Reference no: EM131274684
Case Study: Does the Use of Analytics Produce Better Decisions?
Business today is awash in data and data crunchers, but only certain companies have transformed this technology from a supporting tool into a strategic weapon. Their ability to collect, analyze and act on data is the essence of their competitive advantage and the source of their superior performance. A prime example is Anheuser- Busch Companies Inc., brewer of many of the world's best-selling beers, based in St. Louis. It has made a science out of monitoring the metrics that allow it to understand when, where, and why consumers buy beer- insights that have allowed the company to post double- digit profit gains for 20 straight quarters.
The core of the company's competitive capability is BudNet, a real- time network capable of gathering data on dozens of key performance indicators which the company's distributors report as they re-view shelves and product positioning in the field. Analysts at corporate HQ regularly analyze and mine the data for decision support. What's more, Anheuser- Busch combines the figures it gleans from its distributors' information systems with other key data, such as U. S. Census figures on the ethnic and economic makeup of neighborhoods, allowing the company to design local promotions that match their markets to a tee.
Recently, Anheuser- Busch was the first to identify an important shift in customer purchasing preferences toward more healthy beverages, information the company harnessed to successfully capture the low- carb beer market. Granted, organizations have been gathering massive amounts of data on customers' buying habits and the efficiency of their operational processes for decades. But Anheuser- Busch is one of a new breed of data- driven companies that has taken analytics to a new level. " Firms like Anheuser- Busch are outsmarting and outmaneuvering the competition because they have made information analysis and management a distinctive capability, one that is fundamental to their formula for doing business," observes Paul F. Nunes, an executive research fellow at the Accenture Institute for High Performance Business in Wellesley, Mass. Accenture's continuing research into the components of high performance proves that information can indeed be power. The global management consultancy, technology services, and outsourcing company recently surveyed 450 executives in 370 companies spread across 35 countries and 19 industries. The company identified a strong link between extensive and sophisticated use of analytics and sustained high performance. Of the respondents, high- performance companies- businesses that Accenture research has identified on the basis of their ability to substantially and consistently outperform their competitors over the long term, over economic and industry cycles and through generations of leadership- were five times more likely than low performers to single out analytics as critical to their competitive edge. " It's not about better number crunching, it's about reinventing a company's core value algorithm to embrace analytics and make it part of the company's distinctive capability," notes Jeanne Harris, a director of Accenture's Institute for High Performance Business who spearheaded the survey. " This focus consistently distinguishes the market leaders from the also rans." In addition, Accenture has identified three categories of companies that win on analytics. " Some were born that way," Ms. Harris ex-plains. Prime examples include Internet giants such as Google, the dominant search- engine company; Amazon, the leading online retailer; and Netflix, the pioneering online Streaming TV/DVD rental company. Such companies were built from the ground up on new ways of capturing and analyzing data. "They correctly view their algorithms as a key weapon in their competitive arsenal."
Other companies, such as Procter & Gamble and General Electric, have a " long and proud history" of using analytics to drive high performance, Ms. Harris continues. Finally, there are the companies that have come to embrace analytics, either as part of a turnaround strategy or a plan to dramatically change their market position. "These are the companies that have trans-formed themselves by harnessing technology to drive results and pull away from the competition," she says. In line with this, Accenture has pinpointed the three approaches companies can choose from to join the ranks of analytics juggernauts. Put simply, organizations can, first, leverage analytics to add value to their offer in the form of service improvements, such as better or more timely delivery of goods and services; second, they can develop and deliver more personalized services to their customers; or third, they can expand their participation in the value chain. Cemex S. A., a global supplier of cement and building solutions headquartered in Monterrey, Mexico, grew from a regional player to a world leader by using analytics to deliver its products to its customers on time and on their terms. A deep understanding of its customers- which the company gained by meticulously gathering data about its customers' needs- allowed it to identify a crucial and unmet demand: quick delivery. Ready- mix concrete is perishable and begins to set when a truck is loaded. Cemex found that, on average, it took three hours from the receipt of a contractor's order to the delivery of the concrete. These delays were costly to contractors, whose crews were at a standstill until the concrete arrived.
To complicate matters, Mexico, like other developing countries, is plagued by traffic congestion in its major cities, making it hard for a company to accurately plan deliveries. Cemex determined that it could charge a premium to time- pressed contractors- as well as re-duce costs by decreasing the amount of concrete that hardened en route- if they could reduce delivery times. To accomplish this, Cemex again turned to analytics, this time to collect data and study the techniques and technologies used by couriers, delivery firms, police, and paramedics. Based on this research, Cemex devised a strategy to cut response times by equipping its concrete-mixing trucks in Mexico with global- positioning satellite locators and Web- based vehicle dispatch technology. Using these systems to reconfigure its business processes allowed the company to deliver cement to its customers within a 20- minute window, boosting both productivity and customer loyalty.
ASSIGNMENT
In a 2-3 page paper: Respond to the questions below. Keep in mind these are not 1 sentence answers you will want to analyze and use examples from the case to demonstrate your understanding. You may also draw from your own work experience to help support your position and look to the internet for more research as needed.
1. Which of the four steps associated with the rational model of decision making are most likely to be affected by the use of analytics? Discuss your rationale.
2. Which of the seven evidence- based decision-making implementation principles were used by Anheuser- Busch and Cemex? Provide examples to support your conclusions.
3. Would the use of analytics lead to more or less ethical decisions? Explain.
4. Why don't more companies rely on evidence- based management?