Analytics 1
Analytics 1
McKinsey Analytics
Interview
McKinsey Quarterly
September 2018
R
evolutions, it’s been remarked, never go backward. Nor do they advance at a
constant rate. Consider the immense transformation unleashed by data analytics.
By now, it’s clear the data revolution is changing businesses and industries in profound
and unalterable ways.
But the changes are neither uniform nor linear, and companies’ data-analytics efforts are
all over the map. McKinsey research suggests that the gap between leaders and laggards
in adopting analytics, within and among industry sectors, is growing. We’re seeing the
same thing on the ground. Some companies are doing amazing things; some are still
struggling with the basics; and some are feeling downright overwhelmed, with executives
and members of the rank and file questioning the return on data initiatives.
For leading and lagging companies alike, the emergence of data analytics as an
omnipresent reality of modern organizational life means that a healthy data culture is
becoming increasingly important. With that in mind, we’ve spent the past few months
talking with analytics leaders at companies from a wide range of industries and
geographies, drilling down on the organizing principles, motivations, and approaches
that undergird their data efforts. We’re struck by themes that recur over and again,
including the benefits of data, and the risks; the skepticism from employees before they
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buy in, and the excitement once they do; the need for flexibility, and the insistence on
common frameworks and tools. And, especially: the competitive advantage unleashed by
a culture that brings data talent, tools, and decision making together.
The experience of these leaders, and our own, suggests that you can’t import data culture
and you can’t impose it. Most of all, you can’t segregate it. You develop a data culture by
moving beyond specialists and skunkworks, with the goal of achieving deep business
engagement, creating employee pull, and cultivating a sense of purpose, so that data can
support your operations instead of the other way around.
In this article, we present seven of the most prominent takeaways from conversations
we’ve had with these and other executives who are at the data-culture fore. None of these
leaders thinks they’ve got data culture “solved,” nor do they think that there’s a finish
line. But they do convey a palpable sense of momentum. When you make progress on data
culture, they tell us, you’ll strengthen the nuts and bolts of your analytics enterprise.
That will not only advance your data revolution even further but can also help you avoid
the pitfalls that often trip up analytics efforts. We’ve described these at length in another
article and have included, with three of the seven takeaways here, short sidebars on
related “red flags” whose presence suggests you may be in trouble—along with rapid
responses that can mitigate these issues. Taken together, we hope the ideas presented
here will inspire you to build a culture that clarifies the purpose, enhances the
effectiveness, and increases the speed of your analytics efforts.
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Rob Casper, chief data officer, JPMorgan Chase: The best advice I have for senior leaders
trying to develop and implement a data culture is to stay very true to the business
problem: What is it and how can you solve it? If you simply rely on having huge quantities
of data in a data lake, you’re kidding yourself. Volume is not a viable data strategy. The
most important objective is to find those business problems and then dedicate your data-
management efforts toward them. Solving business problems must be a part of your data
strategy.
Ibrahim Gokcen, chief digital officer, A.P. Moller – Maersk: The inclination, sometimes,
when people have lots of data is to say, “OK, I have lots of data and this must mean
something, right? What can I extract from data? What kind of insights? What does it
mean?” But I’m personally completely against that mind-set. There is no shortage of data,
and there is even more data coming in.
Focus on the outcomes and the business objectives. Say, “OK, for this outcome, first let’s
look at the landscape of data and what kind of analytics and what kind of insights I need.”
Then act on it rapidly and deliver that back to the team or the customer. This is the digital
feedback loop: use the insights, ideas, and innovation generated by the team or your
customer as an accelerator for improving the capability and product and service that you
already have.
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Cameron Davies, head of corporate decision sciences, NBCUniversal (NBCU): It’s not
about the data itself. It’s not just about the analytics—any more than taking a vitamin is
only so you can claim you successfully took a pill every morning. When it comes to
analytics, we have to keep in mind the end goal is to help make better decisions more
often. What we try to do first and foremost is look at places where people are already
making decisions. We review the processes they use and try to identify either the gaps in
the available data or the amount of time and effort it takes to procure data necessary to
make an evaluation, insight, or decision. Sometimes we simply start by attempting to
remove the friction from the existing process.
Jeff Luhnow, general manager, Houston Astros: We were able to start with a fresh piece of
paper and say, “OK, given what we think is going to happen in the industry for the next
five years, how would we set up a department?” That’s where we started: “OK, are we
going to call it analytics or are we going to call it something else?” We decided to name it
“decision sciences.” Because really what it was about for us is: How we are going to
capture the information and develop models that are going to help the decision makers,
whether it’s the general manager, the farm director who runs the minor-league system, or
the scouting director who makes the draft decisions on draft day. How are we going to
provide them with the information that they need to do a better job?
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Cameron Davies, NBCU: You can talk about being CEO-mandated. It only goes so far.
Our CEO [Steve Burke] is very engaged. He’s willing to listen and share feedback. We try
to be thoughtful of his time and not waste it. A CEO, especially for a company of size, is
thinking about billion-dollar decisions. He’s thinking big, as you would expect. So we try
to focus on the larger things. We have a mantra: even if you have nothing to communicate,
communicate that. We have a cadence with Steve that happens on a quarterly basis,
where we say, “Here’s what we’re doing. Here’s what the challenges are and here is how
we’re spending the funding you gave us. Most importantly, here is the value we’re seeing.
Here is our adoption.”
Our CEO also provides encouragement to the team when he sees it. For a data scientist—if
you’re an analyst or a manager—to get the opportunity to go sit with the CEO of a
company and then have him look at you and say, “That’s really cool. That’s awesome. Well
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done,” that goes further to retention than almost anything else you can do. And he’s
willing to go do that from a culture perspective, because he understands the value of it as
well.
Takehiko (“Tak”) Nagumo, managing executive officer, Mitsubishi UFJ Research and
Consulting (MURC); formerly executive officer and general manager, corporate data
management, Mitsubishi UFJ Financial Group (MUFG): Just like any other important
matters, we need the board’s backing on data. Data’s existed for a long time, of course, but
at the same time, this is a relatively new area. So a clear understanding among the board is
the starting point of everything. We provide our board educational sessions, our directors
ask questions, and all that further deepens their understanding. And it’s good news, too,
that directors are not necessarily internal. They bring external knowledge, which lets us
blend the external and the internal into a knowledge base that’s MUFG-specific. Having
those discussions with the board and hearing their insights is an important exercise and,
increasingly, a key part of our data culture.
Rob Casper, JPMorgan Chase: Senior management now realizes that data is the lifeblood
of organizations. And it’s not just financial services. As more and more people digitize all
that they do, it all comes down to having transparency and access to that data in a way
that’s going to deliver value. Senior leaders need to promote transparency on every level.
Whether it’s the budget, what you’re spending your time on, or your project inventory,
transparency is paramount. As Louis Brandeis said, “Sunlight is the best disinfectant.” If
everybody sees what everybody else is doing, then the great ideas tend to rise to the top
and the bad ideas tend to fall away.
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Tak Nagumo, MURC: For MUFG, data culture is a part of our value system. Like eating
rice or bread—if you don’t eat it, you miss the day. Ultimately, everyone in the
organization has to adopt a mind-set of data culture, but it doesn’t happen overnight.
Creating a cross-cutting data set across the organization is a key for success.
Cameron Davies, NBCU: Just getting the people the data gets them excited. I’ve never
met anybody in all my time at NBCU, or in my past 20 years at another very highly
creative company, where I had someone look at me and say, “No, please don’t give me any
information to help me make a better product.” At the same time, I don’t believe in the
Field of Dreams philosophy that seems to be inculcated through a lot of data analysis,
which is, if you just build it, build something cool, it’ll come. I’ve never seen that work.
Ted Colbert, CIO, Boeing: You have to figure out how to really democratize the data-
analytics capability, which means you have to have a platform through which people can
easily access data. That helps people to believe in it and to deliver solutions that don’t
require an expensive data scientist. When people begin to believe in the data, it’s a game
changer: They begin to change their behaviors, based on a new understanding of all the
richness trapped beneath the surface of our systems and processes.
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Ibrahim Gokcen, Maersk: Data has to flow across the organization seamlessly. Now that
our data is democratized, thousands of people can access it for their daily work. We see a
lot of energy. We see a lot of oxygen in the organization, a lot of excitement about what is
possible and the innovation that’s possible. Because data, applied to a business problem,
creates innovation. And our people now have the ability to act on their innovative ideas
and create value.
Ted Colbert, Boeing: For Boeing, safety always comes first. There’s no “sort of” in it.
Always comes first. The certification requirements for software embedded on our
products are tremendous, for example. Data about how people use a system can help us
understand exactly what they’re doing, so that productivity and safety go hand in hand.
Cameron Davies, NBCU: There are things we demand about our data and how we treat
and consume it. For example, we take PII[ 1 ] very seriously. It’s a written rule: “This is
what you can and can’t do.” We have policies that are allowed and things that are not
allowed. And going against those policies will probably end up in you losing your job.
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There are expectations that if I do get the data, I treat it safely and effectively. If I
transform it or I move it, it’s in a place where most people can get to it with the controls in
place.
There also is the risk of getting [analytics] wrong. Solutions now are starting to help us
understand what’s happening inside the box. And it’s important to understand that as you
build up these capabilities, there is a support cost you’re going to have to take on. You
should have people monitoring to make sure it makes sense. You should build alerts into
place. Sometimes the data goes south, which I’ve seen happen, and nobody realizes it. I
won’t throw anybody under the bus, but we had a vendor that couldn’t recognize an
ampersand. But that’s how somebody decided to title one of our shows. We think that
issue cost us tens of millions in potential revenue—an ampersand!
We used to think we could build these systems and hand them to people, and they’d be
sophisticated enough to run them. We found very quickly that wasn’t always the case. We
ended up actually staffing to help run it or assist them with it.
Tak Nagumo, MURC: It’s almost like a yin and yang, or a dark side and a sunny side.
Introduction of the data-management policy documents, procedures, data catalog, data
dictionary—the fundamental setting is common for the [financial] industry. And the
mind-set necessitated to this area is more of “rule orientation.” The other side, the sunny
side, I would say, is more Silicon Valley–oriented, more of the data usage, data science,
data analytics, innovation, growth. Housing those two ideas into one location is so
important.
If you don’t have a solid foundation, you can’t use the data. If you have a solid foundation
but are not using the data creatively, you’re not growing. This mixing of those two is a key
challenge for our entire industry. You have to combine both, that’s the bottom line.
Ibrahim Gokcen, Maersk: Every company has constraints. Even the Silicon Valley
companies have a lot of constraints. Clearly, we are regulated. We have to comply with
lots of rules and regulations across the globe. We are a global company. But failing fast and
cheap doesn’t mean making bad decisions. It means complying within the constraints
that you have, and learning how do you go faster or how do you test things faster. And
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then implementing the decisions properly. So I think it’s really all about the culture of
using data, experimenting, building stuff, doing all that as fast as you can—and delivering
that to the front line, of course with the right mechanisms.
Cameron Davies, NBCU:You can talk about a CEO-mandated thing. It only goes so far.
People work, breathe their business every day. Nobody knows it as well as they do.
We had a business unit that needed to produce forecasts on an annual basis. There are a
lot of players in that process. We went into the organization and found one of the key
researchers, who seemed the most open, and we said, “Hey, what do you think? Let’s bring
you in and you work with us.” He became our point person. He interfaced with all his
peers throughout this process. Anything we needed to do, this person was the interpreter.
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how to use it. He brought feedback to us, and through that process took on ownership.
Now it’s, “This is my project. I’m responsible for making sure this happens.” Nice for us! I
don’t have to have a product manager now that’s meeting with seven different people
every month. They’ve fully taken it on and adopted the process.
Tak Nagumo, MURC: A key role for us is middle management. They’re a kind of
knowledge crew, conceptualizing and really justifying ideas from upper management,
and also leading implementation throughout the entire organization. So that’s up, middle,
and down. We’ve also found that “expats” are really well-suited to blend different
elements, particularly as we become more globalized. Understand that we have people
who work in, among other places, Tokyo, London, New York, or Singapore. No one can
communicate better in Tokyo, for example, the needs of employees in the United States
than someone who has actually lived and worked in the United States.
Jeff Luhnow, Houston Astros: We decided that in the minor leagues, we would hire an
extra coach at each level. The requirements for that coach were that he had to be able to
hit a fungo, throw batting practice, and program in SQL.[ 2 ] It’s a hard universe to find
where those intersect, but we were able to find enough of them.
What ended up happening was, we had people, at each level, who were in uniform, who
the players began to trust, who could sit with them at the computer after the game, or
before the game, and show them the break charts of their pitches or their swing
mechanics and really explain to them, in a lot more detail, why we’re asking you to raise
your hand before you start swinging or why we’re asking you to change your position on
the rubber or how you deliver the ball. Once we got someone in uniform to be part of the
team, ride the buses with them, eat the meals with them, and stay in the motels they have
in Single A,[ 3 ] it began to build trust. They were real people there to help them.
That was great, and that transition period worked for about two years, until the point
where we realized that we no longer needed that, because our hitting coaches and our
pitching coaches and our managers are now fully technology enabled. They can do the
translation. And they’re actually real baseball people who have had careers in coaching
and playing. The “translators” have essentially become the coaches themselves.
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Jeff Luhnow, Houston Astros: There was a trend in the past of using external companies
to house data like scouting reports or statistics. Most of that has now come in-house.
When I was with the Cardinals [2003–11], we used an outside provider, and when I got to
the Astros they were using an outside provider, but the response time and the
customization was lacking. Most important, when you come up with a way of looking at
the world and you want the external provider to build the model for you, you don’t want
them to share it with the other 29 clubs. It’s difficult to have the confidence that it’s not
going to be shared in some way, shape, or form. I think that’s led to most clubs believing
that their way of handling data and information is a competitive advantage. It therefore
becomes critical to have control over that in-house.
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But for some other cases, clearly we can create unique insights and machine learning and
AI algorithms and applications and software products for our teams. We can transform
our operations and serve our customers much better. So those things, obviously, we want
to keep to ourselves. We also don’t want to create a situation where we have hundreds and
thousands of different companies working for us. We want to be able to insource key
talent as much as possible. And that’s the journey we’re on today. We are building those
capabilities in-house, which means we’ll rely less on contractors.
Cameron Davies, NBCU: You’ve got to get people within the organization to understand
that first-party data is really important. I’ll give you an example. We had a business unit
that signed a contract with a data vendor to do some marketing-analytics work. It was
fine; we couldn’t take it on at the time. We agreed to help support it. However, they didn’t
ask us to review the contract. When we did get the contract, later on, we learned two
things that were a little disconcerting to us.
Number one, there was nothing in the contract that said the vendor had to give us back
any of the transformed or enriched data. Well, that’s a lot of work to go do; plus, we
provided the data in the first place. And not to get any of that back? And then the second
disconcerting thing—and the most disconcerting thing in the contract—is that it gave the
vendor the right to keep that data and use it in their syndicated sources for their further
products. Now, I don’t blame the vendor. If I could get away with that contract, I would
write it that way, too.
So we’ve gone on a little bit of an education tour. We put together a package and we did a
little road show. “This is an asset. Here’s how we use it. You should think about it as
something valuable, not just something you just read over in the contract and give up.” I
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think as people see the value, they’re getting more excited—like, “OK, not only can I use
my first-party data but I can bring in other data, enrich it, and create value across the
organization.”
Ted Colbert, Boeing: I approve every single project that goes into the cloud; it’s very
helpful that we have a process in place to do that. Our cybersecurity consciousness also
has caused us to put a bunch of infrastructure in place to protect the company. It’s natural
to worry about whether this slows down our ability to innovate or to deliver new
capabilities and leverage cool technology. But my first mission is to protect the company.
Ibrahim Gokcen, Maersk: This is a company that manages close to 20 percent of global
container-trade capacity. Think of the impact to populations. The passion and the
purpose are there, and that helps us a lot in attracting the right people globally. We focus
on those talents that we need, that we can embed into our business, who can help us
execute as soon as possible, but also the pipeline that will be our future leadership team.
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I think we have seen that you don’t need to have a PhD in computer science, for instance.
We actually have a lot of astrophysicists who are amazingly good at working with data and
creating value from data. For the skills that we are hiring, industry is not a big
differentiator, because we are more interested in functional skill sets. For example, we try
to hire an amazing software developer, regardless of which industry he or she worked in
before, because we know that an amazing software developer can create a
disproportionate amount of value for the company.
Cameron Davies, NBCU: I find it interesting because “culture” itself is a bit of an ethereal
term. I used to have a boss at Disney who would say to me, “If you only hire people within
your industry, you’ll never be smarter than anybody else in your industry.” That has
always stuck with me. As these data-science programs have evolved, the demand [for
talent] has grown. Unfortunately, what we see is the skill set necessarily hasn’t followed.
People now know how to use some of these tools, but they don’t really understand the
basic concepts behind the tools, the math that they’re using. If you put the math aside for
a moment and focus on their ability to learn the business, manage products, interact with
clients, then often you can find people you can pair together and have them become very
successful.
We’ve had a lot of luck hiring from nontraditional areas. One example may be our guy who
runs all of our predictive analytics; he actually has a PhD in political science and worked
for the Mexican government. Nobody would have picked up his résumé and said, “Yeah,
this is a guy who I should go hire to go build forecasting models and interface with a
bunch of media creatives on predictive models to tell them how good their show’s going
to do.” Yet he’s done a brilliant job of it.
Rob Casper, JPMorgan Chase: The people who succeed in this business are the ones,
obviously, who are smart and have high integrity. Those are table stakes. Next, I look for
some subject-matter expertise. But you want to have people who bring different things to
the table. If you have a team that’s very similar in nature, you’re not going to get that
necessary healthy tension. You want somebody who’s strong with technology. You want
somebody who’s strong with business process. You want somebody who’s strong with risk
and regulatory. You want people who can communicate effectively, both in writing and
verbally. If you have that, then you have the healthy tension that makes for a good team.
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The red flags highlighted in this article represent three of the ten challenges identified in
“Ten red flags signaling your analytics program will fail.”
The authors would like to thank Kyra Blessing, Nicolaus Henke, and Kalin
Stamenov for their contributions to this article.
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