In this volume, Thomas Davenport and Jeanne Harris explain how to become an analytical competitor: “an organization that uses analytics extensively and systematically to outthink and outexecute the competition” through support of a strategic, distinctive capability (e.g. Netflix and Wal-Mart), taking an enterprise-level approach to and management of analytics (e.g. Harrah’s Entertainment and RBC Financial Group), sustaining a commitment to analytics by senior management (e.g. Jeff Bezos, founder and CEO of Amazon, and Rich Fairbank, founder and CEO of Capital One), and having large-scale ambition (i.e. the aforementioned companies as well as others “bet their future success on analytics-based strategies”), with senior executive commitment “perhaps the most important because it can make the others possible.” Davenport and Harris classify companies within five stages of analytical competition:
Stage 1: Analytically impaired (“flying blind”)
Stage 2: Localized analytics (isolated, fragmented, disconnected, inconsistent, etc.)
Stage 3: Analytical aspirations (sees need, begins to explore options)
Stage 4: Analytical companies (enterprise-wide perspective, eager to innovate and differentiate)
Stage 5: Analytical competitors (analytics are the primary driver of performance and value)
Obviously, the challenge is to become a Stage 5 organization but an even greater challenge is to remain one. According to Davenport and Harris, companies that successfully compete on analytics have analytical capabilities that are difficult to duplicate, unique, adaptable to many situations, better than the competition, and renewable. By design and when utilized, those capabilities must also be able to accommodate all manner of changes within the given competitive marketplace. In some circumstances, in heavily regulated industries or when the analytics support an obsolete business model (e.g. large U.S. airlines such as American and United), analytics are not enough. Still another challenge is to identify those internal applications of business analytics that are clearly strategic and involve competitive advantage.