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Analytics is now a hot buzzword but how much analytics and rational are decision makers in practice? Are usual averages and ratios all what you

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E.g. marketing campaign - average response rate is 5%. Using analytics you find segment of customers with RR=50%. And you sell 10 times more with the same budget. Or save 90% of your budget with the same results...

In credit risk. Average loan bad rate is 10%. With risk policy set to 5%, you can't sell a single credit product. You could increase this limit to 15%, but unpaid debts will possibly ruin you. If you score customer properly, you'll find customers with risk of 3% and less and customers with risk above 15% and more...

There are lot of other examples. Averages are good for overview, with analytics you gain insight & advantage.
Analytics is mainly used for automating the Business process without which an organisation needs to employee more number of people to figure out the RR for a Direct Marketing campaign, PD/LGD in a Bank, and so on...
My impression ... and it is nothing more than this ... is that really big decisions get made with rather little analysis. The people that do great analytics are a bit like Generals in the army busily analyzing around the last war ... while critical decision makers are having to engage in the next one. But I would add something even more controversial, and that is that much of the analytics being done to improve corporate performance as measured by various proxies that deliver profit are more often than not doing damage to society in one or many ways. For all practical purposes there is no analysis that ties corporate activity to social damage at the community level ... yet, I would argue, this is a huge issue and to some extent explains why the USA has had profitable corporations and an infrastructure that has gone to the dogs!
Peter Burgess


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