The Convergence of Analytics and IT

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October 25, 2016
Analytics
Kelly McGuire
JeremyTerBush

If you’ve been following the evolution of hospitality IT (and since you’re reading this publication, I have to believe that you are), you’ve probably noticed that some pretty substantial changes have come about in the last few years.

IT’s traditional role of developing and maintaining the company’s technology infrastructure, essentially sorting the technology mess from disparate legacy systems into a cohesive infrastructure, has begun to evolve into a more strategic role focused on leveraging data and technology to develop unique and differentiable business solutions used both internally and externally.

As this evolution in IT occurs, many hospitality organizations are also growing analytical capability, another function that leverages company data.  Hospitality companies are working on streamlining access to data and reporting to facilitate speed to insight and improved decisions.  They are investing in hard core data scientists to gain even more value from their vast amounts of complex data, moving organizations toward more proactive, prescriptive decision making.

As is common when new functional areas are added to organizations, hospitality companies are beginning to question the best organizational structure and reporting lines for analytics.  There is an added complication that this group works on data that was generated from operations, managed by IT and used by the entire organization. Some companies have kept analytics within functional areas like finance or revenue management, reporting through a vice president or SVP in those groups.  Others have built centralized organizations that serve all lines of business, reporting directly to a C-level executive.

Yet, before analytical functions were created, IT was often responsible for building and maintaining analytical modules such as business intelligence systems and revenue management systems.  As IT matures and analytics develops, we see many areas of convergence.  In fact, we believe that there are significant advantages to eventually merging the IT and analytics departments.  (As you can imagine, we also have opinions about which function should lead, but we’ll leave that argument aside for now.) Let’s talk about how IT’s evolution and the emergence of analytics support this idea.

The Evolution of IT

Today most organizations recognize IT as a critical strategic asset.  Obviously the technology implications of the digital transformation have played a big part in the function becoming crucial not only to tactical day-to-day functions but also longer term strategy.  The CIO has a seat at the executive table, and company resources are dedicated to ensuring that the company can effectively sell and manage its inventory, keep pace with the digital transformation, and build innovative solutions to support activities both internally and externally.  The evolution of cloud-based technology allows companies to manage infrastructure and platforms as a service, reducing much of the day-to-day burden of managing operations and freeing up time to focus on more strategic activities.

Because of this, IT is now able to focus more on innovation in solution delivery to harness internal data and business knowledge.  IT groups are investing in expertise in the development of digital solutions like Web design or mobile applications.  They are building extremely user-friendly applications designed to make the guest experience smoother or the business more productive.  They are considering more agile or nimble development methodologies so they can continue to be responsive to the business.  With a seat at the executive table, IT is influencing business strategy, aligning initiatives with the longer term goals of the organization.  This is quite an amazing transformation for a group that 15 to 20 years ago barely had a position above a director, and was struggling to stand up a website while patching together disparate legacy property management systems from merger and acquisition activity decades before.  (OK, I know many of you are still struggling with this last one even today…it’s not easy!)

The Emergence of Analytics

At the same time that IT is evolving, many hospitality organizations are also focused on building up their internal analytics capabilities.  The hospitality industry today is extremely competitive, and there has never been a greater focus on performance.  From finance to marketing to operations, all functional areas must continually improve performance and demonstrate results.  Analytics are becoming a must-have to keep up with competition, let alone get ahead.  Hospitality companies are investing in data visualization, advanced analytics tools, and resources like data analyst and data scientists.  Much as with IT 20 years ago, today only a few organizations have a vice president of analytics, let alone a SVP or chief analytics officer.  However, these titles are gaining momentum.

Analytics groups are generally responsible for three main activities: producing regular performance reports, conducting ad hoc analyses, and building recommendation systems (such as pricing or segmentation analysis).  Most start with performance reporting and ad hoc analyses, but as they mature, they increasingly begin to build systems that imbed advanced analytical models in applications designed with an end user in mind.  Think about pricing systems that are rooted in complex forecasting and optimization algorithms but must deliver recommendations to the revenue manager in a consumable format, which allows for exploration and overrides.  Marketing campaigns should use analytical segmentation models and response predictions, but these models need to be accessed in the workflow that builds and executes a campaign.

As analytics become more broadly used, it is no longer enough to deliver an excel report or a power point deck with recommendations. Analytics need to be infused into business process, as part of a regular workflow, and they are increasingly likely to be consumed by a non-analytical resource.  User expectations of simplicity have greatly evolved with the mobile revolution, and they expect that level of usability with everything, including analytical applications.  It doesn’t matter how good the model is, if the user experience isn’t great, it won’t be used and it will not drive value for your business.

The Convergence of Capabilities

You can see where we are going with this.  IT is increasingly focused on building innovative solutions on top of organizational data, and analytics is focusing more time, improving the front-end of analytical applications to ensure high adoption rates from business users.  Might it make sense for these two groups to be aligned under the same organizational structure?

We are not suggesting that this happens immediately.  In fact, many analytics teams are new enough that being part of a large IT organization might actually do them a disservice.  Likely the focus of these newer analytics groups is primarily on reporting and business intelligence, so they are yet to require application development support.  Further, for companies new to analytics, keeping the function very close to the business is probably the best way to ensure widespread adoption, and promote business knowledge in the analytics function.  If IT has yet to fully evolve as described above, it will not be an effective partner for analytics and could even be a barrier to advancement.  It (quite logically) will prioritize the “plumbing,” and may not invest sufficient resources in innovation and solution design.

It could very easily be argued that an analytics team should be laser focused on, well, analytics.  We added development resources because we were responsible for delivering these complex solutions to the field.  The IT group already has resources dedicated to project management, solution development and data management. If we could staff our projects from a larger pool of these types of resources, we’d probably be able to get even more work done.  We already partner with IT for data acquisition and to maintain our development, testing and production environments.  IT is incredibly responsive to our needs, but frequently has many different projects that demand attention.  Prioritization might be smoother if we were all part of the same group, and we’d have access to specialized resources from a larger pool.

As more and more hospitality companies increase their investment in analytics, and these departments take on larger and more complex projects, the reliance on database and development resources will increase.  We believe that the industry, broadly, will start to see this shift of merging IT and analytics within the next 10 to 15 years, as investment and innovation continue.  In fact, when we write the follow up article, don’t be surprised to see a CSO title in the byline….chief solutions officer.

KELLY MCGUIRE IS THE VICE PRESIDENT, ADVANCED ANALYTICS FOR WYNDHAM DESTINATION NETWORK, AND JEREMY TERBUSH IS THE SENIOR VICE PRESIDENT, GLOBAL ANALYTICS FOR WYNDHAM DESTINATION NETWORK.

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THE ANALYTICS TEAM AT WYNDHAM DESTINATION NETWORK is comprised of data analysts, data scientists and developers, who are frequently called upon to deliver solutions to the field that imbed complex advanced analytics into a streamlined business process. We build custom pricing solutions for our rental companies that provide decision support to the field revenue managers. We have also built mobile applications that support the negotiation process between our field recruiters and owners who are considering partnering with one of Wyndham’s vacation rental companies to manage their home. These applications allow the recruiter to demonstrate the predicted impact on performance, if the homeowner were to make certain decisions about his or her rental, such as allowing pets.

In both of these examples, the interfaces to the analytics need to be extremely user friendly and the delivery mechanisms robust and sustainable. For solution development projects, we use “pods,” teams that include data scientists, developers, data analysts and project managers. While everyone is stretched during major deliverables, we find that activities associated with building and maintaining the user interface, data infrastructure and application architecture take up the most time on these projects. Because of this, our development resources are frequently in short supply.



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