CHAPTER ONE THE NATURE OF ANALYTICAL COMPETITION USING ANALYTICS TO BUILD A DISTINCTIVE CAPABILITY

Question 1

What inspired Reed Hastings to start Netflix?

Answer 1

A $40 late fee from Blockbuster after renting Apollo 13

Hastings envisioned a subscription model similar to health clubs.

Question 2

What was Netflix’s revenue in 1999?

Answer 2

$5 million

This revenue grew to $8.3 billion by 2016.

Question 3

How many subscribers did Netflix have by 2016?

Answer 3

Over 93 million in 190 countries

Netflix streams a wide range of content, including movies and original programming.

Question 4

What is Cinematch?

Answer 4

Netflix’s movie-recommendation engine

It uses algorithms to personalize movie recommendations for each user.

Question 5

What innovative approach did Netflix use to improve Cinematch?

Answer 5

A $1 million prize for quantitative analysts to enhance the algorithm

This crowdsourcing method helped improve Netflix’s data analysis capabilities.

Question 6

What is the significance of ‘the long tail’ in Netflix’s strategy?

Answer 6

It refers to recommending less popular movies that fit customer preferences

This approach allows Netflix to cater to niche audiences.

Question 7

What was the first original series produced by Netflix?

Answer 7

House of Cards

The show starred Kevin Spacey and had a significant budget of at least $200 million.

Question 8

What analytics techniques did Netflix use to predict the success of House of Cards?

Answer 8

Attribute analysis

They identified up to seventy thousand attributes related to viewer preferences.

Question 9

What is the batting average of Netflix for renewing original shows after their first seasons?

Answer 9

Well over .900

This statistic indicates a high success rate for their original programming.

Question 10

What type of culture does Netflix promote in analytics?

Answer 10

A strong culture of analytics and a ‘test and learn’ approach

They conduct numerous variations of consumer experience experiments.

Question 11

What is the role of analytics in modern competition?

Answer 11

To drive decisions and actions based on extensive data analysis

Analytics can lead to competitive advantages in various business processes.

Question 12

Define ‘analytical competitor’.

Answer 12

An organization that uses analytics extensively and systematically to outthink and outexecute the competition

These organizations leverage data for strategic decision-making.

Question 13

What are the four types of analytics mentioned?

Answer 13

• Descriptive analytics
• Predictive analytics
• Prescriptive analytics
• Autonomous analytics

Each type serves different purposes in business analysis.

Question 14

What is the primary focus of prescriptive analytics?

Answer 14

To specify optimal behaviors and actions

This involves using techniques like optimization and machine learning.

Question 15

What is the importance of data management in analytics?

Answer 15

It is essential for acquiring, transforming, managing, analyzing, and acting on data

Good data management capabilities enhance analytical effectiveness.

Question 16

What does ‘Moneyball for movies’ refer to?

Answer 16

Using data analytics to make decisions in the film industry

This concept highlights the analytical approach taken by Netflix.

Question 17

What is an example of a company that successfully applies analytics to a non-analytical industry?

Answer 17

CEMEX in the cement industry

CEMEX optimizes supply chains and delivery times through analytics.

Question 18

Fill in the blank: Netflix uses data to make decisions that moguls make by _______.

Answer 18

gut

Question 19

True or False: Netflix’s analytics approach is limited only to marketing.

Answer 19

False

Analytics permeate all aspects of Netflix’s operations, including marketing and customer service.

Question 20

What is a distinctive capability that CEMEX has applied analytics to?

Answer 20

Optimized supply chains and delivery times.

Question 21

Which industries are more amenable to competing on analytics?

Answer 21

• Financial services
• Travel and transportation
• Gaming

Question 22

What is an example of a traditionally intuitive business that is now using analytics?

Answer 22

The wine business.

Question 23

What are some sources that have created more and better data than ever before?

Answer 23

• ERP systems
• POS systems
• Mobile devices
• Websites and e-commerce

Question 24

What was the purpose of decision support systems (DSS) introduced in the late 1960s?

Answer 24

To analyze data and support decision making.

Question 25

Who were the pioneers of decision support systems?

Answer 25

* Peter Keen * Charles Stabell

Question 26

What term refers to data that is too big, volatile, and unstructured for traditional technologies?

Answer 26

Big data.

Question 27

What significant trend has been observed in organizations regarding analytics?

Answer 27

Most large organizations have some sort of analytical applications in place.

Question 28

What is a common limitation of analytical tools in organizations?

Answer 28

They are often managed at the departmental level and are invisible to senior executives.

Question 29

According to the text, what is one benefit of decisions based on analytics?

Answer 29

They are more likely to be correct than those based on intuition.

Question 30

Fill in the blank: The best firms are using analytical techniques to explore ______ decisions.

Answer 30

merger and acquisition

Question 31

What are some examples of data that will continue to grow in the future?

Answer 31

* RFID sensor data * Sensor data from industrial machines * User behavior data from mobile phones

Question 32

What is the significance of analytical software in competitive organizations?

Answer 32

It allows for extensive quantitative analysis on large data sets.

Question 33

What does the term 'analytical competition' imply?

Answer 33

An arms race requiring continual development of new measures, algorithms, and decision-making approaches.

Question 34

What is a key prerequisite for building an effective analytical competitor?

Answer 34

Having a moderate amount and quality of data about the business domain.

Question 35

What is a pivotal factor for the progress of an organization in analytics?

Answer 35

Sponsorship from executives.

Question 36

True or False: Intuitive decision making is only appropriate under certain circumstances.

Answer 36

True.

Question 37

What is a potential risk of relying on outdated analytical predictions?

Answer 37

They may no longer apply under changing economic conditions.

Question 38

What do firms like Netflix and Capital One have that supports their analytical competition?

Answer 38

CEO-level sponsorship and passion for analytics.

Question 39

What is the role of human factors in developing analytical capabilities?

Answer 39

A committed manager is essential for further development of analytics.

Question 40

What is the pivotal factor in how fast and well an organization proceeds along the analytical path?

Answer 40

Sponsorship ## Footnote Executive sponsorship is crucial for the success of analytical initiatives.

Question 41

Which companies are mentioned as having CEO-level sponsorship for analytical competition?

Answer 41

* Netflix * Caesars * Capital One * UPS

Question 42

What is the contrasting path organizations without passionate executive sponsorship must take?

Answer 42

Prove-it path ## Footnote This path is slower and requires demonstrating the value of analytics.

Question 43

Which professional sport is noted for its extensive use of quantitative and statistical analysis?

Answer 43

Baseball

Question 44

What book by Michael Lewis popularized the analytical orientation in baseball?

Answer 44

Moneyball

Question 45

Who was the general manager of the Oakland A's that shifted to an analytical approach?

Answer 45

Billy Beane

Question 46

What traditional baseball statistic did the Oakland A's move away from in favor of new metrics?

Answer 46

Runs Batted In (RBIs)

Question 47

What two new metrics did the Oakland A's focus on for player performance?

Answer 47

* On-base percentage * On-base plus slugging percentage

Question 48

Who was the first Oakland GM to adopt a statistical approach in the early 1980s?

Answer 48

Sandy Alderson

Question 49

What was a key reason for the Boston Red Sox to adopt the moneyball approach?

Answer 49

A business need to win the World Series after an 86-year drought

Question 50

Who were the new principal owners of the Boston Red Sox in 2002?

Answer 50

* John Henry * Tom Werner

Question 51

What position did Theo Epstein hold when he was hired by the Red Sox?

Answer 51

General Manager

Question 52

What analytical talent did the Red Sox hire as a consultant?

Answer 52

Bill James

Question 53

What significant event in 2004 did the Red Sox achieve after implementing analytics?

Answer 53

They won the World Series

Question 54

What was the result of the seventh game in the ALCS for the Red Sox?

Answer 54

They lost to the New York Yankees

Question 55

What did Nate Silver's data journalism site find about teams with analysts?

Answer 55

They outperformed their expected winning percentage by 44 percentage points

Question 56

Which team ended a 108-year World Series championship drought in 2016?

Answer 56

Chicago Cubs

Question 57

What document did the Cubs create to detail their philosophy and approach?

Answer 57

The Cubs Way

Question 58

Who led the Cubs' R&D group that analyzed various aspects of the game?

Answer 58

Chris Moore

Question 59

What is the salary cap situation in professional baseball regarding front office talent?

Answer 59

There is no salary cap

Question 60

What advanced analytics approach did the New England Patriots utilize?

Answer 60

Data and analytical models for player selection and game decisions

Question 61

What nontraditional factors do the Patriots consider when selecting players?

Answer 61

* Intelligence * Willingness to subsume personal ego

Question 62

What is one way the Patriots analyze on-field decisions?

Answer 62

Using statistics to decide whether to punt or go for it on fourth down

Question 63

Which basketball team hired a quantitatively oriented executive as GM in 2007?

Answer 63

Houston Rockets

Question 64

What new measure in basketball assesses a player's value while on versus off the court?

Answer 64

Roland Rating

Question 65

Which European soccer team uses predictive models to prevent player injuries?

Answer 65

AC Milan

Question 66

What system does AC Milan use to analyze data for training and preparation?

Answer 66

Match Insights

Question 67

What has dramatically changed in Premier League clubs regarding analytics?

Answer 67

Every club now employs a team of video and data analysts

Question 68

What challenge does Oliver Bierhoff associate with the fluid game of soccer?

Answer 68

The large amount of data points generated in a short time

Question 69

What system is used alongside cameras to analyze data in professional sports?

Answer 69

Match Insights ## Footnote Match Insights helps coaches and players assess opponents' capabilities and devise strategies.

Question 70

What is a key lesson from professional sports analytics regarding human resources?

Answer 70

Focus on choosing, appropriately compensating, and keeping the best players ## Footnote This practice is growing in the business domain but is not yet widespread.

Question 71

Name a company that has adopted an analytical approach to human resource management.

Answer 71

Google ## Footnote Google exemplifies a firm using analytics in talent management.

Question 72

What does analytical competition in sports illustrate about data?

Answer 72

Analytics arises when sufficient data is present to analyze ## Footnote New business areas with large data availability are likely to see analytical competition.

Question 73

What do analytical innovators in professional sports often create?

Answer 73

New measures ## Footnote Businesspeople are encouraged to create new measures as well.

Question 74

How does technology impact opportunities in sports and business?

Answer 74

It creates entirely new types of data ## Footnote This new data can lead to additional competitive advantages.

Question 75

Who mentioned that all teams now use available data for personnel decisions?

Answer 75

Mark Cuban ## Footnote Mark Cuban is the owner of the Dallas Mavericks and emphasizes the efficiency of the market due to data use.

Question 76

Who was an early adopter of video data in the NBA?

Answer 76

Daryl Morey ## Footnote Daryl Morey was associated with the Houston Rockets.

Question 77

What advantage do analytical teams have during actual games?

Answer 77

They make informed, data-driven, real-time decisions ## Footnote This capability is paralleled by analytical businesses adapting to market changes.

Question 78

What influences a team's decision to embrace analytical competition?

Answer 78

Leadership decisions and backgrounds ## Footnote The decision to adopt analytics is often linked to the leader's experiences.

Question 79

What is a common outcome for sports teams that embrace analytical competition?

Answer 79

They generally do well ## Footnote While they may not win every year, analytical competitors have found success across various sports.

Question 80

What must teams or firms do to maintain their competitive edge in analytical competition?

Answer 80

Continue innovating and building analytical capabilities ## Footnote No team or firm can afford to become complacent.