Analytics: Putting Information to Work

Tom Davenport admits that analytics is a "nerdy" topic, but it's also one of the hottest in the IT community today.

The IT and management professor at Babson College didn't expect too much of a reaction to his 2007 book, Competing on Analytics: The New Science of Winning (Harvard Business Press, 2007), but it caused quite a stir.

And now we can't hear enough about analytics and business intelligence. Two recent surveys—IBM's Global CIO Study and the Society for Information Management's annual survey of CIOs—found that BI sits at the top of the CIO's priority list this year.

So the timing couldn't be better for Davenport and his co-author, Jeanne Harris, an executive research fellow with Accenture's Institute for High Performance, to write a follow-up.

Where Competing on Analytics focused more on information as a competitive advantage, their new book, Analytics at Work: Smarter Decisions, Better Results (Harvard Business Press, Feb. 12, 2010, with Robert Morison), is more of a manual for turning the theory into practice.

Davenport and Harris spoke with CIO Insight Editor in Chief Brian Watson a week ahead of the book's release. Their message: CIOs can be heroes if they can give business leaders the information and tools they need to make better decisions. But first, they need to truly understand what information can do for their company—and then get past all the traditional hurdles to disseminating it in effective, productive ways. What follows is an edited version of the discussion.

What drove you to write a follow-up to Competing on Analytics?

Davenport: Basically, we felt like there was a much more positive reaction to Competing on Analytics than we expected. It's a fairly nerdy topic, but we struck a nerve and thought there was more to say. In particular, companies said they like the idea of analytics, but we don't necessarily build our strategies around or become analytical competitors, so we just want to make more analytical decisions. The first book had such an emphasis on competitive advantage; we thought we'd write another book that was more broadly directed and framework-oriented to provide people with some specific tools on how to make more analytical decisions.

Harris: Not only how to make more analytical decisions but how to set their own analytical capabilities, and give them thoroughly pragmatic advice about specific things that have helped companies improve those capabilities over time.

BI and analytics are a huge priority this year, based on various surveys. Why the imperative to do more now? What have CIOs and businesses been doing wrong?

Davenport: There's a big sea change going on right now. Prior to this, companies have been focused on implementing transaction systems, e-commerce systems, point-of-sales systems, ERP systems and so on. They've now arrived at a place where they've accumulated a lot of data; the next step is to figure out what to do with it.

Business intelligence and decision support are hardly new ideas, but they've really come of age. Organizations are interested not only in putting tools in place, but more around organizational capabilities—the analysis culture they need to pull that off.

Harris: Analytical decisions are such a hot topic right now, not only because we have the data and the technology processing power to use that information effectively, but because it's really an unmet need that goes back for decades.

If you look back at surveys from when the "CIO" term first came about, companies didn't just want someone who could slam in systems and build them infrastructure—they wanted someone who could help them get better information to make better managing decisions. Tom and I did a study about ERP systems going back to 2001, asking them, "What benefits did you most want from implementing ERP?" The answer was, "Better information for management decision making." Unfortunately, the benefit most slowly to be realized was better information for management decision making.

So there's been a desire for a very long time for IT to play a more proactive role not only in improving business transactions and processes more efficiently, but to help managers apply the information they need to make better decisions and put them into practice.

Davenport: IT organizations do an awful lot that's oriented to better decision making—not just business intelligence, but data warehousing, knowledge management, ERP systems. A lot of that is justified by its supposed contributions to better decision making, but the link between those activities is tenuous, to say the least.

We're starting to see a few IT organizations doing this better. A good example is Procter & Gamble, which renamed its IT organization "Information and Decision Solutions." But that opportunity for really affecting decision making has not been taken advantage of.