Bloomberg Research Services has recently published a report entitled "The Current State of Business Analytics: Where Do We Go From Here?” In this publication several key findings from a survey of 930 global businesses in various industries were highlighted.
I found these insights to be particularly useful:
- Business analytics is still in the “emerging stage.” While business analytics has gone mainstream, most organizations still rely on traditional technology. Spreadsheets are the number-one tool used for business analytics.
- Organizations are proceeding cautiously in their adoption of analytics. Use of business analytics within companies has grown over the past year, but at a moderate rate. Analytics also tend to be used narrowly within departments or business units, not integrated across the organization.
- Intuition based on business experience is still the driving factor in decision-making. Analytics is used as part of the decision process at varying levels, depending on the organization.
- Companies are looking to analytics to solve big issues, with the primary focus on money: reducing costs, improving the bottom line, and managing risks.
- Data is the number-one challenge in the adoption or use of business analytics. Companies continue to struggle with data accuracy, consistency, and even access.
- Many organizations lack the proper analytical talent. Businesses that struggle with making good use of analytics often don’t know how to apply the results.
- Culture plays a critical role in the effective use of business analytics. Companies that have built an “analytics culture” are reaping the benefits of their analytics investments.
Very interesting insights, especially when you consider the impact that analytics can have on providing competitive advantage to your company.
The Power of Predictive Analysis
I’m reminded of a challenge I once had in launching a telecommunications product. It was back in the time when examining analytics meant poring through whatever documents and records you could find to try to build a spreadsheet of pertinent information. The new product was actually a combination of two products in a new compact design (voice mail integrated with a small PBX). I had a theory that the price of the voice mail service had a direct relationship to the adoption rate as a combined purchase. My analysis showed a sliding scale of the price of the voice mail as compared to the PBX. I simply asked the General Manager of the division, “How many voice mail systems do you want to sell in relationship to net margin of the product?” He was very skeptical of this analysis but when I showed him the detail, he bought into the strategy. At the end on the first year after launch we were within two percentage points of the objective for number of units sold. This meant big revenue and profits for the division and I have been sold on analytics ever since.
Data Just Gets Bigger
Of course things are much more sophisticated now. There are increasingly large amounts of great data to pore through. I am a big believer in business intelligence and how this can improve a company's competitive advantage. A 2012 survey of CIOs indicated that Analytics and Business Intelligence is the number one priority behind mobile and cloud computing, but the advent of "Big Data" has thrown massive complexity at this opportunity. In December of 2011 the Gartner Group released their predictions for the next five years and among other things they predicted through 2015, “more than 85% of Fortune 500 organizations will fail to effectively exploit big data for competitive advantage".
For mid-size companies, getting started with business analytics can be a daunting task. The first step is to appoint someone in the organization to be responsible for organizing and cataloging data. If as a CEO you have not already done this, get prepared for a significant culture change. You will be moving to a fact-based decision making structure in your company in order to implement effectively and take advantage of the benefits of analytics. In my opinion, the inability for organizations to exploit Big Data, as Gartner has predicted, is due to this culture change requirement. Implementation will also take an investment in resources, both human and software. There is a good article by Zulfikar Sidi from SAS that discusses Getting Started with Business Analytics. It’s clear that over the next five years, mid-size companies which figure out how to leverage the data they have (and can obtain in the market) will excel at expanding and beating their rivals who do not.