Why IT Fumbles Analytics by HBR

In the Jan-Feb 2013 issue, Harvard Business Review noted why analytics projects often do not live up to expectations:

"In their quest to extract insights from the massive amounts of data now available from internal and external sources, many companies are spending heavily on IT tools and hiring data scientists. Yet most are struggling to achieve a worthwhile return. That’s because they treat their big data and analytics projects the same way they treat all IT projects, not realizing that the two are completely different animals.

The conventional approach to an IT project, such as the installation of an ERP or a CRM system, focuses on building and deploying the technology on time, to plan, and within budget. The information requirements and technology specifications are established up front, at the design stage, when processes are being reengineered. Despite the horror stories we’ve all heard, this approach works fine if the goal is to improve business processes and if companies manage the resulting organizational change effectively.

But we have seen time and again that even when such projects improve efficiency, lower costs, and increase productivity, executives are still dissatisfied. The reason: Once the system goes live, no one pays any attention to figuring out how to use the information it generates to make better decisions or gain deeper—and perhaps unanticipated—insights into key aspects of the business.

For example, a system that an insurance company installs to automate its claims-handling process might greatly improve efficiency, but it will also yield information for purposes nobody articulated or anticipated. Using the new data, the company can build models to estimate the likelihood that a claim is fraudulent. And it can use data on drivers’ speed, cornering, braking, and acceleration—gathered in real time from sensors installed in cars—to distinguish between responsible and less responsible drivers, assess the likelihood of accidents, and adjust premiums accordingly. Yet simply putting the system in place won’t automatically help the company gain this knowledge."

The authors go on to discuss what they have learned from studying 50 international organizations and share five guidelines for taking the voyage of discovery.

#HBR #journal

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