New IBM study on business analytics and optimization

IBM today released a new report on the progress companies are making adopting business analytics and optimization. The paper is called “Smarter decisions for optimized performance” (love it) and focuses on how companies are using analytics and optimization to “breakaway” – a sports analogy such as where a cyclist breaks away from the pack not just by pedaling harder, but thanks to a focused and thoughtful team effort that enables them to capitalize on opportunities and create some separation.

IBM use this graph that shows information and analytics maturity on one axis and business operations maturity on the other. More and more sophisticated insights (spreadsheets to integrated data to predictions, rules and patterns) and increased business sophistication (command and control to process automation and process integration) respectively. The levels they define (ad hoc, foundational, competitive, etc.) build up with increasing levels of both. Staying in the cone is important – you don’t want to wander along either axis (more analytically sophisticated without execution or more sophisticated systems with no analytics). Working …

So how do people manage to breakaway? IBM has just completed a worldwide study of about 400 people (60% senior executives, 80% business rather than IT). In the report they compare top performers (top quintile) and lower performers (4^th/5^th quintile). The data is self-reported, though the survey was conducted by an independent organization, and there are some really interesting findings.

The first topic was to determine which characteristics of an intelligent enterprise (something IBM has surveyed on before) were most impactful – the ones that most differentiated high from low performers. In each case the top performers have dramatically higher scores than lower performers:

Challenging, an ability/willingness to overturn the status quo where top performers described themselves this way at a rate of 21x poor performers!
Anticipating, predicting and preparing for the future proactively at a rate of 15x
Empowered, where employees can analyze, decide and act at a rate of 5x

These show that top performing companies have a very definite sense of themselves that is different from lower performing ones. Given the power of analytics to challenge the status quo, anticipate the future and empower front-line staff to make decisions this all seems like good confirmation of the power of analytics.

A separate set of questions asked about capabilities and found that this distinct set of characteristics were driven by three sets of capabilities – quality information, decision support, and a business change focus:

Quality of information, for instance, was reflected in that data governance was much more sophisticated in top performers with 3x having sophisticated data governance relative to low performers. More than half of lower performers only had rudimentary data governance.
Decision support was reflected in much higher uses of decisioning technologies like dashboards/visualization (4.4x), predictive analytics (2.7x) and business rules (2.4x). These line up very strongly with the characteristics – you need tools to let people challenge intelligently, anticipate/predict and change the systems involved for themselves.
They were also more likely to have more trusted information with technologies like content management (2.5x), data integration tools (2.4x) and master data management (2x) all being more common.
Business change – making operational changes to create value. Top performers were much more focused on driving change – culture and people change, business process change, organizational alignment, data governance. A focus here almost tripled the likelihood of success in a change project. Focusing on driving change was twice as important for success as having a well run project.

The survey also asked about investments and found that organizations felt that investments will increasingly be focused on revenue protection and growth (71%), competitive differentiation (41%) and rather less so on cost takeout/efficiency (33%). This shows that a top-line focus is back, displacing to some extent internally focused objectives like continuous improvement or compliance.

Finally organizations were asked about their top 10 priorities for this year and IBM built a predictive model to see what would likely to be high priorities in 2010 based on the rest of the study. Areas likely to get more focus were:

Pricing and offer strategies
Branding and reputation management
Product/services market selection
Lead generation and pipeline management
Promotion and offer management
Logistics and distribution management

Almost all areas where analytics has great potential. Items like customer segmentation and profitability; demand forecasting and management; enterprise goal setting and alignment; and budgeting and resource allocation remain constant (and also repay an investment in analytics) while companies seem likely to reconsider any focus on reporting, cost/expense management, fraud and financial risk management etc.

All in all a fascinating study that you can download from IBM at www.ibm.com/gbs/intelligent-enterprise.

And don’t forget to join me in a first-of-a-kind “diavlog” later on today – Breakaway Breakout: The Live Interactive Diavlog Dec. 9 3pm EST.