Effective Analytics Requires Actual Analysis, not Just Tools or Data

In a previous post we examined business’ new-found love of metrics & analytics data in their quest to prove the efficacy of marketing programs, specifically initiatives around social media and other popular initiatives long on buzz but short on proven ROI.

And the market, forever on the lookout for the next rich vein of hype to mine, is quick to respond. Google “big data” and you are presented with the usual suspects – including IBM, Accenture, Oracle, SAS, even McKinsey – offering to help you with this latest new new-thing, that promises to help business find new customers and sell more to the ones they already have.

But dig a bit deeper and you will quickly discover that, while the volume of data has indeed grown, the problems business leaders face in dealing with them haven’t really changed. For lack of data was never really the problem. Interpreting what it means, extracting true insight and knowledge, and acting on it was. And this challenge remains and, in fact, grows larger in lockstep with the growth in data volumes.

But the countless tools being pushed by vendors are unlikely to solve this quandary, at least not in the short-term, and certainly not without significant investment in process and people. Most tools on offer today focus primarily on data capture, storage and visualization. What’s missing is something that no tool will be able to provide, at least not off the shelf and without the help of actual people: true analysis.

And this is where business continues to struggle. As Shvetank Shah, Andrew Horne, and Jaime Capellá summarize in their excellent Harvard Business Review article, one of the big challenges is that “Analytic skills are concentrated in too few employees.” If they truly exist at all to the degree needed in many organizations, I would add.

Data and charts are no substitute for insight

Long on data, charts and tools, short on effective analysis and insight.

For most analysts, even those working at large, relatively sophisticated companies, while familiar with business intelligence tools and platforms, lack the contextual knowledge and business insight to provide truly valuable analysis. So they are left to create their weekly reports, regularly feed the dashboards with data, create monthly presentations and charts, but often lack the fundamental understanding of what drives what and how it affects the bottom line. As the HBR article summarizes succinctly, “Managers need to wake up to the fact that their data investments are providing limited returns because their organization is underinvested in understanding the information.”

And one pivotal reason for this deficit of understanding is the absence of qualified and trained analysts equipped with the needed business knowledge, an innate grasp of what is truly significant, and the analytical rigor to add the contextual insight required. For without this, all trends will seem meaningful and it is difficult to discern correlation from causality, and identify relevant, but perhaps small shifts in patterns.

At the root of this lies, I believe, our slavish obsession with quantitative data. A focus on reports, and tools, at the expense of critical thinking and sound judgment. This is reflected in the profiles of most analysts working to gather, collate, organize and interpret business data, in particular in marketing. Most came to their position because they were familiar with certain BI tools or analytics platforms and not necessarily because of their critical thinking or analytical talent. Many have a background in engineering, math or statistics (reflecting our obsession with so-called “quants”), which works well in highly-structured applications such as finance, automated trading, and risk management, but less so in more fluid, complex areas as marketing and the Web. Here, these “hard skills”, while no doubt valuable and needed, need to be augmented by a deep contextual understanding of the business, the technology, application and scenario that generated the data being analyzed. To be truly effective, the analyst will also require a certain degree of sound judgment that can only come from real-world business experience.

Previously, in simpler times, analysts would prepare standard reports and feed data to executives via dashboards and other means under the assumption that these more senior business leaders would then provide the contextual business knowledge to interpret the data. The problem we face now is that data is far more voluminous and permeates nearly every aspect of business, along each step. So, while the job of the analyst used to be to simply to gather sales data from POS or ERP systems and compile them into a report for executives to interpret, they are now called upon to judge which data are relevant and how they are to be structured and presented.

Basically, as data availability and volume has exploded and much of it is now generated well before a purchase decision is reached, the level at which important decisions are made has also moved down the reporting hierarchy. Unfortunately, the knowledge, skills and experience needed to effectively make these pivotal decisions still resides mostly at the senior management level, creating a disconnect.

As the HBR article summarizes in closing, “To overcome the insight deficit, Big Data—no matter how comprehensive or well analyzed—needs to be complemented by Big Judgment.” Many organizations still have a long way to go in this regard, I believe.

About Daniel Backhaus

Dan has close to 15 years of experience in the field of information technology, brand development, and interactive marketing, working with brands that include Bayer AG, BMW, Daimler-Benz, Deutsche Bank, H&R Block and Wachovia. His diverse background includes service in our nation’s military, and stints at Xerox, TSYS, several technology start-ups and leading interactive agencies in Europe and the United States. Originally from Germany, he has lived and worked in Germany, the Czech Republic, Greece and England before settling in Atlanta in 2005. A PMI-certified Project Management Professional and a Six Sigma greenbelt, his experience includes digital strategy, solution sales, new business development, enterprise systems implementation, project and program management, SEO/SEM and Web Analytics. Dan holds a BS in Business Management from Arizona State University and an MBA with concentration in international business from the European University in Montreux, Switzerland. The parent of three young children, Dan’s interest in environmental sustainability issues stems from concerns over their future well-being and his international background have given him an enlightened perspective on the challenges we face and the approaches other countries and societies have taken in addressing them. Dan blogs about technology, his love of writing, interactive marketing, brand development and strategy and whatever or whoever might have pissed him off the week before.
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One Response to Effective Analytics Requires Actual Analysis, not Just Tools or Data

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