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Is Analytics Driving the Scale Paradox?

Short Takes...on Analytics

Posted by Ryan Renner, Principal, Deloitte Consulting LLP

Wherever you look today, you can find examples of small and mid-size businesses leapfrogging competitors – even large multi-national organizations – by getting closer to their customers. By using innovative technologies like cloud, mobile and social media, small businesses can achieve a depth of customer understanding and ‘punch above their weight class’, generating insight that was once only the domain of the large multi-national enterprises. Take the example of one small-retailer-turned-global-brand that grew rapidly during its first few years in business by better understanding and connecting with customers using social analytics. The business built such strong customer loyalty that it overtook its larger competitors in the marketplace; generating brand premium that is the envy of the industry. This is an example of the scale paradox—when disruptive technologies combine to change how companies innovate and compete.

While it may sound like the scale paradox tips in favor of small businesses, that’s not necessarily the case. Within the scale paradox, small businesses can access large-scale insight, while large enterprises can effectively create ‘intimacy at scale’ and connect with the customer in a way that small businesses cannot due to their size and reach. Even though larger enterprises may have more layers of bureaucracy and specific fiscal responsibilities that can impede innovation, the application of analytics allows big businesses to become more agile.  From establishing insights groups staffed by analytics specialists with business acumen, to creating analytics centers of excellence staffed with talent adept at wielding data in powerful ways, large-scale enterprises can achieve new competitive advantages within the scale paradox.

In the end, the advantages that can be derived from the scale paradox may be tipped in favor of the companies that win the analytics talent war as many organizations, large and small, are struggling with how to source analytical talent given the scarcity of this skill. Data scientists and analytics-savvy resources are often attracted to smaller businesses that don’t encumber their data exploration initiatives, but instead set them free to examine business problems across multiple dimensions and in non-traditional ways. This could be a signal for larger enterprises to find new ways to recruit, deploy, incent and retain analytics talent.

One thing is likely clear for both large and small businesses -- decision makers can no longer reside at the top of the business, but instead should be empowered throughout. Analytics can reduce the risk in decisions by quantifying the measurable, with the definition of what is ‘measurable’ expanding nearly every day. Organizations should empower employees to execute on strategy and use analytics to understand the impact and when necessary adjust execution in order to achieve the vision of the strategy. For smaller businesses, winning the analytics talent war means retaining their speed in execution and ability to attract analytical talent, but also in taking care of their data and maximizing their resources. For large businesses, it is not only important to execute more efficiently, but to instill the culture and talent that inspires and celebrates innovation.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

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