Friday, September 25, 2009

Build vs. Buy to Land Marketing Analytics

I break analytical marketing into two families: performance optimization and performance improvement. Both families are equally popular these days. However, I'm still seeing significant frustration landing "analytical marketing", particularly in large companies. Smaller "born on the web companies" have no problem at all with this. Generally, the founders of these companies built the core strategy around analytics, hired people comfortable with these concepts, and have woven analytics into the core IT systems of the company as it has grown.

However, for larger "digital immigrant" companies, weaving analytics into marketing can be a daunting task. It's no accident that large global consultancies like IBM are investing heavily in analytics consultants. They've realized a simple truth: that no matter how many fancy new airplanes an airline has, they won't get off the ground without skilled pilots and mechanics. So, why not just book a ticket on United?

I can't take credit for the pilot / mechanic / airplane /airline analogy, but it's a good one so I'll use it shamelessly. To be clear:
  • Pilot = analytics marketing professional. A dork like me. There are different kinds of pilots. There are the ones that can only fly the plane, and then there are the ones that can also probably start their own airline.
  • Mechanic = data warehouse, SAS server, web analytics etc. software guru. These are the people that actually understand how the plane is put together and fix it when it breaks.
  • Airplane = the data warehouse, SAS, etc. software itself, or "cloud", doesn't matter. These are the $100,000 + CAPEX investments that make analytics possible.
  • Airline = IBM Global Services etc.--the firms that will just do this stuff for you. You just get on the airplane and it flies you where you want to go.

Looking at it from the company's perspective that just wants to get better at customer insight, targeting, ROMI, web ad optimization, etc., it's a very difficult strategic question: Where should I start? One could make an argument for starting at any of the four bullet points above, and I can think of case examples of companies who have gone down each path. But, I'll give you what I think the answer is now.

  • Don't even bother hiring mechanics if you are less than $500 M in revenue, unless you were born on the web. It's extremely expensive; the people that can truly build great systems are few and far between, and the pain will be enormous.
  • Everyone who wants to do analytics needs at least one good "senior pilot". All the other stuff might be outsourced, or you might fly United, but you need one person who really understands the stuff and can direct vendors, etc.
  • Whether to buy airplanes or not depends on business context. I'm a huge fan of the cloud and renting airplanes, and this is getting more and more feasible. Companies that provide managed ROMI environment that still house your data like MSights are a powerful option. However, for large companies, buying other components selectively can make sense. And it certainly makes sense if you were born on the web.
  • Full-service airlines can also make a lot of sense. Totally outsourcing all analytics to IBM might be the way to go if your culture is simply not built around digital and it's not a core focus. Over time, the company may get enough digital natives on board to make analytics a core competency.

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