PLANNING AND LEADERSHIP FOR A BETTER WORLD
PLANNING AND LEADERSHIP FOR A BETTER WORLD A joint IBM Institute for Business Value and MIT Sloan Management Review study finds a growing divide between companies that see the value of business analytics and are transforming themselves to take advantage of these newfound opportunities, and those, on the other, that have yet to embrace them.
To create the 2011 Business Analytics and Optimization study, MIT and IBM interviewed and surveyed 4,500 managers and executives from more than 120 countries.
It found that 58 percent of organizations now use analytics to create a competitive advantage within their markets or industries. That’s up from 37 percent just one year ago. And perhaps the most telling statistic from the study is that the organizations that do apply analytics are more than twice as likely to substantially outperform those that do not.
In today’s competitive marketplace, that makes the use of analytics a no-brainer.
Not surprisingly, the study also found a correlation between the level of analytics adoption and business success, with those organizations using more sophisticated approaches reaping greater benefits.
Drilling down into the survey information collected, IBM and MIT categorized the use of analytics into three classes of user organizations.
At the top are what the researchers label “Transformed” organizations. Use of analytics in these organizations is strong and fairly sophisticated. These organizations use a comprehensive portfolio of tools to support advanced analytics modeling. And they rely on their analytics efforts to guide decision making in day-to-day operations and future strategies across the organization.
A level below “Transformed” is the “Experienced” organization. Use of analytics in these organizations is at a moderate level. Many are expanding their portfolio of analytics tools. They use analytics to guide future strategies, and they increasingly rely on analytics to guide activities in marketing and operations. In contrast to the Transformed organization, an Experienced organization typically does not use analytics in day-to-day operations.
And finally, there is the “Aspirational” organization. These organizations use basic analytics for ad hoc analysis when needed. Many managers in these organizations still rely on spreadsheets as their analytics tool, and the use of analytics is often limited to areas related to financial management.
Where does your organization fall in this spectrum of analytics use? If you’re on the lower end, you should really consider moving up the food chain. The reason: the more extensive use of analytics and the more integrated it is in the operations of an organization, the greater the benefit.
Only 37 percent of “Aspirational” organizations said they had a competitive advantage using analytics. Sixty-three percent of “Experienced” organizations claimed an advantage. And 80 percent of “Transformed” organizations said they had an advantage.
For those who wish to increase their use of analytics and more tightly integrate analytics into day-to-day decision-making processes, the study found there are two common paths to success.
With what is called a “specialized path,” organizations develop deep analytics expertise within lines of business, using a wide array of analytical skills and techniques, to improve specific business metrics. Slightly more than half of the Experienced organizations took this route.
The alternative is to take what the researchers called the “collaborative path.” Here an enterprisewide information platform is created, enabling insights to be developed and shared across lines of business. Analytics is then used to improve enterprise objectives.
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