The Business Impact of Business Analytics
Posted July 19, 2018 by Tom Davenport
- President’s Distinguished Professor of Information Technology and Management - Babson College
There is an increasing amount of concern that business school research doesn’t have sufficient impact on business practice and practitioners. One recent provocative article even suggested that to produce research that isn’t useful to business school stakeholders is immoral. I share the belief that business research should be useful to businesses, having made a personal decision more than 30 years ago to publish research that was intended to influence practitioners as well as other academics. So I was excited to speak about the impact on practice of business analytics at the AACSB Co-Lab conference this past June at Drexel’s LeBow College of Business. “Connecting Business Schools With Practice” is a subtitle that stirs my soul.
Demand and Supply for Analytics
Business analytics—in both teaching and research about it—has been one of the recent bright spots in business school impact. As AACSB’s Dan LeClair noted in a blog post earlier this year about analytics, more than 400 degree programs on the topic are now offered by business schools worldwide. LeClair credits this upsurge in programs to an almost insatiable demand for analytics talent, and indeed that is an important factor in the rise of analytics at business schools.
But there are supply factors at work, as well. Of course, business analytics has long been a focus of business academics. “Operations research,” the primary precursor field for business analytics, has been a popular focus for faculty research and teaching for several decades now. Econometrics—a set of analytical tools favored by economists—has also been a focus of the many economists who have settled in business schools. Many business schools have offered basic and advanced statistics courses to students, which often were required for graduation. Disciplines such as marketing, finance, and even human resources have embraced analytical methods and strategies to varying degrees.
The primary implication of the long-term analytics focus in business schools is that once the demand became apparent, business schools could waste little time in supplying well-trained students. The first master’s degree in analytics (drawing from faculty across the university—not just the business school) was established at North Carolina State University in 2007, and many more have followed. Programs in data science, business intelligence, quantitative management, and other similar concepts have also proliferated.
Practice-Oriented Research and Writing on Analytics
I’d also like to think that practice-oriented research and publications helped create the demand for analytics in business. I had published a few articles on that topic, but none really took off until the 2006 publication of my Harvard Business Review article “Competing on Analytics.” It describes how some companies were beginning to compete on the basis of their analytical capabilities. I would never have predicted—using predictive analytics or intuition—that it would be named one of the 12 most influential business ideas of the decade by HBR editors, or be included as one of 10 articles in the “HBR Must Reads: The Essentials” collection. Certainly many management concepts have been more popular, but I remain surprised that such a relatively nerdy topic like analytics would become so appealing.
Many other people had, of course, written articles that used analytics to make their case, but this was one of the first nontechnical treatments of the analytics topic. I remain grateful to the leading practitioners who shared their approaches and results with me for that article. I often say that a practice-oriented academic like me can only succeed by relating the heroic activities of practitioners and their organizations.
In the following year, I coauthored the book Competing on Analytics with Jeanne Harris of Accenture, and then revised and updated it a decade later in 2017. Another popular book about analytics, Super Crunchers by Ian Ayres (a Yale Law School professor), also came out in 2007. Today the topic of “competing on analytics” gets almost 80,000 Google hits, and “analytics” alone has 10 times the number of monthly Google searches that it got in January 2004 (although it is now declining somewhat; more fashionable concepts, like machine learning, are overtaking it). As the topic evolved, I felt compelled to write or coauthor several other books and articles on analytics, big data, data scientists, and artificial intelligence. Whatever the concept is called, to me these are all different variations on the same theme—that data, analytics, and algorithms are becoming increasingly important to business success. But practice-oriented academics must employ the concepts and terms that practitioners find exciting.
Factors Driving the Impact
Several factors enhanced the impact of the business analytics idea. Here are some of them:
- Timing played a big factor in the response to business analytics ideas, as it usually does. Companies had been putting transaction systems in place for a couple of decades by the early 2000s and accumulating data from them. By the mid-2000s companies were ready to use analytics to make sense of it all.
- Vendors like SAS, IBM, SAP, and Oracle both provided capable analytics software and also marketed the concept aggressively. I worked with all these firms, but much more closely with SAS than any of the others. They adopted “competing on analytics” as a marketing campaign and told me that it was one of their most successful ever. They also provided me with numerous ideas and case studies for how to use analytics effectively.
- I believe that one of the most effective vehicles for business school collaboration with firms is the sponsored research program, and it was helpful in solidifying this “competing” idea, as well. In the mid-2000s I co-directed the Working Knowledge Research Center at Babson, and “Competing on Analytics” research took place under its auspices. SAS and Intel were the most active sponsors of the topic within that center. Now there are several other analytics-oriented sponsored research centers at business schools, including at the University of Kansas, Georgia Tech, the University of Maryland, and others. The topic of analytics in general at research centers has branched out to topics like customer analytics (at Wharton and Yale), people analytics (at Northeastern and Wharton), and supply chain analytics (at the University of Tennessee). These centers have spawned lots of research articles and books, conferences, and enlightened businesspeople.
- Analytics even captured popular culture to some degree. The popular book and movie, Moneyball, brought the concept of analytics in sports to the masses. The MIT Sloan School’s Sports Analytics Conference, which began in 2006 in a small classroom, now attracts thousands of attendees, and last year featured Barack Obama as a speaker.
Not all of these factors will be present in other business ideas that have impact, but at least some of them should be. If there is a formula for success, it’s probably a simple equation of (D [demand for talent and ideas] + S [supply of faculty expertise and ideas] + E [an ecosystem of interested companies and research centers]) * T (a timing factor) = I (impact). Let’s hope that many other ideas with the winning combination of these variables help business schools achieve greater impact in the future.
Thomas H. Davenport is the President’s Distinguished Professor of Information Technology and Management at Babson College, a fellow of the MIT Initiative on the Digital Economy, and a senior advisor to Deloitte’s Analytics and Cognitive practice.