190
Business Intelligence Journal
APPLICATION OF ANALYTICS IN BUSINESS STRATEGY
January
Koo Ping Shung
Researcher, Singapore Management University
80 Stamford Road Singapore 178902
Murphy Choy Junyu
Instructor, Singapore Management University
80 Stamford Road Singapore 178902
Abstract
In the most well-known ancient treatise of war, Sun Tzu Art of War, the following quote was made by Sun Tzu, He who knows his
enemy and himself well will not be defeated easily. He who knows himself but not his enemy will have an even chance of victory. He
who does not know himself and his enemy is bound to suffer defeat in all battles. (Sun Tzu Art of War, Chapter 3) In most of the papers
written on analytics, they are mostly focus on certain operations or functions of the business. The current literature lacks the discussion of
analytics on the strategic planning and execution. As such in this paper we are going to discuss more about using analytics where possible
to improve upon the strategy planning and execution. This paper will at times use quotes from Sun Tzu Art of War as support for analytics
application in strategic planning and execution. Key Words: Strategic Planning, Strategic Execution, Sun Tzu Art of War, Management.
Sun Tzu Art of War
Sun Tzu Art of War is a well-known Chinese ancient
treatise of war. Its popularity can be seen by the fact that
it is translated into many languages even though it is an
ancient text that is written more than three thousand years
ago. The book has also gained much traction in business
strategic planning due to the close nature between war and
business, providing inspirations for business managers on
how to succeed in the competitive business situations.
In Sun Tzu Art of War, there is a well-known quote that
goes.
He who knows his enemy and himself well will not be
defeated easily. He who knows himself but not his enemy
will have an even chance of victory. He who does not
know himself and his enemy is bound to suffer defeat in all
battles. (Sun Tzu Art of War, Chapter 3 )
Thus in terms of strategic planning and execution, it is
of utmost importance that the business manager knows the
“enemy” and “himself” well.
What is “Enemy”?
In the context of war, the enemy is referred as someone
you are up against or competing with. But in the context
of business, it should be referred to as external sources of
competition. With that in mind, the well-known Porter’s five
forces would serve as a relevant framework to determine
what the external forces that a company has to compete
with are and they are potential competitors, substitutes,
customers, suppliers and intensity of competitive rivalry.
With Porter’s five forces being a permanent feature in
many strategic management courses, it needs no further
introduction so let us discuss how analytics can be used to
assess these forces.
Potential Competitors
Markets that give high return will attract new firms to
be set up to serve the market. But before the company starts
to scurry to find out more about these potential competitors
with intent to ‘squash’ them, a recommendation would
be to first understand the markets that you are serving in,
lookout for potential barriers of entry and exit in the market.
Tactically, where possible, you would set up high barriers
of entry and play up barriers of exit in the market. This is in
line with Sun Tzu Art of War. In Sun Tzu Art of War it can be
seen that the terrain, where two or more competing parties,
fought out their battles can be seen as very important since
a whole chapter (i.e. Chapter 10) is dedicated to it. And in
the chapter, it discuss about the various terrains based on
its characteristic of ease of entry and exit. We can easily
Business Intelligence Journal - January, 2012 Vol.5 No.1
2012
Kamaladevi Baskaran
find that the terrain is similar to the market that companies
compete in. With that in mind, what is of most importance
would then be the market’s barrier of entry and exit.
Thus in terms of analytics there is a need to understand
the macro environment of the market the company is
working in. Know what are the barriers of entry for instance,
first-mover advantage, high set-up costs, lack of skilled
labor and so on. The next step would be to know where
the barriers of exit are and play them up in the minds of
competitors. Why do we work on the barriers of entry and
exit first instead of working to ‘squash’ the enemy? Please
look at the following quote from Sun Tzu Art of War.
Thus to fight a hundred battles and win a hundred battles,
is not a reflection of the most supreme strategy. The ability
to subdue the enemy without battle is a reflection of the
ultimate supreme strategy. (Sun Tzu Art of War, Chapter 3 )
As advocated by Sun Tzu, by working on the barriers
of entry and exit, you are able to discourage potential
competitors from entering the market avoiding ‘battle’ with
them.
Only after playing out the tactic, would company then
seek to find out more about these potential competitors,
discourage each of them where possible and proceed to
compete with them when they turn into real competitors.
Competitors
Let us now look at competitors. It is always difficult
to obtain data on competitors but that does not mean that
companies cannot get data or information on their rivals.
Public information such as advertisement that comes from
rivals marketing effort are some source of information that
companies can get. Companies can also seek out relevant
information from the suppliers and customers too since they
would most likely have in contact with the rivals. But one
has to take note that getting information from customers
might be difficult as customers tend to make rivals play
against each other so as to reap the most benefit out of it.
But this is only true for a B2B relationship. If it the company
is B2C then it can be easier to scout out more information.
Suppliers might be a good source of information but
care must be taken that there are no detrimental effect on
the suppliers’ benefits if they do divulge information.
Substitutes
In Porter’s five forces, substitutes are defined as
products that would increase the propensity of customers
191
to switch to alternatives. As such, companies have to
decrease the propensity to switch as such an understanding
of the available substitutes and a deeper understanding of
the customers is required. As the discussion on Customers
would cover part of the using analytics on the latter, the
focus of this discussion would be instead on the former,
having a good understanding of the available substitutes.
In order to gather better intelligence on the available
substitutes and its standing in customers, companies should
directly conduct surveys with the customers themselves. With
customers being more astute consumers, always seeking
out the best deal and with the Internet rapidly reducing the
barriers that arise from information asymmetric, customers
are the best data source to seek out the available substitutes.
What companies need from customers would be the name
of the substitutes and what customers are thinking about
these substitutes. With such information, companies can go
online to seek out more information on these substitutes,
understand what their value proposition to the customers is
and how customers are reacting to it. Companies can also
purchase reports from industry researchers such as Gartner
and IDC to understand more about the standing of existing
substitutes or competitors.
With such information, companies would be able to
react better to changes in tactics by companies producing
substitutes, thus retaining market share.
Customers
Analytics have definitely found its way into consumer
industry, mostly the banks and telecoms. It has found its
ways especially into marketing where there is a strong
desire to reach the right people at the right place and at
the right time. As such marketing analytics has entrenched
itself firmly in helping companies to understand more about
their customers, areas of opportunities, building brand
loyalty and preventing attrition.
Suppliers
In many battles that are fought out in ancient China,
there are some battles that are fought out by cutting the
supply chain or eradicate the logistics of enemy’s army. The
most famous of such war is Battle of Guandu fought during
the Three Kingdom period of Ancient China (Wikipedia,
2011). It was a classic battle because although Yuan Shao
has a obvious numerical advantage as compared to Cao
Cao (110,000 vs 40,000), it was Cao Cao who emerged as
Baskaran K. - The FDI Permit for Multi Brand Retail Trading in India - Green Signal or Red Signal
192
Business Intelligence Journal
the victor of the battle. The battle was won when Cao Cao
sent troops to attack a weakly defended Wuchao the supply
depot of Yuan Shao’s troops.
Such battles have shown the importance of logistics in
any battle and this is especially true in the business arena.
For a business to be able to meet its demand well, the
management of suppliers is of utmost importance. As such,
in recent years we have seen companies like Tesco and
Wal-mart working together with their suppliers to ensure
that they can meet demand when it happens in their retail
stores. Companies can use analytics and work with their
suppliers to ensure constant supply of goods and services.
Another thing to take note of is the need to have a Business
Continuity Plan that is worked together with suppliers.
Such importance is seen in the Japan Earthquake of March
2011. Many electronic goods have parts that come mostly
from Japan. As such, most of the electronic goods suppliers
found out that they cannot meet the orders because of such
supply chain disruption.
Thus analytics could be used together with suppliers to
better predict demand, manage delivery lags and ensure
constant and just-in-time supply of materials.
What is “Himself”?
As can be judged from the quote, himself means the
party himself that is planning to go into war. In the business
context, it would refer to the company itself.
Thus is also of utmost importance that the company
understands itself well. The importance of such knowledge
can be seen from the following quote by Sun Tzu.
In ancient times, those who were skilful in warfare
ensured that they would not be defeated and then waited
for opportunities to defeat the enemy. The ability to prevent
defeat lies on oneself while the opportunities of victory
depend on the enemy. Thus those who are adept at warfare
can ensure that they will not be defeated by the enemy, but
will not be able to ensure victory over the enemy. Thus
one is able to predict victory but not necessary be able to
achieve it. (Sun Tzu Art of War, Chapter 4)
Companies are responsible for putting themselves in a
position that they would not lose whereas the opportunity
for victory comes from the action of the rivals. Thus in order
for companies to truly put themselves in a good position,
they first have to know their companies well.
Over here we recommend to follow the framework that
is found in Sun Tzu Art of War.
January
Which Ruler has a higher Political Intelligence? Which
general is more capable? Which side has the advantages
created by the weather and terrain? Which side is capable
of executing orders effectively and efficiently? Which army
is better equipped, stronger and larger in numbers? Which
side has better training? Which side is more enlightened in
the administration of rewards and punishment? (Sun Tzu
Art of War, Chapter 1)
If you look at these seven areas they can be grouped
into the following areas; Leadership, Human Resource
Management, Process & Operations.
Let us now discuss more about each area.
Leadership
Although the usage of analytics to improve leadership
is far and few, there is a need for leadership to drive
the analytics movement in the company. The need for
that as mentioned is that for anything to be successfully
implemented, the strong support from leadership is greatly
needed. Without the strong support, it would be difficult to
push through a motion in the company. This can be seen in
literature that discuss about the implementation of analytics
in companies.
Besides giving the strong support, there also is a need
to a culture where decisions are made based on facts, made
up of available data in the companies, rather than decisions
based on gut feel.
Process & Operations
Another area that analytics have found its way into
has been in the Process & Operations area of businesses.
Most of the common usage of analytics is to find areas
for improvement, like cutting down unnecessary steps,
reduction in requirements or materials, optimizing delivery
process, optimizing manpower in service industries,
optimizing the inventory to hold and so on. The usage of
analytics brings to the management more clearly the areas
of improvement in their operations and processes. But one
has to take note of the customer experience implications
when deciding to make changes to the operations or process.
Human Resource Management
In the areas quoted above by Sun Tzu, we can see that
Human Resource Management is very important. The need
Business Intelligence Journal - January, 2012 Vol.5 No.1
2012
Kamaladevi Baskaran
for them to be well-equipped, well trained, stronger both
physically and mentally and also carrying out the orders
effectively and efficiently.
In the Knowledge Economy that we are in, the need for
an effective management of human resources has taken
precedence over many other areas.
The area of talent analytics has slowly been emerging
in the business world with the focus on mainly retaining
talents, improving staff engagement and optimizing the
work schedule.
For instance, using the behaviors such as making
claims, taking both sick and annual leave and other forms
of interaction between the employee and the employer to
predict when a staff is likely to leave. If the staff is a talent
that the company wants to retain, it can then start to take
pre-emptive measures, to start engaging the talent so as to
prevent turnover where possible. Or finding out more about
the low performers and understand the reason for their
performance.
With reference to “Competing on Talent Analytics”
from October 2010 Harvard Business Review (Davenport,
2010) and Sun Tzu’s quote above, analytics can now be
used to determine whether employees are meeting key
objectives and if they are not, what the reason could be. Is it
a lack of equipment or skills? Analytics could also be used
to identify and intervene so as to retain the good performing
managers.
193
The world of talent analytics is still very new but as
mentioned it would definitely be adopted in the arena of
human resource management given the strong need for the
‘right’ employee in the Knowledge Economy.
Conclusion
In this paper, we have mentioned the several areas that
companies can use analytics to improve upon their strategic
planning and execution. It was broken down into external
and internal factors. External factors would be, according
to Porter’s five forces, potential and existing competitors,
suppliers, customers and substitutes. For the internal factors
where analytics can be used, they are Process & Operations
and Human Resource Management, together with the
strong support from leaders or top management.
References
Battle of Guandu, Wikipedia, http://en.wikipedia.org/
wiki/Battle_of_Guandu
Davenport TH., Harris J., Shapiro J., 2010,
<<Competing on Talent Analytics>>, Harvard
Business Review, Oct 2010, Pages 52-58
Sun Tzu Art of War, http://www.chinese-wiki.com/
Sun_Tzu_Art_of_War
Baskaran K. - The FDI Permit for Multi Brand Retail Trading in India - Green Signal or Red Signal