Here are several excerpts from an article by Jeffrey Pfeffer, professor of organizational behavior at Stanford’s Graduate School of Business, Information Is a Strategic Resource, So Use It:
Last summer, my American Airlines flight from San Francisco to Miami was diverted to Los Angeles for mechanical problems. By the time the plane finally arrived in Miami — five hours late — many passengers, including me, had missed their connections to South America. American knew, of course, what each person had paid for the ticket and their frequent-flyer customer value status. But everyone was treated exactly the same as they left the plane in the middle of the night — that is, badly: no hotel vouchers, no help with luggage that had been checked through (and locked up). It didn’t matter if you had paid more than $10,000 for a round-trip ticket to Sao Paulo or a few hundred dollars for a domestic coach ticket.
With the number of airline-issued credit cards, grocery-store club cards, department-store credit cards, and reward accounts with hotels, airlines, and car-rental agencies, companies have tons of information about their customers and their purchase patterns.
But almost no companies use that data strategically. By “strategically” I mean using information to identify their most profitable customers and figure out, by running experiments, what to do to capture a larger share of the customers’ expenditures on a given category of product or service.
Why so little use of information?…
As Usama Fayyad, former chief data officer at Yahoo! commented, most senior leaders don’t see data as a strategic resource and competitive weapon but just as part of the boring IT infrastructure, something IBM handles. Both Fayyad and Loveman recognize that a company’s ability to use information to gain competitive leverage is not about having data warehouses and data analysis software — that’s necessary but largely insufficient for achieving business results. Instead, gaining strategic advantage entails:
1. Recognizing the potential to use information to gain business intelligence;
2. Asking intelligent questions of the data;
3. Using the data to segment your customers so you can treat them differently on a moment-to-moment basis; and
4. Running and analyzing experiments to continuously learn how to make your marketing more effective.
This year, my two trips to South America for consulting gigs won’t be on American. If I’m not going to get much for my platinum status, I might as well try a different carrier. Another customer lost — but I don’t think American Airlines will even notice. This lack of attention to customer data is one of the reasons that U.S. airlines, grocery stores, and other companies have such poor financial results.
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Great article, questions! Maybe part of problem is that today(!) IT is specialized to data, not information? Not much education but more and more training, certification on (IT) specialized areas!
Why do I say today? Because working as a systems programmer in a large insurance company in 70’s and consulting several global financial institutions in 80’s information collection, analyzing, designing for business intelligence, etc were main (and most interesting) tasks in my profession. At end of 80’s and since then even asking about information, NOT data, has been labeled you as an outdated old-timer.
What is interesting that BI, capacity planning, total security, etc are coming back in IT, same functions and tasks but with new, different names, acronyms, abbreviations.