Last year, a client asked me an interesting question: How would you start Analytics in an organisation? And how do you make it contribute meaningfully to the bottomline?

This also seems to depend on the industry. While Banking has greater maturity in the use of Analytics, FMCG companies may not be that advanced. Also it takes time to build analytical maturity in a company. And it takes a certain unique mix of people- a combination of left & right brained!

The question was interesting from many perspectives:

1. What exactly is analytics and does the name describe the function?
2. How should one go about starting doing the work that analysts are supposed to do?
3. Where should the Analytics team report-is it part of a marketing team or somewhere else?
4. What kind of issues should analytics try and solve?
5. How much money needs to be invested to really make Analytics work?

go for the counter intuitive bit here and try to make your analysis work for a business unit that is not doing so well. Businesses doing very well, have a lot of competing ideas clamouring for a share of the credit. It’s in the businesses that need help, that you will find maximum support. And finally I would say that choose business themes that are close to the CFO’s heart! The CFO’s support for analytics is probably the most critical part of what you would do-this forms the building blocks on which you can scale up your efforts in the years to come!

I have often come across situations where organisation seem to believe that investing in top end statistical resources and buying high end technology is enough to extract value from analytics. The truth is vastly different and I strongly believe that embedding simple ideas and focussing far more on execution is critical for an Organisation to succeed in analytics based strategy.

But for companies to really make analytics a differentiator, they have to be able to take the simple ideas, embed intelligence in them & create a differentiated strategy. They have to be able to start small but then bring in the specialists & the technology to be able to make a significant impact on their businesses.How do you grow analytics & take it from a stage when it is a small acorn & grow it into a big oak which impacts business & company strategy.  For those of you who are interested, here is a wonderful book, The Deciding Factor, that walks you through how analytics has grown & how it has impacted different industries.

Companies need to be able to connect analytics with their business strategy & only then can analytics play a differentiated role.

“Companies competing on analytics typically differentiate their algorithms. But sometimes companies using the same models may decide on very different business strategies. Historically, most auto insurance companies used the same predictive model to assign risk to drivers and the same criteria to identify bad drivers. (Hence, “If you have these characteristics, you are 90 percent likely to have a claim.”) State Farm and Allstate took that information and decided to set pricey premiums to discourage people with bad driving records from applying. This was the strategy: charge customers even more than necessary to make a profit. Progressive took the same behavioral information and tried to attract drivers rejected by their competitors. Before they even did the modeling, they had a hypothesis that they could make money from “bad” drivers. Then they used analytics to find a policy price just slightly below State Farm and Allstate but high enough to make a profit on customers who were likely to submit a claim”.

Analytics book-The_Deciding_Factor-Jossey-Bass(2009)