Four Ways Analytics Will Transform Enterprises

The surge of investment in business analytics and optimization (BAO) has gone far beyond a CIO fad.  But while the adoption of BAO has been widespread, we're still in the early stages of seeing how widespread use of BAO will change enterprises.  

Really Big Data...An IBM System 360 (Photo from Cote, Flickr, cc)

Today, BAO is something extra.  A shiny new toy.  A source of new insight into existing business processes.  But the revolution that is coming from BAO is far from finished.  I believe there are four ways that BAO will reshape the enterprise before this transformation is over:

1. BAO won't just inform business process, it will change nearly every business process.

• Changes will not be radical, but they will impact every single process in the enterprise
• Plan Do Check Act (PDCA) is already a well established concept in my business process environments.  Widespread use of BAO will make it much easier to do the "Plan" and "Check" components.  That could contribute to changes in business processes in two ways:

1. Speed it up.  More and tighter loops around PDCA, expectation for significantly faster cycle times
2. More focus on outliers.  It will be much easier to see where the process isn't working, and this could lead to greater focus on exception management.

2. BAO will significantly improve the resilience of enterprises to shocks.

• One of the most interesting things about BAO is it's flexibility.  When you're missing key elements of information, BAO systems such as SPSS that can do predictive analytics are able to infer and predict some data based on history and assumptions.  This improves your ability to obtain a good outcome with less information.

3. BAO will reshape the IT systems landscape, making it lighter and more agile.

• BAO systems are more flexible and lighter weight than traditional ERP bolt-ons such as supply chain planning systems.  We'll see a growth of applications on the analytics platform and those will be faster and more flexible than traditional bolt-ons.
• The first systems to be affected will be those that already have some predictive or analytical role such as supply chain systems which already do forecasting.
• Beyond that, nearly every add-on will be reshaped by analytics.  The very ability to be predictive means that we can also be prescriptive.  If you have 2-3 choices, the system might advise of likely outcomes.  You can imagine the application of this data in hiring decisions, in pricing decisions, in product launch timing.

4. Enterprises will become better and more aggressive risk-takers and innovators.

• BAO could make companies more conservative - driving users to take the system recommended choice, but I don't believe it will.
• BAO will, I believe, drive more innovation and risk taking in two ways:

1. One way is through more A/B experimentation.  One of the barriers to experimentation is the inability to correctly and easily measure the impact on control groups.  Smart eCommerce companies already set up their online stores and analytics systems to conduct frequent idea testing.  That concept could be much more widespread as it becomes easier to measure impacts.
2. A second possibility is that we use analytics and predictive optimization to hedge our bets.  If we're planning a huge new product introduction, we can use analytics to identify bottlenecks in the supply and make selective investments in capacity where in the past we might have made blanket investments - so we can make big bets less expensive and consequently make more of them.

The transformation of the enterprise from the rise of the Internet itself isn't even finished yet and now to that we're adding a new layer of transformation - the rise of analytics.  Whatever happens, the results will be interesting.