Analytics: Applying the lessons from Wal-Mart to reducing costs in Government - Part I of II

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Analytics: Applying the lessons from Wal-Mart to reducing costs in Government - Part I of II

Wednesday, December 14th, 2011 - 13:06
Wednesday, November 30, 2011 - 12:10
The business analytics market grew by 13 percent during 2010. Industry analysts predict that the sector will enjoy a sustained annual growth rate of nearly 9 percent through 2015. The growth in this sector is sustained by the indisputable competitive advantage that firms of all sectors derive from the use of analytics.

In our last post we defined what we mean by business analytics and introduced a recent study that was published on the power of analytics. Over the next two blogs, we will address the relevance of analytics to leaders in government departments or agencies. We will address the following two questions:

  1. What can analytics do for government departments or agencies? 
  2. How are government departments or agencies already using analytics to improve their service to citizens?

What can analytics do for government agencies?

American retailing giant Wal-Mart demonstrates — perhaps better than no other — the power of analytics.  What does Wal-Mart do with analytics?  

  • Develop deep knowledge of its customers.  Wal-Mart collects information about every customer transaction.[1]  Wal-Mart applies analytics to understand how its customers behave and to predict their responses to changes in its offerings.   
  • Relentlessly pursue improved operational efficiencies.  Wal-Mart’s supply-chain operations are legendary for their efficiency.[2]  The retailer rigorously measures nearly every meaningful aspect of its operations.  Company-wide performance benchmarking illuminates opportunities for management intervention.

Wal-Mart translates analytics-derived information into performance improvements because it is an information-driven organization.  Employees at all levels are exposed to performance data.  Their inputs are elicited and acted upon in order to extend the company’s competitive advantage.

Wal-Mart’s lessons are transferable to government agencies.  Agencies’ challenges resemble in an abstract sense those faced by commercial firms.  They must:

  • Understand the needs and usage patterns for citizens they serve;
  • Identify the operational factors that contribute most to mission success;
  • Achieve deep insight into the structure of intricate and diverse cost factors; and
  • Manage the alignment between cost and mission-success factors.

Coming up next

Today, we have demonstrated an example of how one commercial organization, Wal-Mart, has effectively used analytics to improve its operational performance. Join us next time as we address the second question on how government departments or agencies are already using analytics to improve their service to citizens.

Let us hear from you

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[1] James Manyika, et al, “Big data: The next frontier for innovation, competition, and productivity,” McKinsey Global Institute, May 2011, http://www.mckinsey.com/mgi/publications/big_data/pdfs/MGI_big_data_full...

[2] “Supply-Chain Management at Wal-Mart,” Richard Ivey School of Business, University of Ontario, Case Study 907D01, June 3, 2006

 


David Treworgy

Mr. Treworgy has over 20 years of analytics and project management experience. In addition to his primary focus on United States departments and agencies, he also has carried out work for a number of government organizations in Europe and Africa. A thought leader in the area of strategy and information analytics, Mr. Treworgy publishes frequent articles, presents often at conferences, and has provided expert witness testimony on several occasions, including at a joint Senate / House of Representatives hearing. He graduated with a BA in Economics from Williams College and an MBA from Harvard University.

David Treworgy (david.treworgy@us.ibm.com)

 

 



Greg Greben is Vice President and Market Leader for Business Analytics and Optimization (BAO), IBM Global Business Services, US Public Sector.