Why Analytics Will Be the Next Competitive Edge

• Author: Gary Cokins,Lawrence Maisel
• Published date: 01 May 2015
• DOI: http://doi.org/10.1002/jcaf.22054
• Date: 01 May 2015

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© 2015 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI 10.1002/jcaf.22054

This article was originally published in Volume 25, Number 5 of The Journal of Corporate Accounting and Finance.

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Lawrence Maisel and Gary Cokins

The farther backward

you can look, the

farther forward you

are likely to see.

—Winston Churchill

Analytics is

becoming a

competitive edge

for organizations.

Once a “nice to have,”

applying analytics,

especially predictive business

analytics, is now becoming mis-

sion critical.

In our recently published

book, Predictive Business Ana-

lytics, we adopted the term pre-

dictive business analytics (PBA),

although in today's parlance the

term analytics can be associated

with any number of business

methods and practices as well as

software tools. We have sought

to distinguish PBA from other

related business practices such as

enterprise performance manage-

ment, driver-based forecasting,

business intelligence, predictive

analytics, and so on because

its effectiveness as a recognized

business practice will only be

sustainable if it demonstrates

how it contributes to value and

growth.

In fact, recent surveys are

quantifying just how valuable

PBA has become to contributing

to the success of a business. “In

one survey, 90% of respondents

attained a positive return on

investment from their most suc-

cessful deployment of predictive

analytics; more than half from

their least successful deploy-

ment” (Predictive Analytics

World Survey, 2009).

Another survey found that

“among respondents who have

implemented predictive business

analytics, 66% say it provides

‘very high’ or ‘high’ business

value” (Eckerson,

2007). And, alarm-

ingly, one survey

reported that “respon-

dents that have not

yet adopted predictive

technologies experi-

enced a 2% decline in

profit margins, and a

1% drop in their cus-

tomer retention rate”

(White, 2010).

In fact, case example after

case example is demonstrating

that for a company to use PBA

effectively it must commit to a

sustained and rigorous process

in order to achieve meaningful

results. This includes the ability

to establish a team of individu-

als with complementary skills

and competencies, a repeatable

set of practices, functional data

and tools, and, importantly, a

management process to review

its results and forge its deci-

sion making by leveraging these

results and insights. Together,

these are used to continuously

analyze the right business and

cost drivers and measures that

have a strong cause-and-effect

Analytics simplify data to amplify its value. The

power of analytics is to reduce huge volumes of

data into revealing and actionable insight. More

traditional business intelligence (BI), by contrast,

mainly summarized historical data, typically in

table reports and graphs. BI consumes stored

information, whereas analytics produces new

information. © 2015 Wiley Periodicals, Inc.

W hy Analytics Will Be the Next

Competitive Edge

This article is excerpted from Predictive Business Analytics: Forward Looking Capabilities to Improve Business Performance

(Wiley, ISBN 978–1118175569). Copyright © 2013 by Lawrence S. Maisel and Gary Cokins, Published by John Wiley &

Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.