Professor Andy Philpott (University of Auckland) has recently had an article on Analytics published in the NBR (National Business Review). This is available online (behind a paywall) and below.

Business Analytics
Professor Andy Philpott

The recent report on the parliamentary inquiry into New Zealand manufacturing comes shortly after the announcement by the Ministry of Business, Innovation and Employment of the New Zealand Science Challenges, and the allocation of $133.5 million to fund research into these.

The parliamentary inquiry seeks to reverse a reported decline in manufacturing. This might be necessary, but it is not sufficient for New Zealand prosperity in the long term. The future challenge for New Zealand is to build a diverse service and knowledge-based economy that does not rely on exporting commodities for its survival. This needs to be given much greater importance in the New Zealand Science Challenges.

In their current form, the national science challenges fall into ten broad categories, most of which deal with the environment, health, and other social concerns, all of which are worthy areas for research. The big science challenge left largely unresolved is how research might lead to economic transformation of this country. In several of the science challenges, one can see a few examples of how research might lead to economic transformation through the promotion of clever ideas e.g. robots that harvest fruit or needle-free injections. These are all good examples of areas that might be enhanced by allocating research resources. Examples can inspire and illustrate, but on their own they do not form a coherent theme for investing heavily in the research that will create value for New Zealand in the rest of this century. One would not want to stake the future of the country by betting heavily on one or two picked winners from these examples.

The research field that will be essential to a successful New Zealand economy in the long term is analytics. It is easy to track down the Google analytics page that tells us how many hits a web site or uploaded video-clip is attracting, and where these are originating. Now advanced mathematics, statistics and computer science is turning these data into value. Companies like Amazon, Netflix and Facebook attempt to estimate individual preference information from any person’s interaction with their sites – this enables them to target advertising and product offering to create more value.

Although analytics is driven by the cheap availability of data, it is much more than just representing or interrogating the data in novel ways. According to http://analytics.org.nz, analytics is the application of modelling, optimization, and data analysis for fact-based decision making. And analytics is not just for internet companies. Analytics includes both a complete business problem solving and decision making process, and a broad set of methodologies that enable the creation of business value. These principles apply to all industries and institutions like hospitals, schools and government bodies, and their application can create huge value.

In the last two years business analytics has taken off in North America and Europe as a key competency recognised as a feature of successful companies. The book “Competing on Analytics” by Harvard academic Thomas Davenport documents this phenomenon. However, despite a number of reported success stories (for example Air New Zealand and Norske Skog have been finalists in international analytics prize contests), New Zealand has fallen behind the United States in the uptake of analytics.

This is why analytics leader Dr Kevin Ross and his colleagues at Fonterra have created the New Zealand Analytics Forum. This body, consisting mainly of analytics professionals from New Zealand companies, is gathering momentum with two successful meetings held at the Auckland Business School this year, and one to be held in Wellington on July 12 (see http://analytics.org.nz/nz-analytics-forum-wellington-event). New Zealand’s business and research funding agencies need to get on board and support this industry-led movement. It has the real potential to drive a knowledge wave that business leaders routinely prescribe for New Zealand’s economy.

What is the government’s role in this? To their credit, the government are supporting and promoting enrolments of engineering, mathematics, statistics, and operations research students in our universities. Some of these students will go on to work for companies like Google, IBM, or Microsoft, or other similar companies that are winning the analytics race against competitors. Alas, few of these smart graduates will want to live and work in New Zealand unless there are rewarding and interesting careers to attract and retain them. Fostering and growing a New Zealand analytics capability will provide these opportunities.

The New Zealand Science Challenges currently under discussion give research funders a unique opportunity to support analytics capability. Modelling and analysis are mentioned as themes in a number of the preliminary outlines of the science challenges, but it is difficult to identify such activity as a separate scientific endeavour that will be seen by decision makers as deserving support. In my opinion, “deserves support” is too weak a phrase. Business analytics is essential for New Zealand’s long-term economic survival. Fonterra are betting on it. The Ministry of Business, Innovation and Employment would be wise to bet on it also.

July 2013

 

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