PERSPECTIVES

Running an O.R./analytics group

John M. Ginderjginder@ford.com

and John Gunckeljpgunckel@fedex.com

Survey of INFORMS Roundtable membership reveals keys to success, problems to overcome.

The INFORMS Roundtable, comprised of representatives from about 50 member companies, is organized to share best practices and recent developments in the practice of operations research, management science and analytics. The Roundtable meets formally at least three times a year. One such meeting focused on some of the key challenges facing analytic leaders in the practice community: organizing analytics teams; communicating value and realizing benefits; data, tools and working with IT/suppliers; and building cohesion and motivating and retaining analytics talent.

To understand the Roundtable’s views and experience on these topics, the organizers conducted an unscientific survey of the membership using an online service prior to the meeting. Roughly 40 percent of the membership participated, representing manufacturing, oil & gas, consulting, transportation, healthcare, consumer goods and defense companies. Their responses and the subsequent dialog that they seeded form the basis of the perspectives presented here.

Organizing Analytic Teams

In many organizations, there is no natural home for operations research and analytics activities and no standard way to organize and govern them. A variety of organizing structures are found in member companies: centralized, in which analytics activities are housed in a single business unit or organization; hybrid, in which multiple business units house analytics activities that are also coupled to a central organization; and decentralized, in which diverse business units house and direct their own analytics activities. Each of these approaches is represented in the Roundtable and can work well depending on corporate objectives, needs and resources.

Regardless of the organizational structure, the need for high-level visibility, direction and sponsorship for analytic teams is clear. That analytics organizations have a leader “at the table” is important to their success; executive-level sponsorship is viewed as necessary to identify emerging analytics opportunities and to break through barriers in or between business units. This leadership tends to be at the managing director or partner level or higher.  

Communicating Value and Realizing Benefits

The variety of capabilities and tools delivered by member organizations is impressive: pricing/yield management, supply chain design, routing/scheduling, network/facility design, market analysis, fleet strategy, workforce design, portfolio optimization, call center/customer service, social media, claims analysis and forecasting. Most non-consulting organizations are set up as cost centers due to the nature of analytics work – long lead times, the unpredictability of the creative process, the challenge of quantifying value, etc. Even for established and well-known analytics and operations research groups, the challenge of demonstrating and quantifying the return on this investment is real and ongoing. Many groups report using a return on investment (ROI) approach coupled with a broader analysis including “soft” benefits such as corporate reputation, supplying talent to the parent company, etc. Even for successful organizations, it is often challenging to quantify analytics project benefits; for example, it can be difficult to attribute benefits to analytics and operations research in isolation of the partner organizations that often are responsible for realizing the benefits of analytic solutions.

As indicated above, analytics organizations have created solutions for a wide variety of problems. However, these solutions may conflict with business experience or be difficult to implement due to legacy systems or entrenched processes. Best practices dictate that the business owner be engaged up front in defining the problem and its solution to help bridge this gap. Fostering strong and lasting ties between the analytics teams and their business partners is critical to implementing solutions that create business value. Communicating the solution and its benefits to business partners can also be challenging; visual analytics is viewed as a necessary tool to enhance this communication.

Data, Tools and Working with IT/Suppliers

Roundtable member companies rely on a wide variety of analytical tools, with predictive analytics and optimization categories cited as most frequently used. Several members reported IT constraints – based on concerns such as indemnification and licensing – against using open source software, particularly in production applications, although some use it for prototyping. Traditional IT development processes and timelines can also be problematic for analytic teams due to the unpredictable creative process associated with many projects, which often requires iterative cycles of development and testing in collaboration with business partners. Member companies report that data access can be problematic for analytic groups housed outside of a firm’s IT organization. Creating relationships with data providers will speed up the analytics process and enhance the overall effectiveness of the organization.

Cohesion, Motivation, Retention

Internal and external conferences are regarded by member companies as a way to help motivate and retain talent. Internal analytics conferences and workshops, such as those held by a large manufacturing company, are seen as a way for analytics professionals to connect with each other and share best practices, particularly when analysts are decentralized organizationally or geographically.

Most member companies have a career path for analytics professionals, but several report that it is limited in scope or opportunity compared to other paths, such as the more familiar management track or more widely populated general technical track. Member representatives touched on the need to provide growth opportunities and manage career expectations of younger analysts, who may be more interested in rapidly moving up the organization – or moving out, by changing companies – than in previous cohorts.

Analytics and operations research practitioners are in great demand, making recruiting and retaining talent a particular challenge. Due to resource constraints and the difficulty of recruiting new team members, member companies will use third-party firms and “off-shoring” to augment the core analytics team. Advantages include greater flexibility and speed in ramping up and delivering high-priority projects, but disadvantages can include the failure to capture intellectual property generated in an outsourced project and the lost opportunity to build the internal organization’s skills. Most organizations will likely take a balanced approach using both internal and external talent.

Summary

The INFORMS Roundtable comprises diverse organizations united by their desire to advance their technical capabilities, maximize the benefits of analytics and operations research, and improve opportunities for their analysts. Despite the differences in the role of analytics and how it is structured in these organizations, several common themes emerged as essential to developing a more productive analytics organization: Executive sponsorship and leadership is key to success; measuring the impact of analytics is challenging but needed to help communicate value; business partners must be engaged up front in defining analytics problems and solutions; traditional IT processes can be problematic for analytics solution development and must be overcome; and managers must help provide growth opportunities since traditional analytics career paths may be limited. These findings represent opportunities for the betterment of the Roundtable member organizations and for INFORMS practitioners in general.

John M. Ginder (jginder@ford.com) is manager of Systems Analytics and Environmental Sciences at the Ford Motor Company.

John Gunckel (jpgunckel@fedex.com) is managing director of Business Analytics and Operations Research at Federal Express. Both are representatives of their respective companies to the INFORMS Roundtable.