Are You Transformed? The MIT Report on Analytics

December 2, 2011
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Are you building a business case for further investments in business analytics?

Are you building a business case for further investments in business analytics? If so, the quarterly journal MIT Sloan Management Review, in collaboration with the IBM Institute for Business Value, recently published a research report called, “Analytics: The Widening Divide.” In this study, the researchers identified a growing divide between companies that see the value of business analytics (and are transforming themselves to take advantage of newfound opportunities) and companies that do not. The findings in this report are based on a survey of more than 4,500 managers, executives, and analysts in more than 30 industries and 120 countries; interviews with academic experts and subject matter experts; and IBM case studies.

Cover image MIT Sloan Review research report.JPG

Readers should take some of the results with a grain of salt — particularly those that attribute business success and outperforming peers to the use of analytics — because the results are based on self-reported opinions rather than hard data (e.g., financial filings, quarterly reports, etc.). Still, the findings are interesting, such as:

  • Transformed organizations use analytics in non-traditional ways. The most common uses of analytics are to manage financial forecasting, annual budget allocations, and supply chain optimization, and to streamline operations. In general, companies less often rely on analytics for decisions involving customers, business strategy, and human resources — but half the Transformed organizations use analytics to make decisions in exactly these areas.
  • Transformed organizations are democratizing information. Transformational organizations have mastered three analytical competencies: information management, analytics skills and tools, and a data-oriented culture. As part of this, they make information and insights readily available. Sixty five percent of Transformed organizations make information readily accessible to employees, vs. 21% of Aspirational organizations, and almost as many Transformed organizations (63%) make information readily accessible to all employees, vs. 16% of Aspirational organizations.
  • Analytics adoption is on the rise and companies are seeing benefit. Fifty eight percent of organizations surveyed apply analytics to create a competitive advantage within their markets or industries, up from 37% one year ago. According to self-reported info from the survey respondents (which must be taken with a grain of salt), the same organizations that use analytics to create competitive advantage are more than twice as likely to substantially outperform their peers. All of the gains in competitive advantage have been made by companies in the Transformed or Experienced groups, according to the researchers’ classifications of analytical sophistication — and none of the gains by companies in the Aspirational group.*

This study offers a number of recommendations to help organizations move forward with analytics. At the highest level, the recommendations are to 1) assess your analytics sophistication against the maturity model laid out in the report, 2) improve your analytics competencies, and 3) use an information agenda to connect your path to your competencies. For more detail, you can download the full study here (no charge). 

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* In Aspirational organizations (32% of survey respondents), analytics usage is basic. People use analytics to guide decision making in financial management and supply chain management. The primary tool is spreadsheets. In Experienced organizations (45% of survey respondents), analytics usage is moderate. These organizations use analytics to guide future strategies and are increasingly relying on analytics to guide activities in marketing and operations. Enterprise data integration efforts are under way and the organization is expanding its portfolio of analytics tools. In Transformed organizations (24% of survey respondents), analytics users are sophisticated. They use analytics to guide decision making in day to day operations as well as future strategies. The organization deploys a comprehensive portfolio of tools to supported advanced analytic modeling.