The upper echelons of analytics is where winning companies gain competitive advantage
In economic times trying even for the most efficient companies, some still mange to outshine and outsmart their competitors time after time. How do they do that? Optimization is the answer, says expert Steve Sashihara, President and CEO of Princeton Consultants, an 85-person firm that helps clients optimize their assets through a blend of information technology and management consulting. In The Optimization Edge: Reinventing Decision Making to Maximize All Your Company's Assets , Sashihara argues that downsizing is no way to grow a company. Instead, the smart firms have figured out a better way to make business decisions. In the book and his practice, he shows clients how to squeeze every ounce of value from their company, even under the perfect storm conditions of the last few years. Today, Sashihara argues optimization is no longer a "nice-to-have" for companies but a categorical imperative.
Consulting: I know Princeton Consultants has always had a heavy focus on optimization, but why did you decide to write the book?
Sashihara: We've been focused on optimization as a small boutique firm for 30 years now. Optimization was traditionally always a nice-to-do, a nice-to-have for very high-end companies, but we now believe it is becoming a categorical imperative. People know a lot about analytics, but don't realize that optimization is at the very high end of the analytics spectrum. I was trying to explain it to clients, and I realized that no real definition of optimization existed out there. So, I figured I'd write the book.
Consulting: How do you define optimization?
Sashihara: Optimization is a combination of two things: One, it's used to make decisions. Optimization uses software that gives you recommendations. If the software does not give recommendations, it is simply not optimization software, no matter how clever that software is. The other piece is that you have to get the people in the organization that make the decisions to use the software effectively. Optimization is really those two halves put together. One is the technology piece, which is optimization software. The other is how do you get organizations to effectively use something. That part, in particular, plays right into management consulting.
Consulting: You mentioned analytics earlier. How does optimization differ from analytics?
Sashihara: The main difference, I think, is analytics is predictive. There are sort of three understood 'levels' to analytics. The bottom tier is descriptive analytics, standard reporting. The middle tier is predictive tier, or forecasting. The top tier is called prescriptive analytics. Not only am I going to look at what has happened, not only am I going to look at what could or will happen, but I'm going to give you a recommendations based on it. Here's what I think you should do about it—that's optimization.
Consulting: Why is the timing right to be talking about optimization? Why now?
Sashihara: Optimization itself is not new. Optimization software goes back to the 1940s and 1950s, but a lot of the algorithms only emerged in the last few years. Plus, the amount of data available and the speed at which you need to make decisions has jumped lately and will continue to do so. Any company that still relies on a human being looking at data, sitting around a conference table and discussing it with coworkers before acting will be completely overwhelmed by optimization.
Why now? Well, there
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