first part describes how analytics are used in both internal and external processes. The second part lays out a roadmap that describes how an organization can become an analytical competitor and how to manage analytical people. This section also provides a quick overview of a business intelligence architecture and offers some predictions for what the future of analytics holds.

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The book is full of stories about how companies compete analytically, for example:

• Capital One's focus on identifying and serving new market segments before its peers can. They have a lovely concept of "deaveraging" - breaking a segment into small segments for better targeting.
• Marriott's total hotel optimization using a new measure called "revenue opportunity" - what percentage of the theoretical maximum revenue they actually made. They got this to rise an amazing 8 percent.
• Progressive Insurance is so certain that if another company offers you a better rate then you would not be profitable and so are willing to disclose what their competitors' rates are.
• The Veteran Administration's use of evidence-based medicine and predictive analytics, along with automated decisions for treatment protocols, is noted, as is the fact that perhaps only 25 to 30 percent of medical decisions are scientifically based.
• Honda makes good use of text analytics to flag early problems in cars by analyzing warranty claims calls by customers or dealers to headquarters.
• DnB NOR bank uses event triggers to prompt customer relationship offers, using analytics to trigger the right events.
• Netflix focuses on giving each customer a personalized website experience based on recommendations, ratings and segmentation.

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