Davis quotes from a recent issue of BusinessWeek that recession is “the mother of invention”.
“If we take that approach to what is going on, I think we have tremendous opportunities,” says Davis, who spoke last week at the Premier Business Leadership Series in Singapore hosted by SAS, a business intelligence software provider.
The challenge then for today’s organisations in the current economic situation, is to focus beyond the here and now. Quoting management expert Peter Drucker, Davis says that for executives to be successful today, they must focus on three dimensions: make the present business effective; identify and realise the potential of the business; and restructure the current business into a different business for a different future.
The last, says Davis, is probably the most important in the current market. “Times are changing and I believe this is what executives need to be dealing with on an ongoing basis. This will not go away.”
He says “gut-level decision making” is not enough. “We have got to rely on data and we have to rely on predictive analytics, so we can maintain a handle on these three dimensions.”
He cites a Gartner report that claims through to 2012, more than a third of the top 5000 global companies will fail to make insightful decisions about significant changes in their business, due to lack of investment in information infrastructure and business user tools.
Gartner points out the Asia Pacific end-user organisations will not be motivated to invest in IT primarily as a way to support expansion, but to increase their competitiveness, reduce cost and enhance efficiency.
“The message there is it is not about technology, it is about solving business problems. There is plenty of interesting and cool technologies out there, but unless you know how to use them in the context of business problems they are worthless,” says Davis.
One of these tools - business intelligence (BI) - is an overused and misunderstood term, he says. While BI has given end-users the autonomy and independence to create their own reports without having to go through IT, it had served its purpose.
“I would argue the future is not in BI, the future is in business analytics (BA) and that is where you find the differentiator.”
He says it is necessary to tackle the data out to ensure its availability for strategic decision making in a timely fashion. Analytics, he explains, span a spectrum of capability that he groups into eight levels.
The first four levels are focused on reactive decision making. These are:
• Standard reports: What happened, when did it happen? We all have these, says Davis, and some of the questions it answers are what were the sales last month or reports per screen on web browsers.
• Ad hoc reports: How many, how often, where?
• Query drilldown: Where exactly is the problem, how do I find the answers?
• Alerts: When should I react, what actions are needed now?
The next four levels, meanwhile, aid in proactive decision making and allow enterprises to look into the future.
• Statistical analysis: This is where you gain knowledge on what is happening and what opportunities are missing.
• Forecasting: This answers questions like what if these trends continue, how much is needed and when will it be needed?
• Predictive modelling: This answers the question of what will happen next and how will it affect the business. “This is powerful, regardless of industry,” says Davis. “This one helps us understand things like what customers think.” It can, for example, provide data in advance on what customer segment is most likely to leave or respond to a campaign or model.
• Optimisation: This answers questions like, how do we do things better or what is the best decision for a complex problem?
The last level is the “hottest area” in BA, says Davis. In retail, for instance, it can answer questions like what are the appropriate price points to maximise margin markdowns? Or, what sizes should be ordered for a particular store? “It can make a difference between success and failure,” says Davis.
In all these, he says, “there is absolutely no mention of technology. It is all about solving business models and demonstrating quantifiable business benefits,” says Davis.
The writer attended the Premier Business Leadership Series in Singapore as a guest of SAS.
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