Analytics and Innovation #PBLS

Jim Goodnight, CEO of SAS, and Geoffrey Moore, author of Crossing the Chasm among other books, had a discussion on the use of analytics in innovation. Several areas were touched on from the global economy to innovation approaches to education.

The growth of low cost competitors in the global economy has commoditized that which can be commoditized, said Geoffrey, so companies in developed nations have to find ways to differentiate to sustain their profit margins. How to get these higher returns is getting more complex as the old advantages, of simply having more technical skills, degrade. Instead things like an ability to try and fail, and a balance between innovation and optimization (effectiveness and efficiency, say) are essential. For instance, grid computing might reduce a job from many hours to a few minutes and that’s optimization but it also allows innovation by making it possible to try things more rapidly, cycle more rapidly.

Geoffrey made some great points about the global economy. There are clear positives in the growth of new economies and the general rise of the standard of living in those companies. This does represent a challenge though. Not, perhaps to companies that are increasingly global and able to take advantage of the world economy, but to the middle of the economy. The top of the US economy is still generating innovation and talent that is competitive worldwide. But below that is a layer that no longer has a social contract with employers and that is struggling to be competitive in a more global economy.

Innovation must have a purpose – it must create differentiation from your competitors. You need to innovate consistently enough in a particular area to create a compelling differentiation from your competitors – be different from your competitors. Ongoing investment and steady improvement may be more useful than some great leap – SAS, for instance, prides itself on having made consistent investment in analytic and software R&D over many years. One of the hardest things in innovation is picking the right place to make the ongoing investment – finding the "crown jewels" of an organization, the key strengths of competitors and the needs of customers is critical to drive this decision.

There was some discussion of the education system and the challenges of education in a global economy. Most kids who drop out of high school, and 30%+ do, report that they drop out because they are bored. The fact that educational style (teacher at the front talking about a subject) has not changed in the last 50+ years despite the huge change in the interactivity and technology usage of the new generation is contributing to this. SAS has developed curriculum material and is focused on creating a more interactive, computer-based, technology-enabled environment. Curiously neither speaker spoke about the drag on the entrepreneurial economy caused by the fragmented and inefficient US healthcare system.

The general impact of the internet in terms of disintermediating everything from IT departments to schools and its ability to support self-organizing groups is that massive change to the way organization work. Building on this, getting ahead of it, is going to be critical as it cannot be resisted, only leveraged.

Finally the scale of the economy and the fact that it means systems have to be used to manage the data, manage the customer interactions is driving analytics. If interactions are so numerous or products are so varied that computers must be used then optimizing your business, making this work for you involves analytics. Over the last 30 years the shift has been from presenting analytics to people so they could make decisions to systems where no human being can be in the loop and the analytics drive decisions. These systems require a second loop, outside the transactional environment, to manage and improve the analytics in the system. This is essential because it is only the people that have a strategic intent that can drive the system in the right direction.

The panelists were asked their key philosophies for success. Geoffrey said know what your core is and then declare it, make it public. Find ways to optimize non-differentiating processes to free up resources for your core. Jim said to treat people as though you believe they can make a difference and supply challenging work to keep people engaged.