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What CEOs Need to Know About Predictive Analytics!

Predictive Analytics

With any major brand or investment of a firm, a CEO is expected to understand the size of the market, the investment and return, the risks and pitfalls and how the new strategies align to their corporate goals. As a CEO you are supposed to have a clear point of view on everything impacting on your business. You may not be the only CEO who “wings it” from time to time.

Advanced Predictive Analytics is an excellent example of a capability that often triggers more questions than answers.

*Where does it fit in the organization and who will own it?

*How involved in the strategy do I need to be?

*Why have others tried and failed?

Or more importantly:

*Can predictive analytics give me a real competitive advantage?

*How much data do I need to get started?

*What will it look like when we have finished – will I have gone bald in the process?

*What are the risks?

Well, we need to agree that advanced Analytics Strategies do fail for a fact when, the CEOs or top-level board members, are not fully engaged in the process. Analytics is new and maybe the elephant in the room at board level that the top board member doesn’t want to talk about. But the CEO will play a key role in establishing the analytics function and ensuring that it is adopted across the enterprise.

Data Analytics for CEOs

Many C level Directors may be unhappy or uncomfortable with the new cross-functional capability. You need to anticipate how the different stakeholders will react. You should have a clear point of view on where you want analytics to bring the organization. Talk openly about the plan and the possible anxiety that managers may have as analytics changes the way the business operates. Change management is essential and openness about the level of change helps address different stakeholders’ concerns. It also focuses on the new skills and resources that will be required.

The CEOs should include the key people whose divisions are both benefiting from and funding the analytics deployment. Collaboration at all levels is key to success. Much senior management will want to retain the Business As Usual model and you need to be ready and identify and manage this resistance to change.

Advanced Analytics will bring change. Navigating and managing this change and the power shifts in the C-suite will be a CEO’s key goal. Unless this is driven by the CEO, Analytics will remain in silos with very lumpy ROI.

So let’s now try and unpick some of the hype and buzzwords that have clouded the understanding of what Advanced Analytics really is?

The only difference between a data scientist and the traditional data analyst is their pay. The fundamental of Data Science or Data Mining is that it solves a specific business question in a very measurable way. On contrary, Advanced Analytics (data mining or predictive analytics) is a business process that solves a business pain. It starts with your business objective and ends with measurable results at the conclusion. Unless you have a clearly defined Business Question, you will end up in what is known as “Paralysis by Analysis”.

Trust me, this happens more often than you think. The true skill of your analyst is translating your business question into a data mining question and understanding what needs to be delivered to the business to help them achieve their goal.

If you accept that Data Mining is a business process, the next thing you need to know is that data mining is NOT a black box.

Business Knowledge directs the analytics process at every stage. A shallow understanding might suppose that the business input is needed at the start (to scope the project) and at the end (to deploy the results).

The answer to the question “How much data do I need?” is quite simple. The answer is you have enough data if “the analysis can deliver results that enable you to do your job better.” Data can always be added to the analytics at a later point.

Advanced Analytics is all about answering Big Hairy Questions that you don’t know the answer to. It is NOT a silver bullet. Uncovering truly valuable insights and anomalies mean searching for patterns in the data. It can have multiple approaches and require experimentation with different techniques.

There’s an awful lot of hype about cognitive computing. If there is an artificial intelligence that will deliver the right answer to any question, I have not seen it. Some vendors may tell you another vise.

Remember, your data is unique, and that within your data, by its nature, there are always patterns, insights, and anomalies that would only relate to your business. These patterns are mostly self-evident: invoice associated with payment associated with delivery.

Advanced Analytics aims to discover and use specific patterns to help achieve specific outcomes – stop fraud, reduce churn, predict failure. You have a lot more data than you think and the skill of an analyst is to map these together to create the digital picture of the problem you wish to address.

Another common misunderstanding is that once a data model is built, it can be automated and you can get back to your Business As Usual – Wrong.

By nature, the analytical model will degrade over time. As your market changes, your customers change, your competitors change. Fundamentally this means that over time your models will become redundant and will need to be constantly monitored and refreshed. Patterns in your data will be affected as change hits your business. Those who identify these changes first will have a definite competitive advantage.

So, what are the Risks, and why do Analytics strategies fail?

Analytics as described above is NOT a silver bullet where data fed into a machine gives you the magic answer to all your problems. So what is the biggest risk? Ironically, YOU may be! Lack of senior executive buy-in and direction will kill the strategy. Unless you get behind the strategy and put the relevant senior resources behind it, it will fail.

The reason there is skepticism about Advanced Analytics is that there have been a large number of failures. The analytics strategy has many moving parts and will take both senior management buy-in and a clear understanding of the corporate goals and changes that the capability will bring about.

In delivering change across the organizational structure “politics” may also come to the fore. Managers may feel threatened by a capability that shows up their operational weaknesses in a very stark light. It is not a case of “build it and they will come”. The process of Advanced Analytics only ends in the deployment and measurement of results, and this means senior management putting their weight behind making the change happen. It’s more like, having brilliant analytical predictions produced by an international Football club on when to substitute players, but never actually used the intelligence because no one told the manager what to do.

As a CEO, it’s important that you not just have some good one-liners to toss out when people mention Big Data or IoT. I hope this read goes a little further and gives you some concrete understanding behind the myths of Advanced Analytics and how you can truly take ownership of this incredibly powerful business capability.