Capital One has led in credit cards, Netflix in online movies. Think about Amazon.com: It knows what you buy, when you buy, and what you would probably buy next. Further, it knows what you're buying on Kindle and has a "suggestion engine" that takes that one $9.95 purchase and runs it up with your help to $27.
Most of the analytics innovation is in business-to-consumer. There's the classic example of 7-Eleven knowing that people who buy beer at 10:30 at night often buy diapers (go figure). Some are even raising their prices, when their competition is closed. When you need diapers, you REALLY NEED DIAPERS.
What will these companies need from their IT organizations? Clean data. Data available from a warehouse. And data that is distinctive. They will need to be able to communicate and coordinate from all those stovepipes you have been bitching about. Eventually, you'll want to tie your Web analytics in.
The day is coming (trust me) when your company will have a chief analytics officer. Which companies will make best use of analytics? Those whose leaders have gone beyond skepticism and who believe with a capital B. Former Procter & Gamble chief A.G. Lafley was a modest adherent, but Bob McDonald, its CEO since 2009, is a true Believer.
Neural computing promises better results. What are the relationships that are not evident but are powerful? If you work for a bank, are heads of households whose last name ends in a vowel and who were born between 1965 to 1975 40 percent less likely to have a bad loan than the rest of the population?
Many IT vendors want to help you: SAS, IBM, Oracle, SAP, Teradata, Microsoft, EMC, HP, Accenture, Deloitte, as well as smaller players. Who do you let in?
Every time a change comes in IT, the corporate types (that's you) start by resisting, then put a wall up to keep the problem away, then figure that they'd better take over before the amateurs really screw it up. It happened in office automation, it happened in CRM, and now it's happening in analytics.
In business, it's not what you don't know that kills you. It's what you think you know that ain't so that will. Analytics is just a better way to run things--run your company on pattern recognition and facts, not intuition.
The Red Sox lost an American League Championship Series when manager Grady Little kept pitcher Pedro Martinez in the game when he thought Pedro could last another inning--when Bill James, the team's sabermetrician, knew that after 105 pitches, the opposition lights up Pedro like a pinball machine. Facts trump gut feel. True in baseball, true in your company.
Howard Anderson, founder of Yankee Group and co-founder of Battery Ventures, is currently the William Porter Professor of Entrepreneurship at MIT. He can be reached at handerson@mit.edu.For more Global CIO perspectives, check out Global CIO.
