Defining Advanced Analytics

Originally published June 17, 2010

The term “advanced analytics” is being over used by the business intelligence (BI) vendors. The marketing literature seems to read like, “Solve all your big hairy business problems; buy advanced analytics from us!” In an article by Colin White and Claudia Imhoff, they called this “term abuse and set some parameters on its proper usage.

An important insight was that it is “more important to focus on the business benefits offer by a technology” rather than focusing on the technology itself. That got me to think about how one would properly define this term without referencing the enabling technology. Here is a suggestion…

Definition for Analytics

An analytic is defined as data analysis that changes the behavior of the organization. Thus, the value of an analytic is the degree to which it improves the performance of the organization. An analytic is actionable, and its value is realization of the potential of those actions. There could be analytics that have no effect on performance or even have negative effect. For instance, an analytic could distract persons from focusing on more relevant factors. Using this definition, we can debate about analytics that have zero or negative impacts, regardless of the sophistication of the enabling technology.

Further, a valuable analytic (upon which a company would appropriately spend funds and effort) is an analysis that does change business behavior and where this change increases performance, according to some relevant metric. We could then ask the following question: If the analytic was turned off, would this interruption make a difference in business processes? And, would this interruption affect business performance? The ultimate in a valuable analytic would be the case where a business would be forced to cease operations if the analytic was not available.

Colin White commented privately that it is important to distinguish between the method of the analytic versus the result of the analytic. Instead, this definition complements this distinction by focusing on the impact on the organization, which is caused by the result and enabled by the method. Also, Neil Raden wrote a related article in which he described the effectiveness of the analytic as being dependent on these factors: simplicity, scalability and performance. This is certainly true since any organizational impact will be influenced by these factors.

Definition for Advanced Analytics

We are on a roll, so let’s take the next step. An advanced analytic is defined as an analytic that has a combination of these qualities:
  • Innovative: The analytic is innovative by being the first of its kind, or not obvious in its application, or it is counter-intuitive to current business practices. The value to the customer is the potential competitive advantage over others using less innovative analytics.
  • Unique: The analytic is unique because of a high barrier to entry to be replicated, possibly embodying a very complex algorithm. The value to the customer is also the potential competitive advantage.
  • Transformative: The analytic is transformative by providing a path to a different product/service, creating a new market niche. In other words, the analytic stimulates organization learning. The value to the customer is the eventual transformation of the organization culture as it learns new business practices.

Questions to Ask

Whenever we encounter a product/service labeled as “advanced analytics,” I would suggest that we ask the following questions of the vendor:
  1. How does your analytic product/service make a difference in a business? Give examples of the changes experienced in specific companies? By the way, I have zero interest in knowing about your technology.
  2. Did those changes generate business value for the company? Give examples of performance improvements as measured by a specific metric. 
  3. What are the best business practices that are enabled by your analytic?
  4. Is your analytic innovative? First of its kind? Not obvious? Counter-intuitive? Will I have a competitive advantage if I use it?
  5. Is your analytic unique because other vendors cannot replicate its functions? If I purchase your product/service, will I have a competitive edge over my competitors for a reasonable time? Have any of my competitors purchased your analytic?
  6. Can your analytic be transformative to my business. Thus, can I expect my company to move into new market niches?
Please comment with your thoughts about defining the term “advanced analytics.”
  • Richard HackathornRichard Hackathorn

    Dr. Richard Hackathorn is founder and president of Bolder Technology, Inc. He has more than thirty years of experience in the information technology industry as a well-known industry analyst, technology innovator and international educator. He has pioneered many innovations in database management, decision support, client-server computing, database connectivity, associative link analysis, data warehousing, and web farming. Focus areas are: business value of timely data, real-time business intelligence (BI), data warehouse appliances, ethics of business intelligence and globalization of BI.

    Richard has published numerous articles in trade and academic publications, presented regularly at leading industry conferences and conducted professional seminars in eighteen countries. He writes regularly for the BeyeNETWORK.com and has a channel for his blog, articles and research studies. He is a member of the IBM Gold Consultants since its inception, the Boulder BI Brain Trust and the Independent Analyst Platform.

    Dr. Hackathorn has written three professional texts, entitled Enterprise Database Connectivity, Using the Data Warehouse (with William H. Inmon), and Web Farming for the Data Warehouse.

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Posted June 17, 2010 by Richard Hackathorn

I can not speak for Colin and Claudia. However, my opinion is that the value of the analytic is the impact that the business receives from using that analytic. This fully realizes that a vendor may have the best technology and excellent design, but fail on the value criteria completely because the customer is does not use or misuses the analytic. The article is written for customers, not vendors. The message to customers is: Do not purchase technology, however excellent it may be, if your company is not ready to properly use that technology. - Richard

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Posted June 17, 2010 by

Colin and Claudia

Great article and thanks for taking the over enthusiastic marketers to task. I have question on how you define a valuable analytic.

What if the analytic did not immediately create a positive impact but was helpful in avoiding a bad decision a later point in time? Also, there might be many reasons outside of analytics that a certain initiative did not yeild positive results. Can we assume that results are the only indicator of whether an analytic is valuable or not?

 

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