As a mathematical genius in A Beautiful Mind, Russell Crowe used analytics to assist the government in breaking Soviet codes. While it may not be as exciting as top-secret informant assignments, the analytics industry is expected to take on a lead role in 2011 as businesses embrace its capabilities. The IDC says it expects the global market for analytics software to grow from $25.5 billion in 2010 to $34 billion by the end of 2014. More companies are anticipated to invest in analytics with the improving economy, and those that have already adopted the practice can improve on its existing use.
The banking and healthcare industries have boosted profits and developed a competitive edge through the use of analytics. According to Tom Davenport, co-founder and research director of the IIA (International Institute for Analytics), banking will focus on marketing-related analytics, as opposed to the risk-based analytics that grew popular over the last couple of years. "Banks need to grow, they need to figure out how to attract customers," says Davenport. "We'll see more orientation to marketing and customer oriented analytics over the next few months." Healthcare, on the other hand, is seeing an immense amount of activity in terms of electronic medical system-based analytics. "It may be the first industry [in which] using the data effectively is one of the criteria for success and reimbursement," says Davenport.
The gap between companies that use predictive analytics and those that do not is expected to grow rapidly in 2011. In addition, industries that did jump on the analytic bandwagon early on but did not effectively continue to use the technology will find that they have fallen behind. Airlines for example, have used analytics to optimize pricing and operations, but Davenport thinks that the companies should use them to determine customer needs when it comes to the actual flying experience. "You're starting to see now that everybody in that industry has adopted analytics, and I have prodded American [Airlines] a little bit to start doing something new in this regard. I think there are new frontiers to conquer in that industry," says Davenport.
Within all industries, operational roles such as human resources will see changes due to analytics use. Jeremy Shapiro, executive director of HR Analytics at Morgan Stanley, believes that recessions enact a restructuring process, which will be seen in the upcoming year. "You begin to see some staffing patterns where there are more people sitting inside of the HR function that are not traditional HR teams, they are engineers, they are scientists, they are industrial psychologists that are focusing much more on those topics," says Shapiro.
The demand for analytics professionals will increase along with the development of chief analytics officer roles for centralized management. According to Jeanne G. Harris, executive research fellow and a senior executive at the Accenture Institute for High Performance, countries such as Singapore, China, and India have stated government policies to build analytical focus in their work forces. "We're going to be looking a lot more globally," says Harris. "We're going to be looking in a lot more places, and we're also going to be challenged to build more analytical acumen into our own forces."
The IIA predicts that regulatory and privacy constraints will create a challenge for marketing analytics. Shapiro thinks otherwise, seeing as marketing organizations have proven to break through limitations by finding new ways to operate. "There is such a wealth of data where we're beginning to understand how people really do make decisions, that marketers will be able to work within new constraints and become more efficient for all involved," says Shapiro.
Now that early analytics adopters are up and running, the goal moving forward will be to produce more sophisticated technologies. The concern with developing analytics, for James Taylor, CEO and principal consultant at Decision Management Solutions, is that new tactics will be used inefficiently. "Too many companies have immersed themselves in all data analytics techniques such as social media, data mining and web analytics without first assessing whether all of these techniques will effectively impact their business," says Taylor.
While analytics technologies are improving, it's up to individual industries to determine how to use them to their full potential. "One of the things that's increasingly important for companies to remember is that they need to begin with the decision in mind," says Taylor. "You should understand what your business problem is. What these things give you is new ways to solve business problems, to make better decisions."
(www.idc.com; http://iianalytics.com; www.morganstanley.com; www.accenture.com; www.decisionmanagementsolutions.com)