IBM, MIT SMR identify widening performance gap for 'fact-based' enterprise

New research released by MIT Sloan Management Review and the IBM Institute for Business Value (NYSE: IBM) 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% of organisations say cultural barriers to enterprise-wide analytics adoption, such as the requirement for new leadership competencies and organisational resistance to new ideas, are the primary barriers. In contrast, only 24% 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. The percentage of respondents who cited a competitive advantage using analytics grew 23% for transformed and 66% for experienced organisations. These same organisations are more than twice as likely to substantially outperform their peers. By contrast, aspirational organisations lost ground in competitiveness, falling 5% since last year.

“This research has established a link between early and aggressive adopters of analytics and significant gains in both performance and overall competitiveness,” said Shane Radford, Business Development Executive for IBM South Africa. “The indicators point to direct benefits that organisations can gain from fostering a data-oriented culture and driving an analytics strategy that embeds fact-based insights into decisions and processes at every level of the business.”

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. The biggest gap in adoption and maturity being around the customer, strategic and HR-related areas.

Less than 25% 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. “Targeting analytics for key strategic objectives creates support for shared investments across departments as well as C-Suite sponsorship and leadership. This creates a shared platform in the organisation for consensus-based decision-making," adds Radford.

The three areas where transformed organisations are using analytics to differentiate themselves are:

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 - 86% 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 suggests that organisations typically diverge on one of two paths towards analytics based on the way analytics is leveraged and deployed. While each path poses different challenges, what is key to moving forward is identifying a starting point and creating a plan. To help organisations begin and reach their goals, the study makes three recommendations:

* One - assess the company's analytics sophistication
* Two - improve the company's analytics competencies
* Three - use an information agenda to connect your path to your competencies

The study corroborates the key findings of IBM's CIO Study released earlier this year. The study conducted face-to-face interviews with 3 018 CIOs in 71 countries, with 43% of these CIOs representing the growth markets (growth markets include Latin America, Asia Pacific (excluding Japan), Central and Eastern Europe, Middle East and Africa). Here, nine out of 10 CIOs in MEA stated they were going to focus IT on insights and intelligence to assist the organisations they work with to achieve its strategy, with people skills and risk management requiring high attention and focus. Similarly, CEOs globally say they will focus on getting closer to their customers and make better use of insights and intelligence.

To access the full report, visit MIT SMR or IBM. Go here for more information on the MIT SMR/IBM joint New Intelligent Enterprise project.