When Thomas H. Davenport was writing about business analytics five years ago, the term du jour was “business intelligence.” Before that, it was “online analytical processing,” and before that “executive information systems,” and before that simply “decision support.”
Call it what you will, this thing he was looking at was essentially two activities: “There’s reporting, which is getting a handle on what has happened in your business,” Davenport says. “And there’s analytics, which, to me, is explanatory and predictive. It’s why this happened and what might happen going forward.”
Five years ago, Davenport says, analytics practitioners spent about 95% of their time reporting on the past and only about 5% on analysis. “Most companies were not really focused on the issue and, if they had analytics, it was a very siloed thing: a little bit in market research, a little bit in quality, maybe a little bit in actuarial for insurance companies.”
That’s changing. Some companies have gotten aggressive about analytics and become case studies for the smart use of analytics in their strategy: Progressive, Capital One, Harrah’s Entertainment, Google, UPS. But for most companies, the potential for analytics to become a critical tie to decision making remains an untapped opportunity.
The Leading Question
What challenges lie in the way of analytics being embraced by more executives for decision making?
- Most companies still distinguish between transactional information systems and decision-oriented systems, although that distinction is breaking down.
- The technical challenges of having analytics managers help executives in decision making pales compared to the cultural and political challenges.
- Companies don’t yet embrace the science of collaboration and don’t yet view collaboration as a mission-critical activity to be measured and optimized.
Davenport, who holds the President’s Chair in Information Technology and Management at Babson College, says the link between analytics and decision making needs to be relearned: “What I’ve seen a lot with the proliferation of data and data warehouses and business intelligence systems is that the tie to actual decision making has been lost. We generate a lot of data, we supply a lot of tools and we say to people, ‘Okay, go at it, have fun, play, make better decisions.’ But we never actually ensure that they do.” In a conversation with MIT Sloan Management Review’s editor-in-chief, Michael S.