In the strategy and operations space, the cost of guessing wrong is rising. Or, as our colleagues in the renascent field of analytics suggest, the cost of guessing at all is one we should be ready to put behind us. While there is comfort in intuition, a better answer is out there: Not acting on it represents an opportunity lost, and potentially money left on the table.
In this issue of Deloitte Review, we consider analytics and its implications for business strategy and operations. Analytics is hardly a new topic. As described in “Beyond the Numbers,” it helped revolutionize the Royal Mail in the 19th century, when Charles Babbage demonstrated that it cost more to price mail differently according to distance than it did to carry it at uniform rates. Yet while the theory and equations persist, our ability to collect and process information to drive business decisions has been transformed beyond recognition. We can measure and know seemingly anything.
What is hard to measure, however, is the potential of analytics, in combination with recent technologies, to change the competitive playing field. Hundreds of terabytes of information are produced each day in various forms – text and text fragments, transactional records, Internet clicks, digital multimedia, and RFID and geospatial GPS signals. There is very little about an object, environment, behavior or process that is unknowable. Collectively, these data streams can be an unwelcome deluge or—for organizations with a mastery of analytics—an opportunity to introduce greater efficiencies into operations or to pursue newly feasible disruptive strategies.
While a rising tide lifts all ships, that outcome depends to a large extent on the condition of the metaphorical hull – in this case, strength in analytics. In the United States, with increased pressure to identify and mitigate waste, fraud and abuse, the government has begun to use sophisticated analytics to identify and investigate improper payments that it may have made to contractors, with some agencies using predictive analytics and near-real-time transaction monitoring tools to catch errors prior to payment. As described in “Caught in the Middle,” this reinforces the need for accuracy and compliance, and suggests that formerly leading- edge analytical methods may be table stakes.
We see a sharp distinction between the haves and have-nots in the analytics discipline, and exciting opportunities for those with the imagination to turn the new tide of information to their advantage.