Just how powerful is data analytics? Do we overestimate the ability of data analytics to provide a competitive advantage to businesses?
Businesses built on data have been around for a while. Companies such as automakers and consumer goods manufacturers collect vast amounts of data on sales trends. Most of that data however is rarely about individual customers. Traditionally, data collection and analysis were slow and expensive processes. Companies used to conduct focus group interviews involving small sample sizes because of time and resource constraints.
All this has changed over the last decade with the emergence of technologies that allowed faster and continuous data analytics. Now it is possible to track individual customer behavior, internet searches, type of content consumed, and much more. These new technologies have massively increased the scope of business intelligence.
It is important to remember that business intelligence and competitive advantage does not simply involve collecting huge chunks of data. Here is how to turn data analytics into a competitive advantage.
Data Analytics Barrier to Entry for Competitors
One of the ways that data analytics can create a competitive advantage is by acting as a big barrier for new players in the market. Consider a situation where a company has been in the market for so long and all that they have learnt from their customer data for two decades remains relevant today.
A good example would be Google’s search engine. They have collected so much user data and their learning continue every day. They are continually finding ways to improve their users’ experience. This makes it almost impossible for a new search engine to come around and make a significant splash in the market.
Mobileye, is the leading provider of driver assistance technology for cars (ADAS). They sell their technology to car manufactures and can collect user experience data. Analysis of this data entails learning for Mobileye which improves their technology with every new iteration. The years of learning mean that it is harder for new entrants in the market to earn manufacturers trust. Currently, the accuracy of ADAS technology stands at 99.9%.
Using Data Analytics to Cut Costs
Through analytics, it is possible for businesses to cut costs, pass on benefits to customers, and as a result create a competitive advantage. Analytics can reveal inefficiencies in virtually all processes in your organization.
Airbus, the aircraft manufacturer has successfully used analytics to cut manufacturing and maintenance expenses of their planes. They were able to design planes that offer up to 15% better fuel efficiency. That is enough improvement to influence customer-purchase decisions.
The adoption of IoT technology in office equipment presents opportunities for data analytics to show areas of possible energy savings. It is now possible to collect data to help determine the energy efficiency of various appliances in the organization. An organization can replace inefficient appliances, design better workspaces with shared lighting, and opt for cheaper sources of power such as solar energy during the day.
Personalizing Customer Service
Perhaps the most visible impact of data analytics in the last decade has been the ability of companies to personalize their customer offerings. By setting up an analytics platform, it becomes possible for a company to build a profile of its customers over time. The history, frequency, and value of a customer’s spending is invaluable.
A company can tell when frequent customers are no longer coming back. They contact them, ask whether they have any issues with the company’s products. Keeping existing customers is much easier than acquiring new ones.
Similarly, a company can tell whether there are any upselling opportunities to different customers based on the type of purchases they are making. Amazon is the best example to use because they have a history of a customers’ spending over such a long time. It is possible to even tell when people’s incomes have grown based on spending habits.
Being able to personalize marketing campaigns is so important today because failing to do so means your competitors are using their advertising dollars better. Personalized marketing has better chances of conversions. Sometimes customers do not realize they need a given product until it is presented to them. Analytics, therefore, helps businesses to stay relevant by pre-empting customer needs.
Better Use of Resources
Being able to employ your resources than your customers is a great source of competitive advantage, especially when it comes to human resources. In the sales field for instance, there may be people who are good at establishing new leads but not good at closing deals. Data analytics can reveal such weaknesses and the company can assign them the appropriate person to help with closing deals. Analytics can also reveal instances of overstaffing where employees have too much downtime, for instance during non-peak seasons for the year.
Human productivity often depends on the availability of complementary tools of work. Through data analytics, it is possible to determine the right combination of human skill and capital resources such as technology. For field service companies, for instance, a company can determine how many teams to have, how many members for each time, and the number of shifts in a day.
Clearly, data analytics provides companies with the chance to build a competitive edge over competitors. However, cutting costs, allocating resources optimally, and personalizing customer care are not always straightforward. Access to more data does not always translate to a competitive edge. Sometimes leaders have the access but still opt to use intuition over analytics. According to research from Accenture, 40% of managers still rely on intuition to make decisions that could be guided by more objective guidelines.
Hiring a professional consultancy firm can help your organization make fully use of opportunities for integrating data analytics in your workflow. Transcendent Software has Data Science services for firms in different industries. Organizations of all sizes are creating data exponentially. We can help collect, normalize, analyze the data and share actionable insights for your firm. To learn more about our data analytics services, check our website for further details.