What distinguishes the winners from the losers among companies converting data and analytics into a positive force in their strategies and operations? And what practices are keeping the winners ahead?
The Analytics Mandate, a new research report from MIT Sloan Management Review and SAS Institute, takes several steps toward answering these questions.
Our most significant finding? Our study shows that an advanced analytics culture outweighs other analytics-related factors -including data management technologies and skills-among companies that strongly agree they are gaining a competitive advantage from analytics. Essentially, a strong analytics culture is the lynchpin in moving from competitive parity to competitive advantage.
The need for change within a corporation’s culture, and the best way to achieve it, are both nicely illustrated in a case study included in our report. WellPoint, the largest for-profit managed care organization within the Blue Cross Blue Shield umbrella, knew that sharing insurance data with physicians would provide doctors with a 360-degree medical view of every patient. This in turn, would better enable them to spot patients more likely to go to the emergency room or be readmitted to a hospital, contributing to expenses that drive up the high cost of health care delivery.
Within WellPoint, creating the data reports for physicians initially became a classic showdown between IT and interests from the business side.
The initial reports, prepared by the IT team, were late and lacked fundamental functionality. For instance, different units within the company reported an emergency room visit in different ways. The IT team’s explanation: no one told them the definitions had to be the same. This much was true — the business side didn’t think it needed to specify that emergency room visits be consistent across reports. They had assumed this was a given.
The high-profile project was subsequently placed in Red status. At this point, senior management got involved. Problems were brought to executives who, in turn, ensured resources were allocated. Outside consultants and experts were hired. More resources were diverted to the project.
Finally, after many challenging discussions, IT and the business side began working together using an iterative development approach called “Agile”, which focuses on “user stories.”. This meant understanding the perspective of the end user—the provider—and the context in which he or she would be using the data, as opposed to just developing according to a static set of requirements.
Early reaction to the data system from doctors has been highly positive. Over time, WellPoint believes that the proactive, coordinated-care model made possible when providers have actionable insights at their fingertips can cut health care costs by as much as 20%. That could work out to billions of dollars, given that WellPoint reimbursed more than $99 billion in health benefits for commercial and individual members in 2013.
In short, to create strategic benefits with analytics WellPoint had to change its organizational behavior. Without an effective collaboration between the business side and IT, the program would have remained in jeopardy. Without leadership’s involvement, the program would have remained in jeopardy. Preparing data for a strategic role often means changing business conduct and that, more often than not, requires a top down process to create the necessary alignment of incentives and goals.
To read the full report, please visit “The Analytics Mandate.”
David Kiron is Executive Editor, Big Ideas initiatives, for MIT Sloan Management Review.