MIT Sloan Management Review's David Kiron: What’s needed to transform companies’ use of analytics

A majority of companies are now using huge streams of data and sophisticated analytic tools to transform how they strategize, operate, and engage with customers. According to a new global study by MIT Sloan Management Review (MIT SMR), 58% of organizations now apply analytics to create a competitive advantage within their markets or industries, up from 37% just one year ago.

Yet there is a growing gap between the most sophisticated users of data and analytics, and those just getting onto the path towards analytics competency.

MIT SMR’s initial joint study in 2010 identified three progressive levels of analytical sophistication: Aspirational, Experienced and Transformed.   When we compared this year’s results to last year’s, we found that Experienced and Transformed organizations are expanding their capabilities and raising their expectations of what analytics can do, while the Aspirational organizations are falling behind.

Both studies were conducted in collaboration with the IBM Institute for Business Value.

This growing gap has major implications for businesses, and their approach to decision-making.  We closely examined what the Transformed organizations, the most sophisticated users of analytics, are doing well and found three key competencies: (1) information management, (2) analytics skills and tools, and (3) data-oriented culture. Mastering these competencies enables organizations to gain full benefit from analytics.

Competency #1: Information management

Companies with a strong information foundation are able to tackle business objectives critical to the future of the entire enterprise. Their robust data foundation makes it possible to capture, combine and use information from many sources, and disseminate it so that individuals throughout the organization, and at virtually every level, have access to it. This ability to integrate information across functional and business silos is a hallmark of Transformed organizations, which are 4.9 times more likely to do this well than the Aspirational group.

We found that companies with a well-developed information management competency have expertise in a variety of techniques for managing data and developing a common architecture for integration, portability and storage. They also have a rigorous approach to data governance, a structured management approach designed to track strategic objectives against the allocation of analytical resources.

Competency #2: Analytics skills and tools

Organizations that deploy new skills and tools for analytics can typically answer much harder questions than their competitors. Which customers, for example, are most likely to opt into high-margin services? What will be the impact of a delivery route change on customer satisfaction and on the company’s carbon footprint? Companies can achieve this kind of competency through internal development and cross-training or external hiring and outsourcing in areas like advanced mathematical modeling, simulation and visualization.

One key success factor in companies with this competency has been the creation of analytics champions. Transformed organizations have analytics champions that initiate and guide activities by sharing their expertise to seed the use of analytics throughout the enterprise.

Competency #3: Data-oriented culture

In a data-oriented culture, we found, behaviors, practices and beliefs are consistent with the principle that business decisions at every level are based on analysis of data. Leaders within organizations that have mastered this competency set an expectation that managers must arrive at decisions analytically, and can show how analytics is needed to achieve their long-term vision.

Organizations with this culture are likely to excel at innovation and strategies that differentiate them from their peers. They typically benefit from a top-down mandate, and leaders clearly articulate an expectation for analytical decision making aligned to business objectives. Transformed organizations, in fact, are nearly five times more likely to do this than Aspirational organizations.

Each of these three competencies — information management, analytics skills and tools, and data-driven culture — is critical to analytics sophistication. Mastery of these competences is how Transformed organizations manage, understand and act on data to create a competitive advantage.

To read the full report with case studies please visit: http://mitsmr.com/rX1TQw

David Kiron is Executive Editor, Innovation Hubs, for MIT Sloan Management Review.

3 thoughts on “MIT Sloan Management Review's David Kiron: What’s needed to transform companies’ use of analytics

  1. Dear sir& madam
    MIT Sloan / phd : operations management , system dynamics / is my mission .i am writing this letter to ask you , please give me the references books in mic&mac economics , calculus , to preparing phd program
    many thanks
    i look forward to hearing from you
    seyed saleh karimi
    Current student MSc in MIS /
    IMPS college (tehran)

  2. Pingback: What Piece Is Missing From the Analytics Puzzle? Corporate Culture « A Smarter Planet Blog

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