by Rohan Light

Enterprise analytics isn’t about competitive advantage

Oct 20, 2016
AnalyticsBusiness IT AlignmentC-Suite

Competitive advantage used to mean something. Competitive advantage is a core part of the sales pitch for analytics. But the strategic CxO is wary of buying into that. Because analytics isn't about competition.

To be “enterprising” is to be eager to undertake or prompt to attempt. To show initiative and be resourceful. These are leadership traits, so to be enterprising is to lead. “Analytics” is how we use data to inform decision-making, in the context of achieving business objectives. These are management practices, so analytics is about management.

“Enterprising Analytics” is about being creative, resourceful and adventurous with decision-making to achieve business objectives. It is about the set of leadership and management practices that need to be in place for an organization to make the most of its analytics investment.

Competitive advantage isn’t what we think it is

Competitive advantage used to mean something. For a short period of time and in a limited sense.

Michael Porter started shaping the term as business professionals now understand it in 1979, but the word competitive hadn’t entered general usage until the mid-19th century. Prior to that, the word compete had two meanings: to “be in rivalry” or “to work in common.” In the Golden Age of the Management Consultant, the former meaning was preferred. In the Discredited Age of the Management Consultant, people are returning to the latter.

“Competitive advantage” is a handy abstraction. It sounds clever to say something is good for competitive advantage, and others will nod on cue. The term is not something many people will challenge. The logic seems self-evident. And to question the idea is often seen as questioning the person. And if it’s the boss who says it’s good for competitive advantage, who’s going to argue?

Analytics changes your value network

Analytics, apparently, is good for competitive advantage. It’s fundamental to the sales pitch. The strategic CxO, however, is wary of analytics being sold as Eau de Avantage Competitif. Rita Gunther McGrath hints why in her 2013 book The End of Competitive Advantage:

…deeply ingrained structures and systems that executives rely on to extract maximum value from a competitive advantage are liabilities — outdated and even dangerous — in a fast-moving competitive environment.”

The “deeply ingrained” bit takes us into the murky world of bounded rationality. Or anchoring, depending on how generous you want to be. Whatever the case, investing in an enterprise analytics suite on the grounds that it’s going to get you ahead of the competition isn’t a winning strategy. That’s because strategic CxOs aren’t using analytics to compete outside their organizations’ value networks. They’re using it to change the idea of what the organization is within its value network.

Analytics are about ‘working in common’

Strategic CxOs understand competitive in the older sense of working in common. They’re also aware of how narrowly applicable competitive is in the sense of “acting in rivalry.” Because competitive advantage as a concept doesn’t really apply to the public sector, nor to internal service business units. 

Yes, there will always be people who will find a way to make it apply. Anything can be squeezed into a small space if you’re not worried about the integrity of the thing being squeezed.

Take the word customer, which many a public agency uses as a surrogate abstraction for those to whom the agency has a duty of service. But a customer is a person who can refuse service. This doesn’t usually apply to citizens or other internal business units.

Analytics and the dangers of abstraction

So, “competitive advantage” doesn’t apply to many organizations. And if it does, it tends to get you in trouble. If you’re still comfortable justifying this doctrine in the name of business, take a moment to consider the moral dimension that is (conveniently) hidden behind the abstraction.

An abstraction is “the quality of dealing with ideas rather than events.” That in itself should make strategic CxOs uneasy. Strange things happen to our capacity to consider the humanity of our actions when we live in a world of abstractions. Simon Sinek confronted us with this in his 2014 book Leaders Eat Last:

Anything that separates us from the impact our words and actions have on other people has the potential to lead us down a dangerous path. As Milgram showed us, when we cannot see the impact of our decisions, when the lives of people become an abstraction, 65% of us have the capacity to kill someone.”

Analytics and the crisis of leadership

Sinek was referring to Stanley Milgram’s infamous 1961 Yale experiment on obedience to authority. Why is this relevant? Because as I wrote this article, a Google search on the term leadership generated more than 756 million hits. We are in a crisis of leadership, and this IMHO is, in part, down to our established culture of putting layers of abstraction between senior leadership and the people affected by our decisions. Again, here’s what Sinek wrote:

When our relationships with customers or employees become abstract concepts, we naturally pursue the most tangible thing we can see — the metrics.”

And what does analytics mean to most people? Metrics. Numbers. Abstractions.

This is why the strategic CxO takes a pinch of salt when she hears “competitive advantage” mentioned in connection to analytics. It’s not smart, it’s not relevant and it’s not good. Chasing advantage in rivalry takes leaders down dangerous paths. Coming to terms with working in common is, however, an entirely different story. And the strategic CxO knows that this is what analytics is actually about.