CHAPTER TWO WHAT MAKES AN ANALYTICAL COMPETITOR? DEFINING THE COMMON KEY ATTRIBUTES OF SUCH COMPANIES Flashcards
What is an analytical competitor?
An organization that uses analytics extensively and systematically to outthink and outexecute the competition.
List the four common key characteristics of analytically sophisticated companies.
- Analytics supports a strategic, distinctive capability
- Management of analytics is enterprise-wide
- Senior management is committed to the use of analytics
- Significant strategic bet on analytics-based competition
What does the DELTA model stand for?
- Data
- Enterprise
- Leadership
- Targets
- Analysts
What is a key requirement for analytical companies regarding data?
Integrated, high-quality, and easily accessible data about their businesses and markets.
True or False: Highly analytical firms manage their analytics resources in disconnected silos.
False.
What role does leadership play in analytical organizations?
Strong, committed leaders advocate for the development and use of analytics in decisions and actions.
Fill in the blank: Organizations need to target specific business capabilities and functions for the extensive use of _______.
[analytics]
What factor was added in the subsequent version of the DELTA model, called DELTTA?
Technology factor, particularly for big data analytics environments.
What percentage of firms surveyed indicated that analytical capability is a key element of strategy?
Ten percent.
Which industry was identified as having the highest analytical competitor levels in a survey?
Digital natives (online and e-commerce businesses).
Name one of the lowest-ranking industries in terms of analytical competition.
Health care providers or health insurance companies.
What is an example of a distinctive capability for Netflix?
Predicting customer viewing preferences.
How do analytical competitors approach the measurement of their capabilities?
They engage in both exploitation and exploration of measures.
What is the most commonly used measure in consumer finance?
FICO score.
True or False: Companies without a distinctive capability can still be analytical competitors.
False.
Which company is noted for adopting FICO scores earlier and more aggressively than others?
Capital One.
What is one potential future application of credit scores outside traditional finance?
Making life and health insurance decisions and pricing of premiums.
What should mission-critical capabilities be for analytical competitors?
The organization’s primary analytical target.
What does an enterprise-level approach to analytics involve?
Managing analytics as an organization-wide activity rather than in silos.
What was one of the reasons RBC Financial Group became a successful analytical competitor?
All customer data was owned by the enterprise and held in a central customer information file.
In a survey of organizations’ approaches to business intelligence, what percentage reported a formal needs assessment process across the enterprise?
22 percent.
What percentage of user-created spreadsheets reportedly contain errors?
Between 20 percent and 40 percent.
What is a common issue with departmental analytical applications?
They often remain in the background and may be left to individuals, leading to errors in user-created spreadsheets.
Research indicates that 20-40% of user-created spreadsheets contain errors.
What problem arises from individual analytics in organizations?
They create ‘multiple versions of the truth’ which complicates decision-making.
Different databases and calculations can lead to inconsistencies across departments.
What is the advantage of managing analytics at the enterprise level?
It ensures that there is only one version of critical business information and analytical results for decision making.
What management approach does Caesars use for customer analytics?
‘Centrally driven, broadly distributed.’
What role does a Chief Data and Analytics Officer (CDAO) typically play?
Responsible for data governance, establishing strategic policies, and developing analytical talent.
The CDAO often reports directly to senior executives like COO, CMO, or CIO.
What is one key responsibility of the CDAO?
To ensure the organization has the data and capabilities needed to leverage big data and analytics.
What is a significant factor for the adoption of analytical approaches in business?
Senior management commitment, ideally led by the CEO.
Who are some examples of executives driving the shift to analytics?
- Gary Loveman (Caesars)
- Jeff Bezos (Amazon)
- Rich Fairbank (Capital One)
- Reed Hastings (Netflix)
- Barry Beracha (Sara Lee)
What does ‘information-based strategy’ refer to?
A strategy that emphasizes using data to make critical long-term decisions, particularly in lending.
What did Gary Loveman emphasize in his management style?
The importance of supporting ideas with evidence and maintaining a control group in decision-making.
What is a common characteristic of successful analytical competitors?
They have a strong commitment from senior executives to drive a culture of analytics.
What is the significance of a CEO’s background in analytics?
It helps in engaging with quantitative experts and pushing for analytical thinking within the organization.
What aspect of Barclays’s consumer finance organization illustrates commitment to analytics?
A five-year plan to build analytical capabilities based on successful strategies from other banks.
What is the UPS ORION project known for?
It aims to optimize routing for drivers and has grown from a small team to a large-scale project.
What did Jack Levis prioritize in the ORION project?
Senior management buy-in and persistence to overcome challenges during development.
What defines the aspirations of analytical competitors?
They aim for significant, strategic results from analytics-based strategies.
What are some examples of financial benefits from analytical initiatives?
- Yield management at American Airlines saved $1.2 billion.
- Deere & Company saved $1.2 billion in inventory costs.
- UPS’s ORION project is expected to save half a billion dollars annually.
What impact did Caesars’ customer loyalty analytics initiative have?
Increased market share from 36% to 43% and consistent sales gains over multiple quarters.
Fill in the blank: A single analytical initiative should result in savings or revenue increases in the _______.
[hundreds of millions or billions]
What sales trend did the company experience over twenty-four quarters?
Same store sales gains in twenty-three of twenty-four quarters.
What significant change occurred after the adoption of certain approaches by the company?
The company failed to meet revenue and profit expectations for seven straight years before the adoption.
What was the annual increase in earnings per share and return on equity for Capital One in its first decade?
At least 20 percent each year.
What was the impact of Barclays’s information-based customer management strategy?
- Lower recruitment costs for customers
- Higher customer balances with lower risk exposure
- 25 percent increase in revenue per customer account
How long did Kroger grow same-store sales due to its analytics-based loyalty program?
Fifty-two straight quarters.
What are the four factors defining analytical competition?
- Senior executive commitment
- Enterprise-wide approach
- Analytics-led distinctive capability
- Results aimed at substantial outcomes
Why is senior executive commitment considered the most important factor in analytical competition?
It can make the other factors possible.
What is the estimated percentage of large firms that would be classified as stage 5 analytical competitors?
No more than 5 percent.
What is a characteristic of stage 4 organizations in analytical competition?
They are on the verge of analytical competition but face minor hurdles.
What do stage 3 organizations understand about analytical competition?
They grasp the value and promise but face major capability hurdles.
What is a defining characteristic of stage 2 organizations?
They exhibit localized analytics with no intention of competing on it.
What term is used to describe organizations at stage 1 of analytical competition?
Analytically impaired organizations.
What barriers do stage 1 organizations face in becoming analytical competitors?
- Lack of will
- Lack of skill
- Human and technical barriers
What is the greatest constraint on rapid movement through the stages of analytical competition?
Changing the basic business processes and behaviors of the organization and its people.
What relationship will be discussed in chapter 3?
The relationship between analytical activity and business performance.
What does chapter 4 focus on regarding analytics?
The role analytics play in internally oriented processes, such as finance and human resource management.
What does chapter 5 focus on regarding analytics?
Using analytics to enhance organizations’ externally oriented activities.
