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2 Posts tagged with the decisionmaking tag

Tom Davenport is the President’s Distinguished Chair at Babson College and a Research Fellow at the MIT Center for Digital Business. He is also a Senior Advisor to Deloitte Analytics and the co-founder and Research Director of the International Institute for Analytics. Beyond those credentials, Tom somehow finds time to be a prolific book author.


Keeping Up with the Quants: Your Guide to Understanding and Using Analytics (Harvard Business Review Press, 2013), was described as a “go-to guide on ‘quantitative literacy’ — so you can develop the analytical skills you need to keep up in today’s data-driven world, no matter your role or experience.” This is the 17th book he has authored, coauthored or edited. In fact, his next book, Big Data at Work: Dispelling the Myths, Uncovering the Opportunities, is due out in early 2014.


Smart Enterprise Exchange Editor and Community Manager Paula Klein caught up with Tom to get his response to a few key points about big data and analytics at large enterprises. Read his blog here.


Q1. In the recent book, Keeping Up with the Quants, you argue that everyone needs data analytic skills and you offer ways to develop these. Do you believe that most business people can — or should — master quantitative analytics? Don’t we need the quant specialists to do the heavy data crunching for us?


A. It's a matter of degree. We do argue that every manager needs a better understanding of quantitative decisions and analytical thinking. However, this doesn't mean that [managers] will have to do their own analyses. There will continue to be a need for quantitative analysts who can do the hard, serious analytics. But business managers and professionals need to work closely with them to frame the decisions being made, to discuss the choices of variables and models used, and to communicate and act on results. It's really a partnership — not something you can just turn over to the quant in the back room.


Q2. Why are organizations struggling to extract business value from their big data repositories? Is the organization to blame or the tools (or both)?


A. Well, by definition big data is data that is unruly — too big to fit on a single computer, too unstructured to fit into conventional databases, too fast-moving to be easily warehoused. So it's not surprising that it is difficult to transform into a valuable business resource.


When I interviewed a group of data scientists in 2012, I felt the job should more accurately be "data plumber" — extracting value from big data involves a lot of difficult and time-consuming labor, and you get your hands dirty in the data quality and extraction issues. In addition to the new problems raised by big data, most organizations are still dealing with data integration and management issues from the small data era — standards, integration, quality, governance and so forth.

When we add the complexities of big data, it's like adding a parade to an existing traffic jam, and it can mean that nothing moves for a while.

Q3. On the topic of privacy and security concerns, is there really any way to protect consumers and the public from having their personal data mined, analyzed, sold and dissected?


A. I don't think so, at least not in the United States. It is too difficult to control and prevent these activities on personal data, and no one in the U.S. government seems capable of regulating them intelligently. So, I think we need to get used to the idea that we don't really have any privacy unless you are willing to take yourself totally off the grid.


This may seem somewhat depressing, but most of us already act as if we don't care that much about privacy. We supply extensive details about our lives to social networks, and we tell companies they can exploit our data in exchange for a few discounts on merchandise. So, in principle we say we care about privacy, but our actions suggest otherwise.


I do think that companies that guard our personal data and don't exploit it without permission will gain business, so if there is more transparency about personal data policies in the marketplace, it may lead to somewhat more privacy. The best way to avoid personal data exploitation is to stay away from the organizations that do it.


Over the years, return on investment has been the economic litmus test for most business spending — and IT in particular: For CIOs, a purchase either can show hard-dollar payback or it can’t. ROI was also the bottom line that brought IT under scrutiny of finance departments and auditors.


Certainly, the “go, no-go” rules loosened up a bit when productivity, competitive advantage and other “soft-dollar” results were considered. These intangibles were always difficult to measure with standard calculations such as net present value (NPV) or total cost of ownership (TCO), but they remained the exceptions — one-off purchases or solutions for individual departments or users.


Today, many old metrics and processes seem to be fading, and exceptions are now the rule. Many believe that with the proliferation of social media, consumer devices and cloud computing, for example, new ways to determine ROI — if such approaches even exist — are needed. And some are even claiming that ROI is not only the wrong metric to use, but that it doesn’t exist in reference to social media. Can this be true? If so, how can sound purchasing decisions be made?


We have discussed the economics of cloud and virtualization on Smart Enterprise Exchange in the past. As I wrote previously, “Most conclude that there is no one-size-fits-all ROI calculator that tells you when to go to a cloud model and how much you will save or pay. The most definitive answer about lower costs seems to be that you probably will see savings; but as with warning labels on medicine bottles, results will vary with the situation.”


My advice at the time was: “Conduct your typical due diligence by analyzing contracts, negotiating with providers and starting small.” But I am starting to realize that this type of traditional approach just may not work in the more amorphous world of social media.


Marcio Salles, who blogs about social media with a Brazilian perspective, recently included a great infographic in his blog on Smart Enterprise Exchange. Provided by MDG Advertising, the graphic addressed the ROI of social media for marketing purposes. In sum, it acknowledges that this is a “contentious” topic and offers several ways to measure effectiveness. Among these: going beyond click counts to include revenue generated, reduced returns, conversion rates, and positive brand mentions or feedback, among others.


Still, the company says that many factors such as closing business deals, encouraging new partnerships, quicker information retrieval (which translates to lower costs) and particularly, recruiting new talent, are “intangibles.” Among specific platforms mentioned, Facebook and Twitter were rated highly, and YouTube holds out the most promise. But how can their use be monetized?


Dozens of other recent blogs and consultants have raised the issue of social media ROI, too, and lots of discussion has ensued. Sean Jackson, Chief Financial Officer of Copyblogger Media, and Sonia Simone, Chief Marketing Officer, treat the subject in a lighthearted blog here but also raise some good points. Specifically, they conclude that revenue should not be a success factor for social marketing efforts. “The real measurement of return lies in the profits created from your culture of marketing.” Another social media executive offered some alternative metrics here, while a marketing strategist says not to worry about ROI — just move ahead with your plans.


But I suspect that marketing has different requirements than IT does. Would CIOs get buy-in for large-scale projects based on this advice? Typically, large global enterprises — especially those in regulated industries or with strict guidelines from their boards — need strong business cases for new investments. Has that mindset changed with social media? Must it change?


I believe that the landscape is evolving, but slowly. Uncertain financial returns are still inhibiting social media rollouts, according to many sources, including a recent InSites Consulting research report from the U.K. And even those who last year created social media ROI calculators are going back to the drawing board to make revisions.


CIOs can’t afford to stall and haggle over every purchase and every departmental request, and I agree that “calculating the ROI of social networks is not rocket science,” as this blog states. Nevertheless, sound decisions are key to good leadership and investment decisions should be based on more than popular trends or gut feelings. That’s the point of view Peter DeLisi takes in an upcoming new blog on Smart Enterprise Exchange next month.


Let’s keep this conversation going. What are your experiences in this rapidly changing market sector? Are your corporate purchasing requirements keeping pace with new media? Are RFPs and ROI finally a thing of the past?


Paula Klein

Editor and Community Manager

Smart Enterprise Exchange



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Paula Klein

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Member since: May 14, 2009

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