Book Review: Competing on Analytics

Like a well-written play, Competing on Analytics grabs the reader’s attention and establishes the basic premise early in the first scene. In its first few pages, the authors relate the compelling story of how Netflix beat the odds and triumphed over the then dominant Blockbuster to capture the loyalty of those who rent movies.

Netflix’s success is attributed to its focus on using quantitative methods in every aspect of its business. From the complex algorithms used to analyze customer preferences to the formulas that optimize profits by intelligent inventory management, the company exhibited a drive to use all available quantitative and computational methods to satisfy and win over the customer. The authors name this activity “analytics” and broadly declare that Netflix is in the top tier of “analytic competitors.” Thus, even without completely understanding what analytics really means, the reader is quickly convinced of the validity and importance of the topic.

It must be said that the word “analytics” (and all its variants) is used to great effect in this book. Certainly, it sounds more exciting to refer to the activities of number crunchers as analytics rather than plain old statistics. Nevertheless, credit is due to the authors for their ability to create interest in a topic that would normally be viewed as rather dull. Their thesis of the importance of analytics is illustrated primarily through the telling of numerous stories. Though there is a certain amount of name-dropping and exaggeration employed, there is a basic and undeniable truth to their thesis that analytics is a critical component of success in our information-driven society.

Today, six years after the book was published, the material doesn’t seem at all dated. In fact, the authors were quite prescient in their assessment that analytics would play an increasingly important role in business. Analytics is a buzzword that is still actively heard. Though it has been somewhat replaced by the recent “big data” moniker, the activities that analytics professionals employ have been on the rise. Today, we have universities offering courses in “data science,” and professionals who gleefully post their analytics credentials on LinkedIn.

A particularly interesting insight offered by the authors is their distinction in the chapter on “Managing Analytical People” between “analytical professionals” and “analytical amateurs.” As noted, the bulk of analytics is accomplished by individuals who don’t have PhD’s in statistics or operations research. And yet, there is value in having large number of information workers who can think analytically. In the last few years, we’ve seen a strong trend toward utilizing “visual analytics” in the form of popular software such as Tableau. These types of tools extends the ability of the “analytical amateur” to productively engage in quantitative analysis.

This is not a book where one can hope to learn much about the actual practice of analytics. Chapters such as “The Architecture of Business Intelligence” offer little more than a cursory survey of available technologies. Nevertheless, the authors do deliver on their basic message, and offer up a bit of insight into a topic that rightfully demands to be on the minds of everyone in a business organization, from analysts up to CEO’s.

Competing on Analytics: The New Science of Winning
by Thomas H. Davenport and Jeanne G. Harris
Harvard Business School Press, March 2007
218 pages, $29.95

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