Companies focused on the intensive use of technology generally concentrate their efforts on those areas where they can obtain the greatest competitive advantage. But a new group of companies is changing things. Companies like Amazons, Harrah's, Capital One and Boston Red Sox have been ahead of their competitors by making intensive use of analytical information experiments, which they then use in a wide spectrum of activities. They do it not for pleasure, but because they need it.
These companies meet competitors who offer the same products, the same prices or even lower; that is, there are few aspects to differentiate. Few minus one: the processes.
In reality, the internal processes of the company are one of the few segments to differentiate ……..and Analytics can help you extract every last drop of value from your current processes.
With the use of Analytics, companies not only know traditional indicators such as what their customers are looking for, but also play with information on what prices they will pay for their product or service, how many of them will repeat their purchase throughout their lives or what it is what induces customers to buy larger quantities.
What is Analytics?
Analytics techniques are helping these companies to study market behavior and find out, not only the tastes of their customers but what they will do in the future.
In some way Analytics is the closest thing to the Predictions (Forecast) that we can imagine.
In a nutshell, Analytics is the intensive and sophisticated use of information to know, evaluate and predict the behaviors and behaviors of all the participants in the organization, whether they are customers, suppliers, staff, etc.
Anatomy of an «Analytical» competitor
A quintessential analytical competitor is the Marriott hotel company. Initially, Marriott began by using Analytics to adjust its rate management to peaks in demand for accommodation in its hotels. Revenue jumped from 83% to 91% of installed capacity within 2 years.
The effect was so positive that management ordered the use of Analytics in almost all areas of the company. Different models were created that aimed to improve processes such as the supply chain, customization in customer service, ordering of the franchise system, etc.
The results were surprising. Today Marriott has a department entirely dedicated to Analytics. In addition there is already talk of "classic" models developed by the Marriott team.
Characteristics of an «Analytical» competitor
Three are the most notable characteristics of an Analytical competitor:
1. Generalized use of optimization models: any company can generate simple and descriptive statistics of its business (eg Average sales per employee, or Average number of Sales Orders, etc.). But «Analytics» companies go beyond simple statistics. These companies use predictive models to identify their most profitable customers or those with the highest potential for profitability.
Also to classify those who have a greater probability of canceling their account and find out the reasons for it.
This data is subsequently distributed to the corresponding departments (sales, marketing, credits, operations, etc.) who will use this valuable information in their preventive policies, market segmentation, etc.
An Analytical competitor is the Progressive insurance firm that performs all kinds of analyzes to design credit policies associated with true risks.
In the highly dangerous segment of "motorcyclists from 30 to 40 years", Progressive carried out numerous analytical tests with its own and third party information. He built models based on simulations and scenarios and determined a rate for each type of risk associated with these motorcyclists and their economic-financial consequences for the firm.
The analytical model was an anticipated calculation of reality; claim probability rates were perfectly met and the company was able to successfully enter a segment that most insurance companies traditionally dodge.
2. Models adapted to each company: whether it is a large multinational corporation or a small SME that struggles to maintain its market share, «Analytical» companies design models that adapt to their reality.
Most business functions (including Marketing, even though this function has historically depended more on art than science) can be improved with the use of quantitative techniques.
Another example of a highly Analytical company is UPS, one of the great "players" in the mail distribution market. Although UPS was always known for its passion for rigorous compliance with its operations, its research area on customer response was too narrowly focused.
By adopting the «Analytics» techniques, the company was soon able to predict, with the highest accuracy, the dropout rate of its customers, making use of the information on the frequency of use of some services and the number of complaints. When the information pointed to a group of customers within that segment, UPS's sales department quickly contacted the customer to review and resolve problems, thus dramatically reducing the customer churn rate.
3. Management Commitment: Companies that decide to focus on the use of Analytics as a management tool are making a commitment to cultural, behavioral and skills change for most of their staff. And for this, as in many other stages of transition, it requires the commitment and support of company leaders who must transmit their support and trust through quantitative management methods.
A case that sums it up is Barry Beracha, CEO of Sara Lee Bakery Group. This executive has a sign in his office that says: "In God we believe, everyone else must bring data."
Examples:
Analytical competitors make expert use of statistics and modeling techniques to enhance a wide number of business functions. Let's see some examples:
