Business analytics: the next big thing?

Business analytics is, of course, nothing new. Big Four firms and engineering consultancies have long retained small groups of economists to analyse the macro-economic environment; strategy firms have typically taken an analytical approach to assessing – say – the attractiveness of a new market. However, in all such cases, business analytics has been a back-office function, something that is part of another service offered by the firm.

But there are three reasons why analytics is now emerging, blinking, into the limelight.

The first relates to technology. Organisations have spent hundreds of millions of dollars over the last 10-15 years installing systems which generate massive quantities of data, most of which is used in a purely transactional context – sales order processing, managing inventory, customer accounts. Now the challenge is to distil from these vast reserves the intensely insightful information which reveals underlying efficiency, or the lack of it. The second is opportunity. Our recent report, written in conjunction with Trinity Horne, looks at how the utilities and telecoms sectors are starting to “mash” together different data sources in order to take better, more informed decisions about how they allocated – for example – their investment between planned maintenance of their networks and responding to specific problems. Clearly, technology and opportunity are related: only 4% of the companies we surveyed said they didn’t have enough data; 40% said they had too much. Yet around a quarter said they didn’t understand how the way in which they carried out maintenance work had an impact the satisfaction levels of your customers. The third reason points to something a bit more fundamental in the consulting industry. Against a backdrop in which the difference between clients and consultants is being rapidly eroded (not least because many clients are ex-consultants), business analytics offers the chance for consulting firms to re-establish their credentials.

But how big will it be? Blockbuster consulting services share four fundamental characteristics. They have to tap into a widely-recognised issue in society – thus, re-engineering was less about process than the impact global competition was having on US companies 20 years ago. Business analytics ticks this box: it’s the lifebuoy thrown to a world that thinks it’s drowning in data. Second, there has to be proof that the big, new idea actually works. Here, too, analytics makes the grade, indeed it’s hard to think of a consulting service which is more concrete or tangible. Third, the scale of consulting projects associated with the new idea or tool has to be substantial, otherwise the incentive for consulting firms to invest in promoting the idea isn’t sufficiently great. Finally, the new idea has to be just that, new. And that brings us full-circle because, as we’ve already noted, business analytics has been around for some time. You could, I suppose, argue that it’s new because it’s now explicit, but the real test is what clients think. It would be a foolish consulting firm that thinks that, simply by shining the spotlight on something, they’re going to convince clients that it wasn’t on the stage all the time.

The question of just how big a thing the analytics thing will be depends entirely on how much consulting firms invest, not in saying how important analytics are, but in developing new analytical techniques.