{"id":190,"date":"2018-06-14T19:04:48","date_gmt":"2018-06-14T19:04:48","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/bus3060\/chapter\/ch11\/"},"modified":"2026-02-03T15:50:56","modified_gmt":"2026-02-03T15:50:56","slug":"ch11","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/bus3060\/chapter\/ch11\/","title":{"raw":"11.1 Introduction","rendered":"11.1 Introduction"},"content":{"raw":"
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Learning Objectives<\/span><\/header>\r\n
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After studying this section you should be able to do the following:<\/p>\r\n\r\n

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  1. Understand how increasingly standardized data, access to third-party data sets, cheap, fast computing and easier-to-use software are collectively enabling a new age of decision making.<\/li>\r\n \t
  2. Be familiar with some of the enterprises that have benefited from data-driven, fact-based decision making.<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n \r\n\r\n<\/div>\r\n

    The planet is awash in data. Cash registers ring up transactions worldwide. Web browsers leave a trail of cookie crumbs nearly everywhere they go. And with radio frequency identification (RFID), inventory can literally announce its presence so that firms can precisely journal every hop their products make along the value chain: \u201cI\u2019m arriving in the warehouse,\u201d \u201cI\u2019m on the store shelf,\u201d \u201cI\u2019m leaving out the front door.\u201d<\/p>\r\n

    A study by Gartner Research claims that the amount of data on corporate hard drives doubles every six months (Babcock, 2006), while IDC states that the collective number of those bits already exceeds the number of stars in the universe (Mearian, 2008). Wal-Mart alone boasts a data volume well over 125 times<\/em> as large as the entire<\/em> print collection of the U.S. Library of Congress1<\/sup>.<\/p>\r\n

    And with this flood of data comes a tidal wave of opportunity. Increasingly standardized corporate data, and access to rich, third-party data sets\u2014all leveraged by cheap, fast computing and easier-to-use software\u2014are collectively enabling a new age of data-driven, fact-based decision making. You\u2019re less likely to hear old-school terms like \u201cdecision support systems\u201d used to describe what\u2019s going on here. The phrase of the day is business intelligence (BI)<\/a><\/span>, a catchall term combining aspects of reporting, data exploration and ad hoc queries, and sophisticated data modeling and analysis. Alongside business intelligence in the new managerial lexicon is the phrase analytics<\/a><\/span>, a term describing the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions (Davenport & Harris, 2007).<\/p>\r\n

    The benefits of all this data and number crunching are very real, indeed. Data leverage lies at the center of competitive advantage we\u2019ve studied in the Zara, Netflix, and Google cases. Data mastery has helped vault Wal-Mart to the top of the Fortune<\/em> 500 list. It helped Harrah\u2019s Casino Hotels grow to be twice as profitable as similarly sized Caesars, and rich enough to acquire this rival. And data helped Capital One find valuable customers that competitors were ignoring, delivering ten-year financial performance a full ten times greater than the S&P 500. Data-driven decision making is even credited with helping the Red Sox win their first World Series in eighty-three years and with helping the New England Patriots win three Super Bowls in four years. To quote from a BusinessWeek<\/em> cover story on analytics, \u201cMath Will Rock Your World!\u201d (Baker, 2006)<\/p>\r\n

    Sounds great, but it can be a tough slog getting an organization to the point where it has a leveragable data asset. In many organizations data lies dormant, spread across inconsistent formats and incompatible systems, unable to be turned into anything of value. Many firms have been shocked at the amount of work and complexity required to pull together an infrastructure that empowers its managers. But not only can this be done; it must be done. Firms that are basing decisions on hunches aren\u2019t managing; they\u2019re gambling. And the days of uninformed managerial dice rolling are over.<\/p>\r\n

    While we\u2019ll study technology in this chapter, our focus isn\u2019t as much on the technology itself as it is on what you can do with that technology. Consumer products giant P&G believes in this distinction so thoroughly that the firm renamed its IT function as \u201cInformation and Decision Solutions\u201d (Soat, 2007). Solutions drive technology decisions, not the other way around.<\/p>\r\n

    In this chapter we\u2019ll study the data asset, how it\u2019s created, how it\u2019s stored, and how it\u2019s accessed and leveraged. We\u2019ll also study many of the firms mentioned above, and more; providing a context for understanding how managers are leveraging data to create winning models, and how those that have failed to realize the power of data have been left in the dust.<\/p>\r\n\r\n

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    Data, Analytics, and Competitive Advantage<\/h4>\r\n

    Anyone can acquire technology\u2014but data is oftentimes considered a defensible source of competitive advantage. The data a firm can leverage is a true strategic asset when it\u2019s rare, valuable, imperfectly imitable, and lacking in substitutes (see Chapter 2 \u201cStrategy and Technology: Concepts and Frameworks for Understanding What Separates Winners from Losers\u201d<\/a>).<\/p>\r\n

    If more data brings more accurate modeling, moving early to capture this rare asset can be the difference between a dominating firm and an also-ran. But be forewarned, there\u2019s no monopoly on math. Advantages based on capabilities and data that others can acquire will be short-lived. Those advances leveraged by the Red Sox were originally pioneered by the Oakland A\u2019s and are now used by nearly every team in the major leagues.<\/p>\r\n

    This doesn\u2019t mean that firms can ignore the importance data can play in lowering costs, increasing customer service, and other ways that boost performance. But differentiation will be key in distinguishing operationally effective data use from those efforts that can yield true strategic positioning.<\/p>\r\n\r\n<\/div>\r\n \r\n\r\n<\/div>\r\n

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    Key Takeaways<\/span><\/p>\r\n\r\n<\/header>\r\n

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