CHAPTER ONE THE NATURE OF ANALYTICAL COMPETITION USING ANALYTICS TO BUILD A DISTINCTIVE CAPABILITY Flashcards
What inspired Reed Hastings to start Netflix?
A $40 late fee from Blockbuster after renting Apollo 13
Hastings envisioned a subscription model similar to health clubs.
What was Netflix’s revenue in 1999?
$5 million
This revenue grew to $8.3 billion by 2016.
How many subscribers did Netflix have by 2016?
Over 93 million in 190 countries
Netflix streams a wide range of content, including movies and original programming.
What is Cinematch?
Netflix’s movie-recommendation engine
It uses algorithms to personalize movie recommendations for each user.
What innovative approach did Netflix use to improve Cinematch?
A $1 million prize for quantitative analysts to enhance the algorithm
This crowdsourcing method helped improve Netflix’s data analysis capabilities.
What is the significance of ‘the long tail’ in Netflix’s strategy?
It refers to recommending less popular movies that fit customer preferences
This approach allows Netflix to cater to niche audiences.
What was the first original series produced by Netflix?
House of Cards
The show starred Kevin Spacey and had a significant budget of at least $200 million.
What analytics techniques did Netflix use to predict the success of House of Cards?
Attribute analysis
They identified up to seventy thousand attributes related to viewer preferences.
What is the batting average of Netflix for renewing original shows after their first seasons?
Well over .900
This statistic indicates a high success rate for their original programming.
What type of culture does Netflix promote in analytics?
A strong culture of analytics and a ‘test and learn’ approach
They conduct numerous variations of consumer experience experiments.
What is the role of analytics in modern competition?
To drive decisions and actions based on extensive data analysis
Analytics can lead to competitive advantages in various business processes.
Define ‘analytical competitor’.
An organization that uses analytics extensively and systematically to outthink and outexecute the competition
These organizations leverage data for strategic decision-making.
What are the four types of analytics mentioned?
- Descriptive analytics
- Predictive analytics
- Prescriptive analytics
- Autonomous analytics
Each type serves different purposes in business analysis.
What is the primary focus of prescriptive analytics?
To specify optimal behaviors and actions
This involves using techniques like optimization and machine learning.
What is the importance of data management in analytics?
It is essential for acquiring, transforming, managing, analyzing, and acting on data
Good data management capabilities enhance analytical effectiveness.
What does ‘Moneyball for movies’ refer to?
Using data analytics to make decisions in the film industry
This concept highlights the analytical approach taken by Netflix.
What is an example of a company that successfully applies analytics to a non-analytical industry?
CEMEX in the cement industry
CEMEX optimizes supply chains and delivery times through analytics.
Fill in the blank: Netflix uses data to make decisions that moguls make by _______.
gut
True or False: Netflix’s analytics approach is limited only to marketing.
False
Analytics permeate all aspects of Netflix’s operations, including marketing and customer service.
What is a distinctive capability that CEMEX has applied analytics to?
Optimized supply chains and delivery times.
Which industries are more amenable to competing on analytics?
- Financial services
- Travel and transportation
- Gaming
What is an example of a traditionally intuitive business that is now using analytics?
The wine business.
What are some sources that have created more and better data than ever before?
- ERP systems
- POS systems
- Mobile devices
- Websites and e-commerce
What was the purpose of decision support systems (DSS) introduced in the late 1960s?
To analyze data and support decision making.
Who were the pioneers of decision support systems?
- Peter Keen
- Charles Stabell
What term refers to data that is too big, volatile, and unstructured for traditional technologies?
Big data.
What significant trend has been observed in organizations regarding analytics?
Most large organizations have some sort of analytical applications in place.
What is a common limitation of analytical tools in organizations?
They are often managed at the departmental level and are invisible to senior executives.
According to the text, what is one benefit of decisions based on analytics?
They are more likely to be correct than those based on intuition.
Fill in the blank: The best firms are using analytical techniques to explore ______ decisions.
merger and acquisition
What are some examples of data that will continue to grow in the future?
- RFID sensor data
- Sensor data from industrial machines
- User behavior data from mobile phones
What is the significance of analytical software in competitive organizations?
It allows for extensive quantitative analysis on large data sets.
What does the term ‘analytical competition’ imply?
An arms race requiring continual development of new measures, algorithms, and decision-making approaches.
What is a key prerequisite for building an effective analytical competitor?
Having a moderate amount and quality of data about the business domain.
What is a pivotal factor for the progress of an organization in analytics?
Sponsorship from executives.
True or False: Intuitive decision making is only appropriate under certain circumstances.
True.
What is a potential risk of relying on outdated analytical predictions?
They may no longer apply under changing economic conditions.
What do firms like Netflix and Capital One have that supports their analytical competition?
CEO-level sponsorship and passion for analytics.
What is the role of human factors in developing analytical capabilities?
A committed manager is essential for further development of analytics.
What is the pivotal factor in how fast and well an organization proceeds along the analytical path?
Sponsorship
Executive sponsorship is crucial for the success of analytical initiatives.
Which companies are mentioned as having CEO-level sponsorship for analytical competition?
- Netflix
- Caesars
- Capital One
- UPS
What is the contrasting path organizations without passionate executive sponsorship must take?
Prove-it path
This path is slower and requires demonstrating the value of analytics.
Which professional sport is noted for its extensive use of quantitative and statistical analysis?
Baseball
What book by Michael Lewis popularized the analytical orientation in baseball?
Moneyball
Who was the general manager of the Oakland A’s that shifted to an analytical approach?
Billy Beane
What traditional baseball statistic did the Oakland A’s move away from in favor of new metrics?
Runs Batted In (RBIs)
What two new metrics did the Oakland A’s focus on for player performance?
- On-base percentage
- On-base plus slugging percentage
Who was the first Oakland GM to adopt a statistical approach in the early 1980s?
Sandy Alderson
What was a key reason for the Boston Red Sox to adopt the moneyball approach?
A business need to win the World Series after an 86-year drought
Who were the new principal owners of the Boston Red Sox in 2002?
- John Henry
- Tom Werner
What position did Theo Epstein hold when he was hired by the Red Sox?
General Manager
What analytical talent did the Red Sox hire as a consultant?
Bill James
What significant event in 2004 did the Red Sox achieve after implementing analytics?
They won the World Series
What was the result of the seventh game in the ALCS for the Red Sox?
They lost to the New York Yankees
What did Nate Silver’s data journalism site find about teams with analysts?
They outperformed their expected winning percentage by 44 percentage points
Which team ended a 108-year World Series championship drought in 2016?
Chicago Cubs
What document did the Cubs create to detail their philosophy and approach?
The Cubs Way
Who led the Cubs’ R&D group that analyzed various aspects of the game?
Chris Moore
What is the salary cap situation in professional baseball regarding front office talent?
There is no salary cap
What advanced analytics approach did the New England Patriots utilize?
Data and analytical models for player selection and game decisions
What nontraditional factors do the Patriots consider when selecting players?
- Intelligence
- Willingness to subsume personal ego
What is one way the Patriots analyze on-field decisions?
Using statistics to decide whether to punt or go for it on fourth down
Which basketball team hired a quantitatively oriented executive as GM in 2007?
Houston Rockets
What new measure in basketball assesses a player’s value while on versus off the court?
Roland Rating
Which European soccer team uses predictive models to prevent player injuries?
AC Milan
What system does AC Milan use to analyze data for training and preparation?
Match Insights
What has dramatically changed in Premier League clubs regarding analytics?
Every club now employs a team of video and data analysts
What challenge does Oliver Bierhoff associate with the fluid game of soccer?
The large amount of data points generated in a short time
What system is used alongside cameras to analyze data in professional sports?
Match Insights
Match Insights helps coaches and players assess opponents’ capabilities and devise strategies.
What is a key lesson from professional sports analytics regarding human resources?
Focus on choosing, appropriately compensating, and keeping the best players
This practice is growing in the business domain but is not yet widespread.
Name a company that has adopted an analytical approach to human resource management.
Google exemplifies a firm using analytics in talent management.
What does analytical competition in sports illustrate about data?
Analytics arises when sufficient data is present to analyze
New business areas with large data availability are likely to see analytical competition.
What do analytical innovators in professional sports often create?
New measures
Businesspeople are encouraged to create new measures as well.
How does technology impact opportunities in sports and business?
It creates entirely new types of data
This new data can lead to additional competitive advantages.
Who mentioned that all teams now use available data for personnel decisions?
Mark Cuban
Mark Cuban is the owner of the Dallas Mavericks and emphasizes the efficiency of the market due to data use.
Who was an early adopter of video data in the NBA?
Daryl Morey
Daryl Morey was associated with the Houston Rockets.
What advantage do analytical teams have during actual games?
They make informed, data-driven, real-time decisions
This capability is paralleled by analytical businesses adapting to market changes.
What influences a team’s decision to embrace analytical competition?
Leadership decisions and backgrounds
The decision to adopt analytics is often linked to the leader’s experiences.
What is a common outcome for sports teams that embrace analytical competition?
They generally do well
While they may not win every year, analytical competitors have found success across various sports.
What must teams or firms do to maintain their competitive edge in analytical competition?
Continue innovating and building analytical capabilities
No team or firm can afford to become complacent.
