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Ajay Kelkar

The author is COO and co-founder, Hansa Cequity

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Why Data Driven Organisations Eat Legacy Businesses for Lunch

Is Analytics and Big Data yet another fad? When you're a consumer it sure does look that way

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Marketers still don’t care, as much, about being relevant to you. Period. Or do they? You get that umpteenth credit card solicitation from the bank that has already sold you a card. And nothing about a physical retailer shopping experience makes it personal for you! And yet, your online persona seems to be treated differently. When as a consumer you flit between your online and offline avatars, this becomes even more obvious. So the question that pops up in everyone’s mind is: What have these “new age” companies done differently which has disrupted the legacy competitors?

One of the key strengths that new age companies bring is their “data literacy”. On the other end of the spectrum, legacy companies are still at meddling with the thought and at some level paying a lip service to the whole concept of data based marketing.

Perhaps, the issue is much more fundamental. Organisations have to rethink how they leverage analytics and actually change their company structures, incentives, and processes to create meaningful and large business impact. The volume of data available to companies continues to double every year and new streams of data from the Internet of Things is adding to the party. No wonder, according to estimations by the McKinsey Global Institute, the IoT will have a total economic impact of up to 11 trillion dollars by 2025.

Digital natives versus others

Clearly most legacy companies still have a long way to go to truly extract value from analytics. Companies such as Amazon, Facebook, Google, Netflix, and Uber have capitalised on their big data, advanced analytics, and machine learning capabilities to drive better revenues and engagement which most legacy companies have struggled with.

But it is still early days. According to McKinsey, “About 90 percent of the digital data ever created in the world has been generated in just the past two years, only 1 percent of that data has been analyzed”. Thus, the industry is split where to draw a conclusive line between different players. This struggle has lead them to classify companies as Innovators, Early Adopters, Early Majority, Late Majority, and Laggards’ or ‘Digital Natives and Digital Immigrants’.

I think where many companies go wrong is that they do not have a clearly articulated strategy around analytics. How much extra revenue can I generate if I had access to insights that analytics can produce? What if Shoppers Stop said that we will target a Rs. 1,000 crore revenue by crafting an analytics-led strategy? How do we bake this in the company’s annual operating plan along with the micro level changes required in company structure and business processes? How do we ensure that the business use cases associated with this are sufficiently detailed to ensure that we put together the data required to actually do the analytics.

The next thing companies need to do [honestly] is assess where we are on this journey. One of the most critical pieces in the journey is to embed analytics folk on the business side to become translators who help the traditional business manager understand what is being done with the analytics. This is a very significant step and companies need to invest fully in this to allow for such translation to happen on the ground.

Need for a cultural shift

Clearly an important element that accounts for how data led the organisation can become, is the ‘culture’. A way of working in the business where everybody assembles data to take key decisions. Digital native companies were built for data and analytics–based disruption from their inception.

I guess the “new age” companies are architected to capture data far better than the legacy companies. But a lot of it also comes from mindset. A lot of the new age companies do not hesitate to ask customers for their data, secure in their knowledge that they will provide value back to the customer in this barter.

Also maybe, new age companies have younger employees who are not afraid to use data to change the mind of more senior folk. Data and analytics are in fact changing the basis of competition. Changes in the business environment affect all sorts of companies. India’s move to demonetise was one such trigger. Paytm hit a record 5 million transactions a day starting 10th of November, 2016! In less than 24 hours, Paytm's platform saw an overwhelming 435 percent increase in overall traffic - as millions of consumers across India moved to use their Paytm wallets to transact.

And in most businesses now new age companies are fighting for market share with legacy companies. So your investment in analytics capability can pay rich dividends. But in legacy companies, often analytics is seen to be too theoretical.

So unless companies learn to creatively marshal their data resources, they will leave a lot of opportunities on the table! This is what software architect Grady Booch had in mind when he uttered that famous phrase: "A fool with a tool is still a fool."

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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