Strategy plan

Introducing the course – building analytics as a strategic capability  Defining objectives for success of your company  Finding competitive advantage opportunities through analytics  Communicating the value and engaging the organization  Learning and adapting to drive ultimate success Case studies and group exercises E - Commerce Professional Sports Groups 1, 3, 5, 7, 9 Groups 2, 4, 6, 8, 10 Background on case studies  Fictionalized versions of actual business situations  Key information will be shared, but not everything  some light research on company types will be useful  Purpose of cases is to provide some context for the application of tools and frameworks First, let’s define Business Analytics Deriving actionable insights from available data/information to guide business decisions There are different kinds or levels of Business Analytics Descriptive Analytics – What happened?

Diagnostic Analytics – Why did it happen?

Predictive Analytics – What might happen?

Prescriptive Analytics – How can I make it happen? Evolution of Business Analytics Specialized Consultative Transformative Strategy Statistics Strategy Statistics Strategy Statistics Technology+ interactive, collaborative, efficient+ problem - solving focusTechnical rigor Setting sales targets Optimizing resource allocation Diagnosing business performance Finding new opportunities Actionable customer insights Analytic products “Democratization” Single version of the truth Single source of the truth Leaders who successfully compete on analytics Billy Beane Gary Loveman A. G. Lafley Rich Fairbank Barry BerachaHow many were practitioners? What do they have in common?

• Background?

• Industry?

• Appreciation for analytics • Approach to building analytics into a strategic capability An Analytics Culture is critical to creating a competitive advantage COMPONENTS OF AN ANALYTICS CULTURE Behaviors • Integration of information management and business analytics into strategy • Promotion of analytics best practices, collaborative use of data across company lines • Planned investments in analytics technology, new talent and training • Pressure from senior management to become more data - driven and analytical Values • Data is treated as a core asset • Analytics is a top - down mandate driven by executives Decision - Making Norms • Analytical insights guide future strategy • Data analysis outweighs management experience when addressing key business issues • Organizational openness to new ideas and approaches that challenge current practices Outcomes • Analytics changes the way business is conducted • Analytics causes a power shift in the organization THE ANALYTICS MANDATE, MIT SLOAN MANAGEMENT REVIEW, May 2014 Analytics Virtuous Cycle Building analytics into a strategic capability Ask the right question Find the best solution through analytics Rally the organization to act Optimize by learning and adapting IMPACT!

Define the problem Structure the problem Engage stakeholders Lead adaptivelyAnalytic Maturity Capabilities needed The challenge: most companies don’t make it all the way!

Ask the right question Find the best solution through analytics Rally the organization to act Optimize by learning and adaptingTechnical breakthrough Do technical achievements automatically lead to impact and success? Why isn’t technical capability everything? A different example ….. Why isn’t technical capability everything? Another example …..

The Imitation Game Clip 1: 14:46 – 16:25 Clip 2: 1:20:21 – 1:21:31 http://digitalcampus.swankmp.net/columbia301179/watch?token=70c7e5 9861bc9d5cdbcd7f1f16e4945a5e0161fa01c8f428bc73815e3882d713 http://digitalcampus.swankmp.net/columbia301179/watch?token=70c7 e59861bc9d5cdbcd7f1f16e4945a5e0161fa01c8f428bc73815e3882d713 In summary: strong strategic skills are needed to drive impact Before doing any analyses:

• Are we asking the right question?

• Have we considered all possible ways to answer it? Which is the best approach?

After the analyses:

• Do we have a clear recommendation and a narrative to support it?

• How should the organization take this into action?

• What are the uncertainties and how will we respond? McKinsey Framework What are the insights of these quotes?

“If I had only one hour to save the world, I would spend fifty - five minutes defining the problem, and only five minutes finding the solution.” Albert Einstein What is the insight of this quote?

“If I had only one hour to save the world, I would spend fifty - five minutes defining the problem, and only five minutes finding the solution.” Albert Einstein If the problem is defined correctly, it will point us to the solution Importance of framing What problem are you trying to solve?

https://www.youtube.com/watch?v=ui442IDw16o Defining the problem Framework to define the problem WHAT are you setting out to do?

WHY are you taking this on? What is the real problem?

WILL your approach address the problem? Is it the best/easiest/fastest way to solve it? “Chunking up” and “Chunking down” to find the right level Write in space Build a special pen to write in space Build a special pen with pressurized cartridges to write in space HOW? WHY?

https://litemind.com/problem - definition/ Another example …. from a true story Situation: too many RAF planes being shot down in WW II Solution:

• Analyze plans that returned from attacks • Find areas most likely to be hit, and reinforce • Reduce likelihood that planes will be shot down Framework to define the problem WHAT are you setting out to do?

• Reinforce sections that were hit consistently on returning planes WHY are you taking this on? What is the real problem?

• Need to reduce number of planes shot down WILL your approach address the problem? Is it the best/easiest/fastest way to solve it?

• No! Since these are surviving planes: need to reinforce areas that were not hit!

http://www.motherjones.com/kevin - drum/2010/09/counterintuitive - world Building competitive advantage: Moneyball Clip 1: 5:39 - 7:20 Clip 2: 9:57 - 11:48 Clip 3: 19:22 - 21:26 http://digitalcampus.swankmp.net/columbia301179/watch?to ken=2d4aee3d03a3236ac3b01e70e524f46d9d3cdec75cdc98 b182fdb91c3577dbe8 http://digitalcampus.swankmp.net/columbia301179/watch ?token=2d4aee3d03a3236ac3b01e70e524f46d9d3cdec75 cdc98b182fdb91c3577dbe8 http://digitalcampus.swankmp.net/columbia301179/watc h?token=2d4aee3d03a3236ac3b01e70e524f46d9d3cdec7 5cdc98b182fdb91c3577dbe8 Redefining the problem in Moneyball Recruit in - demand players Score the most runs Win the most games ? Other teams were solving the problem of how to recruit in - demand players However: data showed that in - demand players did not guarantee the most runs The A’s solved a different problem: how to cost - effectively recruit players who would score the most runs Are we solving the right problem?

• Define success clearly and tangibly • List the sequence of problems to be solved for success • Which problem is most tightly connected to success?

Which ones are not? Building competitive advantage: Enigma 1:23:56 – 1:25:37 http://digitalcampus.swankmp.net/columbia301179/watch?t oken=70c7e59861bc9d5cdbcd7f1f16e4945a5e0161fa01c8f 428bc73815e3882d713 Redefining the problem in The Imitation Game Break the Enigma code Stop the necessary number of attacks Win the war ? Initial focus was to solve the problem: how to break the Enigma code consistently However: stopping every attack would give away that they could break the code – giving away their advantage The team solved a different problem: how to selectively stop the minimum number of attacks needed to win the war SMART Framework Characteristics of good problem statement • S pecific • M easurable • A ction - oriented • R elevant (to the problem) • T ime - bound The Oilco refinery is suffering from poor profitability despite a strong market niche position Should the Oilco refinery improve its deteriorating position?

Can the Oilco refinery be managed differently to increase profitability? Too generalNot disputableStatement of fact What opportunities exist for Oilco to improve profitability by $ 40 million per year through overhead rationalization, operational improvements, or restructuring non - core assets?

McKinsey & Company The challenge: leaping before they look • Ingrained assumptions • Conventional wisdom • Urgency to act • …….. Small Group Exercise (1 hour) • Review case study information packs for assigned industry • Define problem to be solved • Identify one representative to read out Small Group Exercise – Readout • 3 - 5 minutes per team • No slides necessary • Explain to the class briefly:

• What did you start with?

• How did you approach problem definition?

• What is your view of what the real problem is? Structuring and Solving the Problem Value of Issue Tree 1. Break down a problem into manageable parts - Problems that are complex and difficult are easier to solve by breaking them down into issues and sub - issues 2. Enable solving the larger problem by solving the right component parts - Prioritization focuses on the issues and sub - issues that drive the greatest impact and contribute most to solving the larger problem. Use 80/20 rule.

3. Align the team on nature of the problem and path to the solution(s) - Provides a shared understanding of the issues that comprise the problem.

4. Provide insight into missing issues and sub - issues - Make each level of the issue tree MECE. Problem Issue 4Issue 1 Sub - issue Sub - issue Issue 2 Sub - issue Sub - issue Issue 3 Sub - issue Sub - issue Issue 5 Sub - issue Sub - issue How could you reduce your expenditure each month? Buy fewer items Food Clothing Travel Entertainment Share costs of items (e.g., split rent with roommate, car pool)same quantity of items Buy lower - quality items Buy items at discount/on sale The challenge: tendency to do things the way they are already done • “Herd mentality” – follow same direction as competitors, without exploring other paths • Try to get ahead by brute force – drain on resources Advantage comes solving problems by working smarter“We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein Issue Tree approach to finding new solutions Problem Solution 1 Solution 2 Solution 3 Everyone is doing this ….

Not practical to implement This could work! Let’s explore further …..

Solutions must be M utually E xclusive and C ollectively E xhaustive (MECE) Solving the problem for the Oakland A’s Issue Tree approach for the Oakland A’s Recruit players who can score the most runs Compete for top players Raise more funding Use analytics to find undervalued players Everyone is doing this ….

Not practical to implement This could work! Let’s explore further ….. Solving the problem for Enigma Clip 1: 9:38 - 10:20 Clip 2: 20:51 – 21:55 http://digitalcampus.swankmp.net/columbia301179/watch?to ken=70c7e59861bc9d5cdbcd7f1f16e4945a5e0161fa01c8f428 bc73815e3882d713 http://digitalcampus.swankmp.net/columbia301179/watch?tok en=70c7e59861bc9d5cdbcd7f1f16e4945a5e0161fa01c8f428b c73815e3882d713 Issue Tree approach for breaking Enigma Break the Enigma Code Break the code with linguists Break the code as a mathematical puzzle Build a machine to defeat a machine Not effective Not fast enough This is the only way to solve the problem Benefits of problem structuring • Uncovers new, undiscovered ways to solve problems • Helps with “root cause analysis” to understand what might be causing a problem in the marketplace • Helps make the best use of all available data and expertise What is the relevance of what we covered today?

• Exercises were based on true - life success stories • Activities took you through the “anatomy” of success in each case • We’ll continue tomorrow on drivers of impact Game - Changing Analytics What’s different in the highlights of these two seasons?

Golden State Warriors 2009 Golden State Warriors 2016 https://www.youtube.com/watch?v=uRep6XaVNhI 0:00 – 0:31 https://www.youtube.com/watch?v=PsjjzJUEVSU 0:00 – 1:00 Data - driven strategy around the 3 - point shot What is the narrative? Why move to more 3 - point shots?

Was this data actually shared with the team? Analytics drove impact!

Wins New 3 - Point Strategy Valuation: $0.3B Valuation: $1.9B What we learned today • Competitive advantage starts with defining the problem correctly – too often this is not done the right way • It requires objectivity and a comprehensive approach to finding solutions – don’t just try to outdo competitors at their own game • Finding a solution is not enough to drive impact – creating buy - in and testing/learning/adapting is necessary for success Tomorrow we will go through the next steps of transformation Ask the right question Find the best solution through analytics Rally the organization to act Optimize by learning and adapting IMPACT!We are HERE