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2011


In 1997, a computer named Deep Blue defeated Garry Kasparov, the world chess champion at the time. In 2011, another computer, Watson, competed and won against former champions of Jeopardy!, the popular U.S. television quiz show. Both events changed perceptions about what computers could do. Deep Blue demonstrated the power of new parallel processing technology, and Watson showed that computers can understand ordinary language to meet the challenges of the “real world.”

In computer science terms, Jeopardy! is much harder than chess. Whereas Deep Blue used specialized computer chips to calculate outcomes of possible chess moves, Watson answered unpredictable questions put forward in peculiarly human speech patterns. Today, almost any computer can scan a database to match structured queries with answers. In contrast, Watson was able to “read” through a massive body of human knowledge in the form of encyclopedias, reports, newspapers, books and more. It evaluated evidence analytically, hypothesized responses and calculated confidence levels for each possibility. It offered up, in a matter of seconds, the one response with the highest probability of being correct. And it did all that faster and more accurately than its world-class human opponents.

New analytical tools for making decisions, such as Watson, are bringing about entirely new opportunities. With the digitization of world commerce, the emergence of big data and the advance of analytical technologies, organizations have extraordinary opportunities to differentiate themselves through analytics. The majority of organizations have seized these opportunities, according to this study, “Analytics: The Widening Divide,” by the MIT Sloan Management Review and the IBM Institute for Business Value. Fifty-eight percent of organizations now apply analytics to create a competitive advantage within their markets or industries, up from 37% just one year ago (see Figure 1).1 Significantly, these same organizations are more than twice as likely to substantially outperform their peers. To understand how organizations are using analytics today, we surveyed more than 4,500 executives, managers and analysts from more than 120 countries.

About the Authors:

David Kiron is the Executive Editor of Innovation Hubs at MIT Sloan Management Review, which brings ideas from the world of thinkers to the executives and managers who use them to build businesses.

Rebecca Shockley is the Business Analytics and Optimization Global Lead for the IBM Institute for Business Value, where she conducts fact-based research on the topic of business analytics to develop thought leadership for senior executives.

Nina Kruschwitz is an editor and the Special Projects Manager at MIT Sloan Management Review, where she coordinates the publication’s innovation hub activities.

Glenn Finch is the Managing Partner for North America for IBM Global Business Services’ Business Analytics and Optimization practice, where he works with global business leaders to transform their organization into analytically-driven organizations.

Dr. Michael Haydock is the Chief Scientist for IBM Global Business Services’ Business Analytics and Optimization practice, where he works with global clients to develop advanced analytic solutions that deliver business value by enabling organizations to better understand and interact with customers.


Contributors

Fred Balboni, Global Leader, Business Analytics and Optimization, IBM Global Business Services

Deborah Kasdan, Writer, Strategic Communications, IBM Global Business Services

Christine Kinser, Strategic Programs Global Leader Communications, IBM Global Business Services

David Laverty, Vice President Marketing, IBM Software Group (Information Management)

Eric Lesser, Research Director, North America, IBM Institute for Business Value, IBM Global Business Services

Mychelle Mollot, Vice President Marketing, IBM Software Group (Business Analytics)

Katharyn White, Vice President Marketing, IBM Global Business Services


Acknowledgments

Dr. Steve Ballou, IBM; Dr. Steve Buckley, IBM; Susan Cook, IBM; Adam Gartenberg, IBM; Robert Gooby, McKesson; Mark Grabau, IBM; William Houghton, GM; Christer Johnson, IBM; Kevin Keene, IBM; Peter Korsten, IBM; Dr. David Kreutter, Pfizer Inc.; Monica Logan, IBM; Kathleen Martin, IBM; Dwight McNeill, IBM; Michael Peters, BAE Systems; Cathy Reese, IBM; Stephanie Schneider, IBM intern; Michael Schroeck, IBM; Craig Silverman, IBM; and David Turner, IBM.


Knowledge Partner

IBM Institute for Business Value

IBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior executives around critical public and private sector issues. This executive report is based on an in-depth study by the Institute’s research team. It is part of an ongoing commitment by IBM Global Business Services to provide analysis and viewpoints that help companies realize business value.

You may contact the authors or send an e-mail to iibv@us.ibm.com for more information.

Additional studies from the IBM Institute for Business Value can be found at ibm.com/iibv


References

1. Organizational performance is a self-assessed measure that delves into the organization’s competitive position relative to its industry peers. Respondents are asked to select one option from five choices: substantially outperforming competitive peers, significantly outperforming competitive peers, on par with competitive peers, slightly underperforming competitive peers, or significantly underperforming competitive peers.

2. LaValle, Steve, et al. “Analytics: The New Path to Value.” MIT Sloan Management Review and IBM Institute for Business Value knowledge partnership. October 2010.

3. ibid.

4. IBM Institute for Business Value. “Capitalizing on complexity: Insights from the 2010 IBM Global CEO Study.” May 2010.

5. Corporate Executive Board, “Internal Audit’s Role in ERM,” referenced 21 October 2011.

6. Torok, Robert. “Improving enterprise risk management outcomes.” APQC. 2011.

7. Clanton, Brett. “Chevron stayed busy while idling in deep water: Staying busy while idle – Confronting a deep-water slowdown in the Gulf, Chevron worked to get more from its data.” Houston Chronicle. July 11, 2011.

8. ibid.

9. Teerlink, Dr. Marc and Dr. Michael Haydock. “Customer analytics pay off: Driving top-line growth by bringing science to the art of marketing.” IBM Institute for Business Value. September 2011.

10. Our findings on the two paths are based on response patterns from a representative sample of Experienced organizations using a subset of key questions from our survey.

i.Looking at Robert Bruce’s Two Huge Healthcare Bets,” Guru.com. September 6, 2011. Accessed on October 17, 2011.