Thinking Out Loud By Tom Vol. 3

One issue that organizations are often interested in is how to organize analytics. In this post I’ll describe five different organizational models; surely one of them will fit your organization.

First there is the totally centralized model, in which a group of analysts in a central function serve the entire organization. The strengths of this model—which, as I pointed out in the last post, is growing—include the ability to work on cross-functional projects, the ability to share ideas, and the ability to assign analysts efficiently out of a central pool. The downside is a potential unresponsiveness to the needs of the business, so other mechanisms (see the last post) will have to be adopted to address that issue. Companies primarily employing this centralized model include Procter & Gamble, UPS, Expedia, and United Airlines. The analytical function may report to IT, strategy, or a corporate services function.

A variation on the centralized model is the consulting model, in which analysts are centralized, but are expected to recover their costs by charging for their time. The chargeback process does ensure that someone in the business finds the analysts’ services to be of value. However, it may also prevent analysts from working on the organization’s most strategic analytical problems. Just because someone can pay doesn’t mean their problem is important. Schneider National and Disney have this model in place.

A somewhat less centralized approach—but still with some enterprise-level coordination—is the center of excellence model. In this structure, analysts are based in business units, but their activities are coordinated by a small central group. The CoEs are typically responsible for issues such as training, adoption of analytical tools, and facilitating communication among analysts. Bank of America, Citigroup, and Kimberly-Clark have this model, though the latter is primarily focused on business intelligence more broadly. This is an analytical version of the Gartner- promoted “business intelligence competency center.”

The functional model puts analysts primarily within the function that dominates analytical activity within an organization. If almost all the analytical work supports marketing, for example, then why not make most or all analysts part of that function? The bad news with this model is that it may limit the ability to expand analytical work to other functions that could benefit from it. Fidelity Investments (in customer relationships) and Harrah’s (in marketing) are two organizations that have adopted this model as the primary home for analysts.

Finally, there is the fully dispersed model, in which analysts are spread throughout an organization with no vehicle for collaboration or coordination. While all the other models have some rational justification, I’m not sure this one does. It usually means that the senior management of the organization doesn’t recognize the importance of analytics. Of course, it does ensure that the different functions and units get what they need, but it’s suboptimal for enterprise applications of analytics. Since I’ve criticized it, I won’t name any adopters of this model—but there are plenty of them.

Next time I’ll present some empirical evidence that some of these models are better than others.