Business culture hurting improvement
NEW research released today by MIT Sloan Management Review and the IBM Institute for Business Value reports that organisational challenges, more so than technology hurdles, are holding companies back from fully integrating analytics across their enterprises.
According to a global survey of more than 4,500 executives, managers and analysts from more than 120 countries and 30 industries, 44 percent of organisations say cultural barriers to enterprise-wide analytics adoption, such as the need to educate management and resistance to new ideas, are the primary barriers. In contrast, only 24 percent point to technology concerns.
The new report, entitled "Analytics: The Widening Divide," builds on the findings from the original study by MIT SMR and IBM in 2010 to understand how companies are embedding analytics in more of the enterprise's processes and operations.
The 2010 study found organisations fall into one of three levels of sophistication: basic users referred to as Aspirationals, followed by the more Experienced users, and the most advanced users referred to as Transformed. Year-to-year comparisons reveal that the more sophisticated users are expanding their deployment of analytics and widening the performance gap over their peers.
For instance, from 2010 to 2011 the percentage of respondents who cited a competitive advantage using analytics grew 23 percent for Transformed and 66 percent for Experienced organisations. These same organisations are more than twice as likely to substantially outperform their competitive peers. In contrast, Aspirational organisations lost ground in competitiveness, falling 5 percent since last year.
"Our new research shows that the early and aggressive adopters of analytics make significant gains in both performance and overall competitiveness," said Fred Balboni, IBM's global leader, Business Analytics and Optimization. "These indicators point to an urgent need for organisations to foster a data-oriented culture and drive an analytics strategy that embeds fact-based insights into decisions and processes at every level of the business."
"We've found that there are three legs to the competitive analytics stool: a data-oriented culture, information management competency, and analytics expertise," said David Kiron, executive editor for MIT Sloan Management Review. "Companies that have all three use analytics to deliver advantage in the marketplace."
The study found that the majority of organisations are using analytics to manage their financial and operational activities, but are less likely to rely on analytics-based insights for decisions in other key areas. On average, less than 25 percent of Aspirational organisations, and one-half of Transformed organisations, say they rely on data and analytics to make decisions involving customers, business strategy and human resources. Even Transformed organisations are not using analytics to their fullest potential, indicating ample opportunities for advanced users to do more and for less sophisticated organisations to create a competitive advantage by targeting analytics at key strategic activities.
While Transformed organisations use analytics more broadly across the organization than their peers, they differentiate themselves by intensely focusing on applying analytics to three areas:
- Increasing the speed of decisions - Transformed organisations are more than three times more likely than Aspirationals to focus intensely on making better decisions, faster.
- Managing enterprise risks - Eighty-six percent of Transformed organisations are addressing the full range of organisational risks that can impact their business, while none of the Aspirational organisations have the same level of focus. Transformed organisations are using analytics to not only mitigate, but also anticipate risks.
- Engaging customers - Transformed organisations are outpacing their peers in leveraging the enormous amounts of data available today to understand and engage with their customers in new ways. Two-thirds of them are putting analytical insights into the hands of customer-facing employees to drive sales and productivity -- compared to one-fourth of Aspirationals.
The study examines how Transformed organisations are creating an advantage in the marketplace. The analysis shows that of all the characteristics exhibited by this group, their proficiency in six areas (represented by the percentage of Transformed companies that say they possess these characteristics) distinguished them the most:
- Ability to analyse data - 78%
- Ability to capture and aggregate data - 77%
- Culture open to new ideas - 77%
- Analytics as a core part of business strategy and operations - 72%
- Embed predictive analytics into process - 66%
- Insights available to those who need them - 65%