Analytics 3.0 and the Impact on Your Business

By Robert Handfield, Oct 21, 2013

In my last post, I discussed some of the insights from IIA’s Chief Analytics Officer Summit in Chicago, and highlights from Tom Davenport’s presentation on “Analytics 3.0”. We covered some of the elements of the early years of analytics, and emphasized the point that given the time and effort being used to get data structured and subdued, there is not much effort being directed at actually analyzing the data using more complex math models, and this is the real opportunity that exists. Enter “Analytics 3.0”.

The current data analytics environment is smoking hot! People are pushing away from consulting, but moving increasingly to creating data products for the new digital analytics marketplace. “I don’t want to be managing, I want to be on the bridge with Captain Kirk!” This has resulted in a strong urgency and a “land grab” situation, where people are moving quickly. There is also a strong push towards tools that open sourced and scraped from Internet where data is free. A number of different attitudes are beginning to emerge…..

The challenge of course is to try to build analytical capabilities in a world where there is already a set of existing analytical capabilities and technology – and that is where Analytics 3.0 is moving. Davenport notes, “Anybody can create database services but the challenge is moving traditional analytics and big data, to analytics that can help people to run the enterprise! This means having data that is produced in real-time, not backwards looking historical reviews.”

And this is where it gets exciting…. as Tom noted, (somewhat crudely…) “Analytics in the past was a pimple on the rear end of the economy! But Analytics today IS the data economy – and it doesn’t work without the people in this room!” Analytics 3.0 calls for a new way of thinking about analytics that are embedded in products and services and are communicating back to the enterprise. For example, a logistics company, CH Robinson, is tagging fruit containers with sensors to determine if the fruit is spoiling, allowing them to determine who was responsible for storage at that location and avoiding payment of waste factors if the shipper wasn’t responsible for it. Cement companies are putting sensors in cement, which allows them to determine when it is beginning to dry in transit, and how to re-route the cement to the job site. In such instances, analytics is not just about supplying data (which information providers already do), but also about providing insight and services.

Consultant Stan Davis has dubbed data from products and services that emerges “information exhaust” because reams of such information escape every corporation, a supposedly useless asset, but in fact this is data that can be converted into insight. To drive insight, begin with the data you have available, and explore what problems can be solved. Such problems require individuals known as “Data Scientists” – who know how to exploit data sets in ways that can be applied to business problems.

At UPS, the history of telematics began with complaints from Teamsters, who complained that analytics was ruining their lives by telling them what to do throughout the data! Similarly at Schneider, fuel sensor analytics tell drivers and operations how much fuel is left in the tank, and where they need to refuel based on the lowest prices and optimization of the route. Historically, the driver made these decisions, so Analytics 3.0 is beginning to have some pushback. Which raises an important point – analytics will bring about significant change in the way that people work, which may require a good deal of change management. UPS analytics data may inform a supervisor that based on predictive analytics, a particular driver may be more likely to have an accident based on driving habits. Now imagine the conversation between the supervisor and the driver! What will this look like? And what will the Teamsters have to say about that? Analytics will create a new dynamic and will put a new set of responsibilities on people who are driving the analytical models.

There is no doubt that Analytics 3.0 is something companies are making a huge investment in. GE is investing $2.5B on data modeling, with 200 data scientists that are embedding analytical sensors in jet engines, locomotives, and other equipment that can help drive predictive maintenance and discover operational issues more quickly, which will in turn improve safety. And Google is working on analytics for driving the new car…. but according to Davenport, what are the major automotive companies doing? Nothing….”let Google work on it…”. Imagine the biggest thing in your industry coming along, and the decision is to let others to work on it. Leading companies are moving ahead with driving investments in analytics, including biopharmaceutical companies and healthcare insurance companies.

It’s time to jump in to Analytics 3.0…. before others do…

This post originally appeared in Robert Handfield’s Supply Chain View from the Field

About the author

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Rob Handfield is the Bank of America University Distinguished Professor of Supply Chain Management at North Carolina State University, and Director of the Supply Chain Resource Cooperative. He also serves as an Adjunct Professor with the Supply Chain Management Research Group at the Manchester Business School.

The SCRC is the first major industry-university partnership to integrate student projects into the MBA classroom in an integrative fashion, and has had 15 major Fortune 500 companies participating as industry partners since 1999. Prior to this role, Handfield was an Associate Professor and Research Associate with the Global Procurement and Supply Chain Benchmarking Initiative at Michigan State University from 1992-1999, working closely with Professor Robert Monczka.

Handfield is the Consulting Editor of the Journal of Operations Management, one of the leading supply chain management journals in the field, and is the author of several books on supply chain management, the most recent being Biopharmaceutical Supply Chains, Supply Market Intelligence, Supply Chain Re-Design and Introduction to Supply Chain Management (Prentice Hall, 1999, 25,000 copies sold, and translated into Chinese, Japanese, and Korean). He has co-authored textbooks for MBA and undergraduate classes including Purchasing and Supply Chain Management 5th revision (with Robert Monczka) and Operations and Supply Chain Management 2nd revision (with Cecil Bozarth).

Handfield received the Emerald Citation of Excellence award in August 2011, for an article cited as one of the top 50 articles from the 300 top management publications worldwide that have had a proven impact since they were published. In 2009, he was nominated as an Honorary Fellow of Contract & Commercial Management (FCCM) by the International Association of Commercial and Contract Management. This honour is bestowed on individuals who have made exceptional contributions in the field of contracting and commercial management. Handfield is regularly quoted and has published op ed pieces, and is quoted in blogs and global news media such as the Wall Street Journal, Financial Times, the San Francisco Chronicle, Spend Matters, Microsoft Live, Ariba Live, Inc., CIO, CFO, the Supply Chain Management Review, and other media.