Oz Analytics

Analytics at Work

Hot off the presses jumps Analytics at Work: Smarter Decisions, Better Results, the new book by Thomas Davenport, Jeanne G. Harris (both of Competing On Analytics fame) and Robert Morison. This book is very much the sequel to Competing On Analytics and this is not a bad thing. CIO Insight magazine named Competing on Analytics one of the all-time “Top 15 Most Groundbreaking Management Books”.

What I like about the book is that it is going after the big picture where better decisions drive outstanding performance, improve competitiveness and help organisations differentiate themselves from the competition.

This time the authors have completed new research on companies in the US and Europe. They include Humana, Tesco, Air France/KLM, Best Buy, Progressive Insurance, and Hotels.com. Using these organisations as illustrations the book is intended to be an implementation-focused guide that describes a five-step model for deploying and succeeding with analytical initiatives.

In the first half of the book five factors are presented as being necessary if an organisation is to succeed at 'doing analytics'. The authors group use the acronym DELTA (the Greek letter that signifies “change” in an equation):

• D for accessible, high-quality data
• E for an enterprise orientation
• L for analytical leadership
• T for strategic targets
• A for analytical talent

This all makes sense to me and then in the second half of the book the five-step model is explained. I will not spoil the authors work by discussing that here.

To me the book is presented as a primer for doing analytics. How well does it achieve this objective? The answer is both 'very well' and 'not really'. Let me explain:

• If you are a C* level executive trying to understand why you need analytics, and you want a high-level understanding of how to achieve this, then the book delivers - and delivers well.
• If you are a Senior Manager directly responsible for making analytics happen, the book is less successful. Not through any fault of the authors. I am one of these managers and I know that analytics is hard. Even a 1,000 page tome and a dozen CD's would not be enough for that.

So I hope that the book will inspire C* level executives that are interested enough to read a 200-or-so page book on the subject. If they only read one book on the subject then this is the one I would give them. For those that can't be bothered, then I can sit waiting for the next crisis to hit and the inevitable change of management to occur!

To the author's credit, I notice scattered throughout the book discussions (on pages 14-15 for example) and insight on how the Financial Industry got risk analytics so wrong - contributing to the financial crisis of 2007. Finance's use of analytics was featured as one of the successes in Competing On Analytics.

Although a Harvard Business Press title, the book is 'tied-in' to Accenture (Harris works for them and Davenport is an Accenture Fellow) and the company has a microsite within their Institute for High Performance consulting practice. Here's a nice brochure from Accenture on Analytics At Work.

A Timely Reminder

I spend a lot of my time developing knowledge management and analytic capabilities for organisations and I have just read a paper that gave me a timely reminder that a lot of the business world still operates in spreadland.

Spreadland is the country where decision makers rely on Microsoft Excel. The paper I read is 'The Importance and Criticality of Spreadsheets in the City of London' by Grenville J. Croll. You can read the paper here but the title is a good description of the contents. Grenville runs Spreadsheet Engineering Ltd, a 'spreadsheet risk & remediation specialist' consultancy and he should know what he is talking about as a former employee of Lotus in Europe who worked on re-engineering the Lotus 1-2-3 spreadsheet software for the European marketplace in the mid 1980's.

Originally published in 2005, the subsequent global financial crisis may have distracted a lot of us for a time but I believe that we should now return some of our attention to addressing the risks of spreadsheets. The risks the author describes are real and apply just as much today in Sydney and Auckland as they do in London.

As the author notes:

““two interviewees each disclosed without prompting ... a current and recent instance of where material spreadsheet error directly involving or concerning them had led to adverse events involving ““many tens of millions of pounds””.”

The thesis is straightforward with the author arguing that the City of London is presently exposed to "significant reputational risk through the continued uncontrolled use of critical spreadsheets in the financial markets”.

Here are some other notable quotes included in the paper:

““Put simply and succinctly, despite the higher operational risk, Excel is everywhere - it is the primary front-line tool of analysis in the financial business. Most traders price deals in spreadsheets and enter them in large-scale deal capture systems afterwards””

““Excel is utterly pervasive. Nothing large (good or bad) happens without it passing at some time though Excel””

““.. if a customer wants to do a bespoke trade that cannot be handled in our designated booking system then we have to book it in a spreadsheet and add a few bips to cover operational risk capital charge (and additional maintenance). How many bips to add is subjective””

““Spreadsheets are integral to the function and operation of the global financial system””.

Give it a read, at the very least it will give you a framework for thinking about the use of Excel in your organisation.