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Featured Business Issue

11 Jan 2010
Analytics for a Competitive Edge

In the last one year, business has seen a tumultuous shift in economic conditions. From a steady state, today, it is despaired by falling consumer confidence and recession in core industries. With profit erosion, companies are faced with scarce resources, internally and externally. With economy showing signs of revival, companies have to prepare for future while being aware of the present.

This has led to companies looking both inward and outward critically. Without exception, companies are assessing their operations and profitability in detail while looking for opportunities to grow the topline and bottomline. In most companies, decisions are made based on the output of their transactional systems and are let down.   Why? Transactions systems are designed for record keeping and doing the same efficiently. Output from the same is a summary of a single dimensional view and lacks insight.

To stay today and to grow tomorrow, companies need a competitive edge. An edge that provides clear advantage over the competition that is valued by potential customers. An edge that can be in terms of a product or service, price, cost advantage, optimized supply chain etc.

To gain a competitive edge, business needs information that enables them to better understand the various elements that make the business happen.

Do we think this is true? Or
Do we know?

Aberdeen Group, in a study on Executive Dashboards, has found Best-in-Class companies to be better than its peers in three performance criteria.

  • 24% average year-over-year increase in operating profits compared with 3% increase for the industry and 27% decrease for laggards
  • 8.3% average year-over-year improvement in customer service, compared with 2.3% increase for the industry and 1% increase for laggards
  • 8.4% average year-over-year improvement in sales performance, compared with 2.3% increase for the industry and 0.6% decrease for laggards

How does Analytics provide a competitive edge?
 


 

Knowing these questions and answers to the same, helps align the plans and performance closer to the plans. But answers to these questions require analysis of transactional and external inputs. An insight which transactional systems are not designed to provide.

In his study of the new science of winning (Competing on Analytics), Thomas Davenport finds that successful companies base their decision on a clear empirical method. A method of systemic data collection and analysis for management decision.

For example, Telecom companies promote products and pricing using Sales Analytics to spot opportunities and trends. And Beverage companies with standard cross country pricing use Cost and Profitability Analytics for pricing and product mix.
 


 

How do companies institutionalize this process to gain competitive edge? Successful companies ensure the following critical success factors.

  • Support a Strategic / Distinctive Capability: Analytics do not constitute a strategy. Using Analytics to support a business strategy certainly does. Companies must have a vision and use analytics to support business decision to translate the vision.
  • Enterprise Level Approach to Analytics: A pervasive approach across the enterprise is required to retain the competitive edge. Companies typically adopt a analytics at a departmental / divisional level which provide short term advantage or frustrated attempt at usage.
  • Support of Senior Management: To successfully convert a vision to results, management process of decision to performance analysis to corrective action is constantly undertaken. With strategic and operating decisions taken by senior management, there must be a top down approach to using analytics.
  • Large Scale Ambition: Analytics are not meant for meant for operational decisions. Companies must have a ambition clearly defined by a vision to use and reap the benefits.
 
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