Creating Value from Analytics: The Nine Levers of Business Success

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IBM just released the results of a global study on how businesses can get the most value from Big Data and analytics. They found nine areas that are critical to creating value from analytics. You can download the entire study here.

IBM Institute for Business Value surveyed 900 IT and business executives from 70 countries from June through August 2013. The 50+ survey questions were designed to help translate concepts relating to generating value from analytics into actions.

Nine Levers to Value Creation

Figure 1. Nine Levers to Value Creation from Analytics. Click image to enlarge.

The researchers identified nine levers that help organizations create value from data. They compared leaders (those who identified their organization as substantially outperforming their industry peers) with the rest of the sample. They found that the leaders (19% of the sample) implement the nine levers to a greater degree than the non-leaders. These nine levers are:

1. Source of value: Actions and decisions that generate results. Leaders tend to focus primarily on their ability to increase revenue and less so on cost reduction.
2. Measurement: Evaluating the impact on business outcomes. Leaders ensure they know how their analytics impact business outcomes.
3. Platform: Integrated capabilities delivered by hardware and software. Sixty percent of Leaders have predictive analytic capabilities, as well as simulation (55%) and optimization (67%) capabilities.
4. Culture: Availability and use of data and analytics within an organization. Leaders make more than half of their decisions based on data and analytics.
5. Data: Structure and formality of the organization’s data governance process and the security of its data. Two-thirds of Leaders trust the quality of their data and analytics. A majority of leaders (57%) adopt enterprise-level standards, policies and practices to integrate data across the organization.
6. Trust: Organizational confidence. Leaders demonstrate a high degree of trust between individual employees (60% between executives, 53% between business and IT executives)
7. Sponsorship: Executive support and involvement. Leaders (56%) oversee the use of data and analytics within their own departments, guided by an enterprise-level strategy, common policies and metrics, and standardized methodologies compared to the rest (20%).
8. Funding: Financial rigor in the analytics funding process. Nearly two-thirds of Leaders pool resources to fund analytic investments. They evaluate these investments through pilot testing, cost/benefit analysis and forecasting KPIs.
9. Expertise: Development of and access to data management and analytic skills and capabilities. Leaders share advanced analytics subject matter experts across projects, where analytics employees have formalized roles, clearly defined career paths and experience investments to develop their skills.

The researchers state that each of the nine levers have a different impact on the organization’s ability to deliver value from the data and analytics; that is, all nine levers distinguish Leaders from the rest but each Lever impacts value creation in different ways. Enable levers need to be in place before value can be seen through the Drive and Amplify levers. The nine levers are organized into three levels:

1. Enable: These levers form the basis for big data and analytics.
2. Drive: These levers are needed to realize value from data and analytics; lack of sophistication within these levers will impede value creation.
3. Amplify: These levers boost value creation.

Recommendations: Creating an Analytic Blueprint

Figure 2. Analytics Blueprint for Creating Value from Data. Click image to enlarge

Next, the researchers offered a blueprint on how business leaders can translate the research findings into real changes for their own businesses. This operational blueprint consists of three areas: 1) Strategy, 2) Technology and 3) Organization.

1. Strategy

Strategy is about the deliberateness with which the organization approaches analytics. Businesses need to adopt practices around Sponsorship, Source of value and Funding to instill a sense of purpose to data and analytics that connects the strategic visions to the tactical activities.

2. Technology

Technology is about the enabling capabilities and resources an organization has available to manage, process, analyze, interpret and store data. Businesses need to adopt practices around Expertise, Data and Platform to create a foundation for analytic discovery to address today’s problems while planning for future data challenges.

3. Organization

Organization is about the actions taken to use data and analytics to create value. Businesses need to adopt practices around Culture, Measurement and Trust to enable the organization to be driven by fact-based decisions.

Summary

One way businesses are trying to outperform their competitors is through the use of analytics on their treasure trove of data. The IBM researchers were able to identify the necessary ingredients to extract value from analytics. The current research supports prior research on the benefits of analytics in business:

1. Top-performing businesses are twice as likely to use analytics to guide future strategies and guide day-to-day operations compared to their low-performing counterparts.
2. Analytic innovators 1) use analytics primarily to increase value to the customer rather than to decrease costs/allocate resources, 2) aggregate/integrate different business data silos and look for relationships among once-disparate metric and 3) secure executive support around the use of analytics that encourage sharing of best practices and data-driven insights throughout their company.

Businesses, to extract value from analytics, need to focus on improving strategic, technological and organizational aspects on how they treat data and analytics. The research identified nine area or levers executives can use to improve the value they generate from their data.

For the interested reader, I recently provided a case study (see: The Total Customer Experience: How Oracle Builds their Business Around the Customer) that illustrates how one company uses analytical best practices to help improve the customer experience and increase customer loyalty.

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