Should you have an analytics team?

In an earlier post a couple of weeks back, I had talked about the importance of business people knowing numbers and numbers people knowing business, and had put in a small advertisement for my consulting services by mentioning that I know both business and numbers and work at their cusp. In this post, I take that further and analyze if it makes sense to have a dedicated analytics team.

Following the data boom, most companies have decided (rightly) that they need to do something to take advantage of all the data that they have and have created dedicated analytics teams. These teams, normally staffed with people from a quantitative or statistical background, with perhaps a few MBAs, is in charge of taking care of all the data the company has along with doing some rudimentary analysis. The question is if having such dedicated teams is effective or if it is better to have numbers-enabled people across the firm.

Having an analytics team makes sense from the point of view of economies of scale. People who are conversant with numbers are hard to come by, and when you find some, it makes sense to put them together and get them to work exclusively on numerical problems. That also ensures collaboration and knowledge sharing and that can have positive externalities.

Then, there is the data aspect. Anyone doing business analytics within a firm needs access to data from all over the firm, and if the firm doesn’t have a centralized data warehouse which houses all its data, one task of each analytics person would be to get together the data that they need for their analysis. Here again, the economies of scale of having an integrated analytics team work. The job of putting together data from multiple parts of the firm is not solved multiple times, and thus the analysts can spend more time on analyzing rather than collecting data.

So far so good. However, writing a while back I had explained that investment banks’ policies of having exclusive quant teams have doomed them to long-term failure. My contention there (including an insider view) was that an exclusive quant team whose only job is to model and which doesn’t have a view of the market can quickly get insular, and can lead to groupthink. People are more likely to solve for problems as defined by their models rather than problems posed by the market. This, I had mentioned can soon lead to a disconnect between the bank’s models and the markets, and ultimately lead to trading losses.

Extending that argument, it works the same way with non-banking firms as well. When you put together a group of numbers people and call them the analytics group, and only give them the job of building models rather than looking at actual business issues, they are likely to get similarly insular and opaque. While initially they might do well, soon they start getting disconnected from the actual business the firm is doing, and soon fall in love with their models. Soon, like the quants at big investment banks, they too will start solving for their models rather than for the actual business, and that prevents the rest of the firm from getting the best out of them.

Then there is the jargon. You say “I fitted a multinomial logistic regression and it gave me a p-value of 0.05 so this model is correct”, the business manager without much clue of numbers can be bulldozed into submission. By talking a language which most of the firm understands you are obscuring yourself, which leads to two responses from the rest. Either they deem the analytics team to be incapable (since they fail to talk the language of business, in which case the purpose of existence of the analytics team may be lost), or they assume the analytics team to be fundamentally superior (thanks to the obscurity in the language), in which case there is the risk of incorrect and possibly inappropriate models being adopted.

I can think of several solutions for this – but irrespective of what solution you ultimately adopt –  whether you go completely centralized or completely distributed or a hybrid like above – the key step in getting the best out of your analytics is to have your senior and senior-middle management team conversant with numbers. By that I don’t mean that they all go for a course in statistics. What I mean is that your middle and senior management should know how to solve problems using numbers. When they see data, they should have the ability to ask the right kind of questions. Irrespective of how the analytics team is placed, as long as you ask them the right kind of questions, you are likely to benefit from their work (assuming basic levels of competence of course). This way, they can remain conversant with the analytics people, and a middle ground can be established so that insights from numbers can actually flow into business.

So here is the plug for this post – shortly I’ll be launching short (1-day) workshops for middle and senior level managers in analytics. Keep watching this space 🙂


Project Thirty – Closure

Today is the last day of my twenties. Which means Project Thirty has come to an end. I had a long list of things to do, and as the more perceptive of you would have expected from me, most of them are undone. Nevertheless, it has been a mostly positive year, and I’m glad I gave myself the year off in an attempt to find what I want to do.

The biggest positive of the last one year was that my mental illnesses (anxiety, depression, ADHD) got diagnosed and started getting treated. Yes I’m on drugs, and face severe withdrawal symptoms if I don’t take my antidepressant for a few days, but the difference these drugs have made to my life is astounding. I feel young again. I feel intelligent again. I have more purpose in life, and am back at the cocky confidence levels I last saw in 2005. I suddenly feel there’s so much for me to do, and for the first time ever, have started enjoying what I’m doing for money.

Which brings me to professional life. I decided to give myself a year to become a freelancer. I must admit I got one lucky break (one long-term reader of this blog was looking for a data science consultant for his company and I grabbed the opportunity), but I grabbed it. My improved mental state meant that I was motivated enough to do a good job of the pilot project I did for that company, and I have managed to extract what I think is a reasonable compensation for my consulting services.

There are other exciting opportunities on the horizon on the professional front, too. I’ve started teaching at Takshashila and am quite liking it (I hope my students are, too). There is so much opportunity staring at me right now that the biggest problem for me is one of prioritization rather than looking for opportunity.

There has been both progression and regression on the “extra curricular activities” front. Thanks to demands of my consulting assignment, I haven’t been getting time to practice the violin and abruptly discontinued classes two months ago. I did one awesome and rejuvenating bike trip across Rajasthan back in February but wasn’t able to follow that up even with weekend trips. I wanted to start on adventure sports but that remained a non-starter. I started preparing for a half-marathon and gave up in a month. I took a sports club membership, tried to teach myself swimming again, but have been irregular.

Personal life again has been mixed. Increasing excitement about work means less time for the family, and have been finding it hard to balance the time requirements. I seem to be putting on weight again, and now look closer to the monstrosity I was four years ago rather than the fit guy I was two years ago at the time of my wedding. I blame my expanding waistline and neckline on my travel, but that is not an excuse and I need to find an exciting way to get fit soon.

For perhaps the first time in several years my car didn’t take a knock that year, but I had two motorcycling accidents (one major and one minor) this year. The former led to the first ever broken bone in my body (the fifth metacarpal) thanks to which I don’t have a prominent fourth knuckle on my right hand. The latter led to major damages to my laptop.

My “studs and fighters” book still remains unwritten, and not a word has been added to its manuscript in the last one year. I was hoping to capstone my Project Thirty by organizing the first ever “NED Talks” but I seem to have bitten off much more than I can chew in terms of work, so that has again been postponed.

So let me take this opportunity to define my Project Thirty One. I want at least two published books by the end of the year. I want to do at least one major motorcycling trip. I need to find partners/employees and expand my consulting business. I want to travel a lot more – at least five weekend trips over the next 12 months. I want to become fit, to the size I was at the time of my wedding. Hopefully I can get weaned off anti-depressants. And I hope to resume music lessons, and start jamming. Ok let me not promise myself too much.

And I have a five-year plan too. By the time I’m thirty five, I want to have written a book on the economic history of India. Ambitious, I know. Especially for an NED Fellow like me.