Where should you dispatch your analytical bullets? Targets are the critical component of the analytical DELTA, since choosing what to analyze will help determine company performance.

Being a good analytical company requires the proper assets but also the ability to target the right areas for analysis. As authors Thomas Davenport, Jeanne Harris and Robert Morison (for author bios click here) write: “Keep in mind that the five DELTA elements are all interrelated, but targets may be the most dependent variable.”

A cuter way of explaining this point? You are sitting at the poker table with five cards in hand. Four of those cards (D, E, L, A) are assets that determine how well you can analyze. The fifth card (T) tells you what to analyze, or where to focus your company’s analytical attentions.

In this episode of our saga, we’ll spend some time on the T card: where to target your company’s analytical efforts.

For the our three co-authors, the first two steps in the analytical target practice are to find the proper opportunities (where can I spend some happy time crunching numbers?), and to set some ambitions (how long should I allow myself this happy time?).

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You may recall from our prior episode that analytics is a very ecological pursuit: lots of trees and a few forests. The wolves lurking in all this green could be called ‘lack of focus’, or ‘serendipity’. In other words, the worst thing a manager can do is jump into some complex, time-consuming analysis and discover after six months that maybe his time might have been better spent on some other analysis. For our authors, the good analytical thinker (click here for box on the stages of analytical evolution) is the one who sees the trees in their entirety and then decides which ones to go after. Which problems and issues within your company are the ones that are worth going after?

Finding the good targets
So, which are the good trees and which are the duds? The authors provide several ideas for finding the good targets. One easy way can be to go to your company’s strategic plan, and check what issues have been identified therein (e.g. innovation, growth, differentiation, marketplace impact). The chances are that the strategic plan will also mention which divisions in your company need the analytical support to improve their performance.

The authors are also helpful in providing an extensive list of some top analytical applications in twelve different business segments. Fraud detection in the financial services, disease management in healthcare, and yield management in the hospitality business are but three examples taken from that list (Table 5.1 on page 76 of the book).

Yet strategic plans sometimes fall short in their outlook. The authors therefore also suggest ‘big-picture thinking’ in order to add yet more trees to the forest. In particular a company’s performance drivers and its opportunities for differentiation.

A last area where a manager can seek trees for her analytical forest is in what the authors call ‘systematic process inventory’. What is this high-sounding beast? Quite simply, this is when a manager reviews which business processes are under pressure, so as to identify the ones that might need analytical help. For example, in the oft-quoted world of Harrah’s casinos (we suspect one of the authors has a bad gambling habit!) this might cover key areas such as customer loyalty, or employee productivity, or external service value.

Setting ambitions
Whew, well after all that, you have probably identified a few opportunities. Alas, you may also have come to the realization that those opportunities will require a battalion of analysts that are not included in this year’s budget…

Which is why the authors rap our knuckles and admonish us to set some realistic ambitions. Don’t take on too many trees, and don’t spend too much time on those trees. To select the right trees, the authors suggest the good old one-two punch. First, assess what benefits the analysis of that tree may bring. Second, do you have the capabilities to handle that analysis?

Since we are in the tree and forest metaphor, the authors very thoughtfully provide us with a conceptual ladder which enables us to ‘climb the tree’, i.e. become increasingly analytical for a specific problem (e.g. yield management for a cruise ship or customer retention for a telecom company).

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This ladder does give a framework for developing analytical projects, starting from simple data hygiene all the way up to real-time optimization. However in developing this theoretical framework, the authors leave us in some doubt as to its proper use. Alas this is often the case in this book, where down-to-earth examples do not always underpin the theoretical concepts. The reader’s eyes sometimes glaze over, under the stream of buzzwords.

By Chris Fodor, published November 2010.
The next installment will appear on December 1.