3 Good Reasons You Need a Chief Analytics Officer (CAO) and a Case Study Illustrating What Happens When a Corporation Loses its CAO
Randy Bartlett, Business Analytics Author & Thought Leader Bartlett wrote 2 articles on www.allanalytics.com of interest on this matter: The first discussing the benefits of a CAO: “3 Good Reasons You Need a CAO” (Chief Analytics Officer) . He then invested about 50 hours interviewing people for a unique case study illustrating what happens when a corporation loses its CAO: “The Dissolution of an Analytics Team” Here they are…
3 Good Reasons You Need a CAO
Decades ago, corporations adapted to changing technology by hiring CIOs. Now we’re adapting to a business analytics revolution by rethinking our analytics hierarchy.
While some might think we can just hire quants, stick them in the back room, and be done, they’d be wrong. We need a chief analytics officer, or CAO, to acquire and retain the right qualifications in the right roles, to inject new facts into the major decisions, and to build and harbor a business analytics team. The following three colossal business failures illustrate the value proposition of the CAO.
AIG Financial Products — the poster child AIG FP “insured” loan tranches for banks. It was a lucrative part of the insurance company, until it put AIG into a liquidity squeeze. In his Vanity Fair article, “The Man Who Crashed the World,” writer Michael Lewis described the breakdown. “How and why their miracle became a catastrophe, AIG FP’s traders say, is a complicated story, but it begins simply: with a change in the way decisions were made, brought about by a change in its leadership,” he wrote.
The Dissolution of an Analytics Team
To understand how to build and lead an effective business analytics (BA) team, we studied the sharp decline of one. We spoke with several people involved, before and after a change in leadership. Let’s start with a synopsis.
- Company’s industry: Short history of analytics on commercial side; dominant sales culture
- Company: $10 billion plus, midsized global
- Business need: Key business unit underperforming
- BA location: Inside commercial operations
- BA composition: About 50 professionals (10 quants, 30 light business analysts, 10 other); some light analytics at a comparably sized sister group
- Leadership: BA was founded under a seasoned business professional acting in the capacity of a Chief Analytics Officer (CAO). This original CAO reported one level removed from the CEO and was well supported, but the C-level did not appreciate the value of business analytics. The CAO had six reports, including two strong lieutenants managing the quant functions. As a result, there was enough domain knowledge and statistics to provide capabilities above the industry norm.
- BA purview: Marketing research, predictive modeling, forecasting, et al.
- BA clients: Four business units managing products (65-70 clients); 15 fact-based clients, remainder were opinion-based clients
Now, let’s take a look at what happened. (READ FULL ARTICLE…)
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