The trend in large businesses over the past few years has been a greater push for better business analytics.  One needs to look no further than at the growth of SAS and at IBM’s latest advertising push. Businesses want solid data upon which to make decisions!

Business analytics is the practice of collecting and analyzing all sorts of business metrics to determine how well a business is doing and to help make  better forecasts. I believe this is a scary development for small businesses.

There is an idea propounded by Michael Treacy and Fred Wiersema that for a company to become a market leader it must excel at one specific dimension of value and maint threshold standards on the other dimensions of value. The authors grouped value into three categories they called value disciplines: operational excellence, product leadership, and customer intimacy. Operational excellence is defined by superb operations and execution. Product leadership is defined by market leading product innovation and marketing. Customer intimacy is defined by excellent customer attention and service.

The authors’ thinking is that to become a market leader in any of these value disciplines is a Herculean task and often each value discipline requires a focus placed on different process, systems, and personnel. Often you would find the largest companies become leaders in operational excellence because of the economies of scale and expertise developed over their long histories. Startups or newer companies tend to be leaders of product innovation and customer intimacy because by their nature startups tend to focus on solving problems of a particular niche and hence tend to be intimately familiar with the needs of the particular niche.

Business analytics changes all of this and gives the upper hand to larger companies that could afford well developed customer insight teams that use millions of dollars worth of automation and analytics technology. Darden Restaurants is an excellent example of how even a gigantic company can develop both operational excellence and customer intimacy through the use of business analytics-enabling processes and technology.

Darden Restaurants is multi-billion dollar parent company of Bahama Breeze, Longhorn Steakhouse, Olive Garden, Red Lobster, Seasons 52, and The Capital Grille. Together the company owns and operates over 1,770 restaurants and serves more than 400 million meals a year. Restaurant businesses tend to have the highest rates of failure. Yet, Darden has been thriving even despite the down-economy and changing consumer preferences (the average American has 79 sit-down meals in restaurants per year, 16% fewer than 15 years ago).

Darden’s secret is business analytics. Their IT group builds custom software that is rolled out through all of the restaurants. The use of this technology helps Darden become ultra-efficient in producing meals and surprisingly knowledgeable of their customers’ preferences. Each restaurant is operated as a just-in-time manufacturing plant that creates a wide range of products selected, produced, consumed, and judged by customers announced in minutes. The technology used allows Darden to track inventory (food) usage in each restaurant, real time sales, forecast staffing and food preparation needs, provide a workflow for optimizing the preparation of a table’s meals, and ensuring delivery of food within one-minute of being ready. At the same time, this software allows Darden Restaurants to track trends in their customers eating habits. They could answer questions such as: Are diners buying more appertizers? Are they choosing healthier meals? Are fewer diners purchasing dessert?

Having this knowledge allows Darden Restaurants to be able to react to changes in consumers habits as they are happening instead of after patrons stopped visiting their restaurants. Prior to the emergence and maturation of business analytics technology, such information could only be acquired through customer surveys and interviews which subjects business operators to the risk of acting on more anecdotal evidence in lieu of having better evidence to go by.

Finally, I believe business anlaytics presents a challenge to small businesses as it eliminates of the advantages that small businesses often have over their larger counterparts, knowledge of the customer. Statistically speaking, the larger restaurant will always have better information to go by because they are pooling a larger and more complete sample of data (every single order placed in their restaurants). The costs of such advanced analytics systems may be an obstacle for small businesses at least in the short-term until mainstream adoption reduces costs further. But, large businesses tend to pay attention to things that they could measure. This may lead to small businesses uncovering and developing innovations that do not appear on the radar yet for larger businesses. One such example is an observation of the type of people that are coming to a particular restaurant. Analytics systems could tell you what your clients are ordering but only a restaurant operator intimately familiar with his business and clientele could identify a certain demographic frequenting a restaurant more and tailor programs to increase business from that demographic (senior citizens may be one such example).

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Bahama Breeze · Business · Darden · IBM · Longhorn Steakhouse · Marketing · Olive Garden · Red Lobster

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