The MIT Analytics Imperative

Steve Miller
Thursday, November 13, 2014 - 14:00

I've finally gotten around to reading The Analysis Mandate, a May 2014 research report published by the MIT Sloan Management Review, in collaboration with SAS. I've been following this research for four years, monitoring the steady progression of analytics and data-driven methods in business. The report defines analytics as “the use of data and related business insights developed through applied analytical drive fact-based planning, decisions, execution, management, measurement and learning.”

The 2013 survey, which serves as the basis for the latest work, was completed by 2,037 business executives, managers and analysts from around the world, representing 100-plus countries and 25 industries. These responses were supplemented by interviews with experts in a variety of disciplines “to understand the practical issues facing organizations today in their use of analytics.”

Following three consecutive years of steady growth in the belief than analytics creates a competitive advantage, the 2013 results were flat at 66%. “The evidence from the last three years indicated that analytics is no longer a new path to value. It's a common one, with many companies searching for ways to differentiate themselves with analytics.”

Based on responses to survey questions, the study segments businesses into groupings of Analytically Challenged (34%), Analytical Practitioners (54%), and Analytical Innovators (16%). Much of the remainder of the research is case-control, searching for distinguishing factors present in Analytical Innovators -- but absent in the other segments.

One current differentiator of Innovators is the tendency to view data as a core asset wherein the business “takes on analytics projects that rely on external data created by partners, suppliers and even competitors.” In short, Analytics Innovators are disproportionately engaging in data science, where the products are data and analytics themselves.

General Electric helping companies integrate sensor data; Extravision Communications offering their consumption data as a new revenue stream research product; and StyleSeek, private-labeling its fashion recommendation platform that dwarfs the click-through conversion of competitors, are offered as examples of companies adapting to a new data products economy. The report says “... many companies are changing their business models and becoming data providers, fueled by high levels of demand across industry sectors for more accurate and timely information.”

The Analytics Mandate identifies company “culture” as the secret sauce behind analytics for profit. Among the components of the analytics culture are Values, Outcomes, Decision-Making Norms and Behaviors.

Values implies that data is treated as a core asset in an mandate driven by senior executives. Outcomes acknowledges that data/analytics changes the way business is conducted – with the accompanying power shift in the organization.

Decision-Making Norms posits that analytics drives strategy, trumping management experience and gut. And, in light of organizational shift towards analytics, Behaviors pressures the business to become more data-driven, aligning organizational investments in analytics technology with integration of information management into strategy and promotion of best practices.

So in which areas are Analytics Innovators differentiated from their less analytically-sophisticated peers? The research identifies five progressive, discriminating questions:

  1. 1. Is my organization open to new ideas that challenge current practice?
  2. 2. Does my organization view data as a core asset?
  3. 3. Is senior management driving the organization to become more data-driven and analytical?
  4. 4. Is my organization using analytical insights to guide strategy?
  5. 5. Are we willing to let analytics help change the way we do business?

In sum, “Organizations that are successful with analytics continue to invest in their analytical skills and technology to stay ahead of the curve. But perhaps the key point is that they foster the right analytics culture, are open to new ways of thinking and change the way they do business. Achieving and sustaining competitive momentum is hard work.”

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