Analytics maturity correlates directly with greater profitability according to a new study by the Melbourne Business School and A.T. Kearney with the research suggesting laggards could grow their bottom lines by 80 per cent if they could match the performance of leaders.
That might be a hard ask though, since the same report found that only six per cent of companies surveyed globally extract the full potential of analytics.
Leading companies outspent their peers, with the authors finding that leaders invest 2.6 per cent of their revenue in analytics, which is anywhere from 3 to 16 times more than other companies.
The second annual Analytics Impact Index report was launched today and it reveals;
- how organisations use data analytics in business,
- the impact of analytics on profit
- and how organisations can extract the most value from analytics.
Conducted over six months, the report is based on surveys of more than 350 companies across 46 countries and 27 industries, with a median revenue of more than $1 billion ($US745 million). Respondents from participating companies were primarily from the C-Suite and Director levels.
Australia is falling behind
There is bad news for the local analytics community. The study revealed that APAC companies, largely Australian, continue to fall behind their global peers in maturity and impact from their analytics functions. Specifically they are referring to how developed their analytics capabilities are, and how much value their analytics operations provide the bottom line, respectively.
It is not all bad news though – APAC companies score two per cent higher in ‘talent and skills’ compared to their global peers.
But that also presumably means they fall even further behind on the other maturity dimensions of strategy and leadership, culture and governance, and data ecosystem.
According to Professor Ujwal Kayande, Founding Director of the Centre for Business Analytics at Melbourne Business School, “These findings suggest that while organisations in the Asia-Pacific have access to high-quality analytics professionals, they may not be focusing sufficiently on the other areas that are required to see an impact on profitability.
“Having the right talent is great, but the picture is incomplete without also focusing on culture and governance, data ecosystems, and strategy and leadership. All of these things add up to make analytics operations effective. One thing in particular that we’ve seen in the results, both this year and last year, is that strategy and leadership at a senior level is important to extract the full value from analytics, with analytics teams led by C-suite execs generating more than twice as much profit as those led by managers.”
Professor Kayande said: “Effective analytics strategies require buy-in at every level – at senior levels to ensure they’re approved, and at lower levels to be implemented. Analytics teams led by C-suite executives are more likely to get the representation and support they need to secure this buy-in, and in turn deliver a greater impact. Another reason for this finding could be that analytics teams who are further ‘down the line’ from senior executives may lose sight of the bigger picture and focus on areas of lower priority and less impact.”
A.T. Kearney’s Enrico Rizzon, a partner at the firm said “Whilst many companies continue to invest in hiring talent and data/analytics infrastructure, it is often done in isolation to strategy and conducted by managers, who while passionate, don’t have the skills or authority to drive the necessary whole of company strategy in relation to analytics. Boards should be asking their executives ‘how is analytics making a difference to our business’ and CEOs should be ensuring they have the right capabilities around them to realise the promise of analytics.”
US organisations are leading the way on analytics – showing a five to 10 per cent better score in analytics practices and processes than the rest of the world (as they are more mature in their analytics approach), EMEA companies are the least mature, falling two to six per cent behind the global average across all dimensions.
APAC and US organisations share the same industry-based maturity, with technology and professional services proving the most mature, and manufacturing proving the least mature. While technology, and energy and utilities companies in EMEA are the most mature sectors, healthcare is the least.