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Tom Davenport

Tom Davenport focuses on new business ideas, knowledge management, and analytical competition. His posts evaluate the staying power of management innovations.

10 Principles of the New Business IntelligenceDecember 1

Business intelligence--and its predecessor concepts decision support, executive information systems, and so forth--have been circulating for several decades in business. However, I don't think it's ever fully worked. What we've done is to throw data (often in the form of difficult-to-navigate data warehouses) and software tools at business users, and said "Go at it." That's simply been too hard. We used a lot of terms like "ad hoc queries" and "drill down," but it simply didn't happen very often.

I've argued for a while that organizations need to increase their focus on decision-making. In particular, they need to think again about the relationship between information and decision-making. I recently completed a study on this topic, with the sponsorship of IBM's Information Management business unit, in which I looked at 26 efforts to improve decision-making in organizations. I concluded the following ten things about how business intelligence (BI) needs to evolve:

1. Decisions are the unit of work to which BI initiatives should be applied.
2. Providing access to data and tools isn't enough if you want to ensure that decisions are actually improved.
3. If you're going to supply data to a decision

The Wisdom of Geeks, The Madness of CrowdsNovember 14

Warren Buffet recently commented, "Beware of geeks...bearing formulas" with regard to the financial crisis, but geeks bearing formulas did pretty well at predicting the results of the Presidential and Congressional elections. Better, even, than the much-praised Iowa Electronic Markets.

The geeks in question are those at 538, which is both the number of electoral votes and a relatively new political website run by Nate Silver. Silver was the subject of a highly laudatory New York Times article this week, and he deserved it. Not only were his final presidential popular vote predictions highly accurate (predictions of 52.3 percent for Obama vs. 52.4 actual, and 46.2 predicted for McCain vs. 46.3 actual), he predicted that Obama would beat McCain as early as last March. And while some Congressional elections are still not resolved, it appears that his predictions are going to be very accurate there as well; he correctly predicted all the resolved races in the Senate, for example.

Silver has, I believe, discovered a good method for political prediction. You start with polls, which are now both frequent and widely-dispersed across the land. You take a bunch of them, correct for biases of various types (e.g., consistent lean right or left, or pollst

Voting for Behavioral Economics (And Against My Own Self-Interest)November 4

Did you vote today? If you did, was your choice purely based on your own economic interest? When I go to vote in a few hours, I will definitely be voting against mine--not only in my Presidential vote, but also in a state referendum. Massachusetts has a ballot question asking me whether I want to eliminate the state income tax, and as most of my fellow citizens are expected to, I'm voting against it.

The fact is that we vote or take other actions for a wide variety of reasons other than simple economic interest. Joe the Plumber, for example, could get a tax cut from Obama, but he's voting for McCain. The usual rule of thumb that wealthy people vote Republican is breaking down, at least in this election--Warren Buffett is only the most prominent example. If you want experimental evidence that people vote for reasons other than selfishness, see the article in today's New York Times on the other criteria people employ.

What is the implication of this for business and the economy? It's just another nail in the coffin of traditional economics, in which rational self-interest is the only motivation that's considered. I agree with David Brooks that the current economic crisis will drive a

When Economists Make Predictions, Remember: Nobody Knows Nuthin'October 29

The current economic crisis is further evidence that nobody really knows the future of our domestic or global economy. While there are a few economists who predicted aspects of the current situation (Robert Schiller of Yale predicted a housing bubble collapse in 2005, and Nouriel Roubini of NYU has predicted a systemic financial collapse for several years), nobody predicted all the manifold aspects of this crisis and how they would come together.

And some futurists got things spectacularly wrong. Remember, for example, Kevin Hassett and James K. Glassman, who wrote the book Dow 36,000 in 1999? Only a few more declines like those of last week, and they'll be off by a factor of 10. With such economic perspicacity, perhaps they should be working for the McCain and Bush economic teams. Wait, this just in -- according to an article in Monday's NY Times, that's exactly what they're doing. As Monty Python used to repeat, "Say no more..."

And how about Peter Schwartz and Peter Leyden, authors in 1997 of

We Need to Renovate the Old Economy, Not Rebuild ItOctober 21

You hear a lot of talk about rebuilding the U.S. economy, and it obviously needs some help. But I wonder if we ought to make some changes as we rebuild. The old structure doesn't seem that desirable anymore. When we rebuild, how about some renovations at the same time?

For example, the old U.S. economy wasn't very environmentally sustainable. The good news about our current predicament is that the U.S. generally emits substantially less carbon into the atmosphere when it's in recession. So maybe we shouldn't come out of it until we figure out how to stop this pattern.

Our old economy was based heavily on consumption by--of course--consumers. Economists are saying that consumer spending is all that has saved our economic bacon over the past couple of decades, and now we've cut back. The good news about this is that consumers have been spending their way into severe hock, so stopping that overspending is positive.  Consumers have even resisted spending their economic stimulus checks. We need to save more to pay off our credit balances, finance our retirements, and send our kids to college. The bad news, of course, if that consumers don't spend we don't reinvigorate economic growth. So how can we stoke a consumer-driven economy and save at the same time?

We can't. It's no accident that China and Japan, for example, have been both producer-driven economies and nations of savers. We have to slowly sh