Competing on Analytics:

The New Science of Winning

By Thomas H. Davenport and Jeanne G. Harris
Competing on Analytics: The New Science of Winning

Take some overweight players, batters that dont hit home runs to plan and run a high-performance
organization, including analytics, data
and pitchers that dont strike out and what do you get? A winning quality and cleansing, and structured
Major League baseball team. Thats what the Oakland Athletics and unstructured content.

discovered in 2002 when they turned to analytics to make up for Further, analytics are a large market
the second-lowest payroll in baseball. The team discovered that with plenty of room to grow. Accenture
Institute research found that high
wins could be had by more affordable methods, such as hitters performance businesses have a much
with high on-base percentages and pitchers who got lots of ground higher analytical orientation than other
organizations. Only a few leaders have
outs. As a result, the Oakland As reached the post-season playoffs realized the full potential of competing
three years in a row, despite having one-third the budget of the on analytics so far. According to recent
Institute research, approximately 10
New York Yankees. percent of company executives (15
percent of executives in high perfor-
More and more organizationsas disparate former director of the Accenture mance businesses) view their analytical
as Netflix, Harrahs Entertainment and Institute for High Performance Business. capability as a key element of their
the global cement giant CEMEXhave Harris is executive research fellow and strategy. But nearly every organization
discovered the power of analytics to director of research at the Accenture aspires to use analytics more effectively
out-think and out-execute the compe- Institute for High Performance Business. and expects to invest to upgrade
tition. These market-leading companies analytical capabilities significantly
see their ability to exploit analytics as This is the first Accenture book to over the next five years.
their distinctive capabilitythe integrated establish a quantitative link between
business processes and capabilities that information and technology and our Analytics and the broader field of
together serve customers in ways that high performance business research business intelligence (BI) that encom-
are differentiated from competitors and and brand positioning. It is also the first passes it will require high-value
that create an organizations formula book describing how to use analytics as consulting upfront for the strategy and
for business success. a distinctive capability to derive maximum analytics, systems integration to design
business value from information. The and implement, and a cost-competitive
analytical maturity model cited in the delivery model to maintain and operate.
Why this book is important book will become the basis of a new BI also leverages and extends previous
diagnostic tool Accenture is developing engagement experience and research,
Now, for the first time, the power of to analyze an organizations analytical such as the New Growth from
analytics will be addressed in a book capability. Enterprise Systems study and high
that strategically positions and differ- performance business findings.
entiates Accenture in a major growth Analytics are a vital element in each of
area. Competing on Analytics: The our key growth platforms. Analytically In short, analytics play to Accentures
New Science of Winning, by Thomas intensive offerings already exist in every core strengths. By integrating consulting,
H. Davenport and Jeanne G. Harris, business capability, such as pricing technology and outsourcing, analytics
will be published by the Harvard strategy, customer insight, supply chain hit Accentures sweet spot and position
Business School Press in March 2007. optimization and enterprise performance the firm at the center of a major
Davenport, currently the Presidents management. Every industry has ana- growth area. Analytics will form the
Chair in Information Technology and lytically oriented offerings tied to its core of enhanced analytical offerings
Management at Babson College, is the unique value proposition. In addition, in virtually every industry and service
Accenture Information Management line. Importantly, analytics build on
Services was formed as a dedicated and extend high performance business
organization to further extend our
commitment to integrate and manage all
the diverse information assets necessary

2 | Accenture Institute for High Performance Business

Competing on Analytics: The New Science of Winning
Quick Q&A
What exactly are analytics?
Analytics are the extensive use of data,
statistical and quantitative analysis,
explanatory and predictive models, and
fact-based management to drive decisions
and actions. The analytics may be input
for human decisions or may drive fully
automated decisions. Analytics are a
subset of what has come to be called
business intelligencea set of technologies
and processes that use data to under-
stand and analyze business performance.
What is an example of competing
on analytics?
Capital One conducts more than
30,000 experiments a year with different
interest rates, incentives and direct-mail
packaging to maximize the likelihood
that potential customers will sign up
for credit cards and pay the money
they owe. The initiative has spurred at
least 20 percent growth in earnings per
share every year since the company
went public.
3 | Accenture Institute for High Performance Business
How can analytics create What are the three take-aways that
competitive differentiation? people can expect from this book?
At a time when companies in many 1. High performance businesses use
industries offer similar products and analytics for competitive differentiation.
use comparable technology, many 2. True competitive advantage comes
of the previous bases for competition when organizations apply analytics
are no longer viable. In a global envi- across the enterprise, as opposed to
ronment, physical location is frequently applying it only to segments of the
not a source of advantage and protec- organization.
tionist regulation is increasingly rare. 3. More companies will choose to
Proprietary technologies often can be compete on analytics as their
rapidly copied, and attempts to achieve distinctive capability in the next
breakthrough innovations often fail. five years as a way to outperform
Whats left as a basis for competition is their competitors.
execution and smart decision making.
Sophisticated analytics enable market-
leading companies to generate a new
and lasting competitive advantage.
Who is this book written for?
CEOs, COOs and CIOs in virtually every
industry can learn important insights.
Additionally, government agencies that
are information intensive, such as
homeland security, intelligence, the
military, revenue and police, also com-
pete on their ability to out-think and
out-analyze their competition. Early
adopters are likely to be in industries
that have accurate and available data,
including consumer goods, pharmaceu-
tical and life sciences, retail, financial
services and industrial products such as
automotive. In addition, analysts and
information workers can learn how to
apply analytics more strategically. Major
analytical software companies also will
be interested, such as SAP, Oracle,
Microsoft, SAS, SPSS, Fair Isaac and
Business Objects.
Competing on Analytics: The New Science of Winning
research, showing organizations how
analytics can support or drive a distinc-
tive capability that delivers lasting
competitive advantage.
The book will receive major marketing
attention that can reap business bene-
fits for years. It will be the cornerstone
of joint marketing efforts in a research
consortium now being formed with
Babson College, Harvard Business
School Press, SAS, Intel and Concours.
This consortium aims to build long-term
strategic relationships and influence the
market by creating branded thought
leadership and becoming the authoritative
center of the analytics community.
Harvard Business School Press expects
to turn the book into a long-term
franchise, extending its impact through
conferences, Webinars, newsletters,
white papers and Harvard Business
Review articles.
Analytics in action
Analytics may be applied to a variety of
business problems, including customer
management, supply chains and financial
performance. Virtually every major
company uses some form of statistical
or mathematical analysis in its business,
but some take analytics much further
than others, as these examples show:
Communications & High Tech
Verizon uses analytics to speed up
and broaden decision making.
The company created a continuous
scorecard broadcasting hundreds of
performance metrics to PCs around
the company, each occupying the
screen for 15 seconds. The scorecard
encourages everyonenot just senior
executivesto address issues that
appear in the data.
4 | Accenture Institute for High Performance Business
Dell Computer created a database of Resources
1.5 million records of all its print, CEMEX used analytics to optimize
radio, broadcast TV and cable ads. supply chains so that it could charge
Dell couples the database with data a premium for delivering ready-
on sales for each region in which the mixed cement sooner.
ads appeared, both before and after
their appearance. The information
enables Dell to fine-tune its promo- About the Authors
tions for every medium in every
region.
Netflix uses analytics to predict
customer movie preferences.
Financial Services
Barclays Bank applies analytics to
the marketing of credit cards and
other financial products in order to Jeanne G. Harris is an executive senior
attract and retain the best customers research fellow and director of research
at the lowest price. at the Institute. She can be reached at
Progressive Insurance profitably jeanne.g.harris@accenture.com
insures customers in traditionally
high-risk categories, such as motor-
cycle riders. It defines narrow
customer groups, identifies the
factors that most closely correlate
with the losses that group engenders,
sets a price for each group and then
uses simulation software to test the
financial implications of the Thomas H. Davenport is the former
hypotheses. director of the Institute. Currently, he
is the president's chair in information
Products technology and management at
Harrahs Entertainment used analytics Babson College.
to create the gaming industrys
first loyalty program, emphasizing
customer service, pricing and
promotions over building mega-
casinos.
Marriott Internationals analytical
approach to establishing the optimal
price for guest rooms has been
expanded to cover the best way to
acquire properties to manage.
UPS not only tracks the movement
of packages but also uses analytics to
anticipate the likelihood of customer
attrition so that targeted interventions
can occur.
Competing on Analytics: The New Science of Winning
Whats inside the book
Competing on Analytics: The Science
of Winning answers six key questions:
Who competes on analytics and why?
What is the link between business
performance and competing
on analytics?
How are top performers using data
and sophisticated predictive analytics
to out-execute the competition?
What are the mindsets, strategic
decisions and practices of top
performers that compete on analytics
and achieve high performance?
What is the road map to develop an
analytical capability?
How do companies use analytics to
create differentiating business
processes in different industries?
The forward is by Gary Loveman, CEO
of Harrahs Entertainment. The body of
the book is divided into two parts,
encompassing nine chapters:
The Nature of Analytical
Competition
Chapter 1
The Nature of Analytical Competition:
Using Analytics to Support Distinctive
Business Capabilities
Chapter 2
What Makes an Analytical Competitor?
Defining the Common Key Attributes of
Such Companies
5 | Accenture Institute for High Performance Business
Chapter 3
Analytics and Business Performance:
Transforming the Ability to Compete on
Analytics into a Lasting Competitive
Advantage
Chapter 4
Competing on Analytics with Internal
Processes: Financial, Manufacturing,
R&D and Human Resource Applications
Chapter 5
Competing on Analytics with External
Processes: Customer and Supplier
Applications
Building an Analytical
Capability
Chapter 6
A Road Map to Enhanced Analytical
Capabilities: Progressing through the
Five Stages of Development
Chapter 7
Managing Analytical People:
Cultivating the Scarce Ingredient That
Makes Analytics Work
Chapter 8
The Architecture of Business
Intelligence: Aligning a Robust
Technical Environment with Business
Strategies
Chapter 9
The Future of Analytical Competition:
Approaches Driven by Technology,
Human Factors and Business Strategy
Back-of-the-book matter includes
notes, an index and author biographies.
 About Accenture

Accenture is a global management consulting, technology

services and outsourcing company. Committed to delivering
innovation, Accenture collaborates with its clients to help
them become high-performance businesses and govern-
ments. With deep industry and business process expertise,
broad global resources and a proven track record, Accenture
can mobilize the right people, skills and technologies to
help clients improve their performance. With more than
133,000 people in 48 countries, the company generated net
revenues of US$15.55 billion for the fiscal year ended Aug.
31, 2005. Its home page is www.accenture.com.

About the Accenture Institute for

High Performance Business
The Accenture Institute for High Performance Business cre-
ates strategic insights into key management issues through
original research and analysis. Its management researchers
combine world-class reputations with Accentures extensive
consulting, technology and outsourcing experience to con-
duct innovative research and analysis into how organizations
become and remain high-performance businesses.

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