Why Analytics Matter More than Ever

Companies that effectively use them will be far more successful than those that don’t.

Introduction

Which companies today are really embracing analytics and Big Data? I’m talking about the ones who are actually walking the talk.

Think about it for a moment.

For my money, the “Big Four” of Big Data are Amazon, Facebook, Google, and Netflix. It’s not even close.

Before I go any further, I know what you’re thinking: What about the elephant in the room? In fact, Apple is the exception that proves the rule. Tim Cook, Jonny Ive, et. al pride themselves on design excellence, not monetizing its user base and questionable privacy practices. Generally speaking, comparing yourself to Apple—what with its insanely high profit margins—is almost always a fool’s errand.

A Little Yarn

breaking_badConsider Ted Sarandos, Chief Content Officer at Netflix. Sarandos knows his company’s more than 60 million customers intimately well. How well? Three years ago in an interview, he described how a mind-boggling 50,000 U.S. Netflix customers watched season four of Breaking Bad in the 24 hours before the premiere of the new season. (They call it binge-watching for a reason, right?)

I came across a slew of astonishing numbers like these while researching The Visual Organization—ones that represent the uniquely profound understanding Netflix possesses.

This begs the big question, Why? Why has Netflix so fervently embraced data and analytics? Are its employees are inherently nosy? Do they have way too much free time on their hands?

No, Netflix has gone “all in” here because its top brass understands following better than most senior-management teams:

  • Analytics are essential to understand your customers—and keep them coming back. Netflix recognizes that the best customer relationships are voluntary. Put differently, “want to” is better than “have to.” Case in point: For years, many of us have tolerated our cable companies and signed two-year contracts with telecom carriers because we lacked viable alternatives. As the rise of cord-cutting demonstrates, many of us will jump at the first chance to bolt.
  • Disruption due to technological change is happening faster than ever. Have you been to a Blockbuster lately? Used a BlackBerry or Kodak product in the last few years? I didn’t think so. Want more proof? Check out the excellent piece that The Economist ran celebrating the 25-year anniversary of the Web. It examines the increasingly rapid adoption of new technologies. Better understanding of a customer base means less chance of irrelevance and even obsolescence.
  • Analytics allow organizations to make better business decisions. Netflix can minimize and quantify risk far better than most organizations and even profit from $100-million-dollar bets like House of Cards. Equipped with fascinating stats like those from Breaking Bad, imagine how much better informed the company’s massive content-related bets are? For example, it can recommend similar series such as Narcos with greater confidence.

Simon Says: Analytics are here to stay.

Companies that embrace—and effectively use—analytics will be more successful than companies that don’t.

Can analytics do it all? Of course not. Consider the famous words of Henry Ford: “If I had asked people what they wanted, they would have said faster horses.

Still, in our era of Big Data, all else being equal, the companies that embrace—and effectively use—analytics will be more successful than companies that don’t.

Amazon, Facebook, Google, and Netflix are among the most successful and valuable companies today for many reasons. Part and parcel to this success, though, is that each uses sophisticated analytics to understand its customers, users, partners, and products exceptionally well. Make no mistake: This bell can’t and won’t be unrung.

Feedback?

Does your company know its customers as well as Netflix? If not, then why not?

This post was brought to you by Analytics@American, the online Master of Science in Analytics from The Kogod School of Business at American University, and the opinions are my own. The program offers concentrations in Business and Policy, Financial Analytics, and Marketing Analytics and requires no standardized test scores or minimum professional work experience to apply. To learn more, click here.

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