Think Customers: The 1to1 Blog

As he explained to me after his speech, there’s a very real danger in the application of PA of missing a key business ingredient: people.

A sociologist by background, Davenport says the human element is all-too-often forgotten in the race to develop and implement new predictive technologies.

“There’s a general tendency with IT to focus on hardware and software,” he says, “but it’s humans who use all this stuff. People talk about data mining and think it’s a matter of computers collecting data and giving you a printout, and that you don’t need people anymore.

“But you then have to take a more systematic look at the decisions being made from that data, including who makes those decisions,” he adds. “There are opportunities for both automation and analysis.”

Davenport notes that the Marriott hotel chain’s booking system automatically suggested raising hotel room prices in response to a sudden demand for rooms in a particular region of the country. It was only when someone actually looked into the data that it became clear that these would-be Marriotteers were, in fact, displaced victims of Hurricane Katrina.

“The human side is extremely important,” he says. “There’s room for intuition, creativity, and insight in this field.”

A centerpiece of Competing on Analytics is Davenport’s “DELTA” concept, encompassing what he considers five key components of a PA approach: Data, Enterprise, Leadership, Targets (“Not technology,” he insists), and Action.

Of the last, he says, “There are companies who do analytics but don’t act on them, with airlines being a prime example. They collected all this customer data but didn’t differentiate their service. I have thousands of frequent-flier miles with American Airlines, but I get the same awful service as everyone else does. You have to use the data you’re collecting to optimize your service or product.”

Such firms as Wal-Mart, J.C. Penneys, Netflix, and Amazon get high PA marks from Davenport, as do his beloved Boston Red Sox. (Those who laughed – like me – when the Sox made a big deal of hiring stat-head Bill James as Senior Baseball Operations Advisor aren’t laughing now.)

“It’s been proven again and again that being more analytical can lead to better performance,” he says. “We’re starting to see how it can be used in all sorts of areas, from healthcare and pharmaceuticals to casinos and even the military.”

So can we expect a Red Sox repeat in the ’08 World Series? Davenport won’t go that far, but you get the distinct impression that he’s feeling pretty confident. “There are vast amounts of data out there,” he says. “It all depends on how you use it.”