Analytics Is The Key To Digital Innovation
Software is indeed eating the world and every business is in the data business. In fact, every action by the company, its prospects, and customers creates a digital trace. Digital era leaders have used this information to both understand where they stand and to figure out where they go next. Analytics is the lens through which companies make sense of their state of affairs; analytics helps them navigate the uncertain future.
When digital innovation fails, analytics is responsible; when it succeeds, analytics is responsible. There is little doubt conceiving new products, processes, and business models with digital components takes mastery of the digital domain. Analytics has played a critical role in the optimization and automation of the enterprise. Now, we argue, it has become a critical resource for digital innovation. But, before you can lead digital innovation with analytics, you need to embrace a new understanding of analytics.
“Analytics has become a critical capability for digital innovation”
Analytics is “the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions.”¹ The digitalization of the enterprise has standardized processes and generated efficiencies, engendering large amounts of data for the enterprise to control and automate its processes. In the midst of business digitalization, analytics proved the ideal tool set to make sense of those seas of data, optimizing processes and the flow of goods.
Over the last decade, we have seen analytics leaders break away from their competition. Examples abound: Wal-Mart, using analytics to monitor the movement of products at the store level, can predict how stocks will decrease and schedule reorders; Amazon, analyzing our browsing behavior on its website, can anticipate an imminent order and ship the product before we authorize the order; Alphabet analyzing product feature use and determining to keep it or remove it from its next beta release; and Twitter deciding to close its APIs based on the number of innovative front ends to its platform.
A quote by Lew Platt, former CEO of Hewlett Packard, encapsulates the optimizing perspective of analytics: “If only HP knew what HP knows, we’d be three times more productive.”² When operating in this paradigm, companies use analytics as a tool to illuminate.
Enter the technologies enabling digital transformation. Datafication has created new forms of value and led to a new kind of analytics. Sensors, mobile devices, and apps (including social media) generate loads of new data. The meshing of these digital technologies enables capturing of online behavior and, in the best cases, relating the digital and the physical domains. New forms of data enable digital innovation of products, processes, and business models; analytics becomes a tool to enlighten.
“Traditional competitors use analytics to shed light into what they do; digital innovators use analytics to be enlightened and innovative.”
For mature organizations and startups to innovate with digital technologies, they must employ people who understands what digital makes possible and who can use analytics to make the most of the datafication process.
Analytics and the Digital Innovator
In our research, we have identified the traits and attitudes of the successful digital innovator³⋅⁴. We have found that the individual who can “bricolage” products and services using digital technologies, spanning the physical and digital domains, is poised to become the leader of digital innovation. Among her most important characteristics, the digital innovator is an agile experimenter who “evaluates opportunity, executes strategy, and manages outcomes, then shares all decisions and lessons learned with upstream levels of management.”⁴
To create business value with digital technologies, the digital innovator relies on experimentation and continuous market feedback. The digital innovator needs to embrace analytics as a tool of enlightenment. In forthcoming posts, we will explore the role of traditional and novel analytics competencies in enabling digital innovation.
This is the first post of a series of articles on analytics and digital innovation. We invite you to leave your comments and read the second post: “The Analytics Skills of the Digital Innovator.“
¹ Davenport, T. H., & Harris, J. G. (2007). Competing on analytics: The new science of winning. Harvard Business Press.
² McAfee, A. (2012). What Sells CEOs on Social Networking. MIT Sloan Management Review, Spring.
³ Iyer, B., Mancha, R., and Shankaranarayanan, G. (2016). Educating the Digital Innovator. Web post. Available at: https://www.linkedin.com/pulse/educating-digital-innovator-bala-iyer
⁴ Mancha, R. and Iyer, B (in press). The Digital Innovator. Ivey Business Journal.