By now, most companies have accepted the wisdom that advanced analytics is a key to their success, if not now then in the not-too-distant future.
But as is true for many enterprise-wide transformations, implementing data analytics won’t achieve success if it’s viewed as just an IT project, notes a new report from the Institute of Management Accountants.
Rather, success requires a company to establish a data-driven culture. Based on a survey of 170 management accountants, the IMA report establishes six key factors for doing so.
Support for analytics from top executives: Setting the right tone at the top is crucial for most organizational initiatives, and it’s no different with analytics adoption.
A majority of executives are championing the practice. However, at more than a third (37%) of them, either departmental managers have been first to embrace it or few people in the company believe it’s important. The chart below details corporate attitudes toward advanced analytics, based on the survey data:
The survey also shows a strong correlation between top company executives championing analytics and perceptions that the company in outpacing competitors in strategy development and execution.
Strategies for effective use of technology: Only 33% of those surveyed said their organizations have developed strategies for effectively using leading-edge analytic techniques and technologies. A greater number (40%) said they have not developed such strategies. Perhaps most interestingly, a sizable chunk (27%) of the management accountants weren’t sure.
“Companies whose decision-making is reactive to the competition are less likely to have developed strategies for the effective use of leading-edge analytic techniques and technologies,” the report states. “Being reactive instead of proactive means that these organizations lack the ability to predict trends or to turn customer data into useful insights that can be used to improve service, products, and overall profitability.”
A commitment to developing and using data: A key here is to embrace data from a wide variety of sources, external as well as internal. A diversity of data sources yields better insights and can help temper biases.
That’s especially true when it comes to strategy development and execution. In that regard, about half (52%) of companies use data from both types of courses.
“While this is encouraging,” the report says, “it’s troubling that the other half of organizations are either using only internal data (40%), using data only to validate strategy post-execution (6%), or not using data at all (3%) when developing and executing their strategy.”
Still, companies that are ahead of their competition in strategy development and execution are more likely to be using existing data, both structured and unstructured, than needing to define new data sources. “This may indicate that companies focused on strategy development have previously devoted the resources needed to generate the data needed to support those efforts.”
Rewards to promote analytical decision-making: According to IMA’s survey, slightly more than half of companies are using incentives, either monetary or non-monetary, for this purpose.
Not doing so is a mistake, IMA says: Companies that believe developing enhanced analytics capabilities is important to their success are more likely to foster an appropriate culture by providing such incentives.
Adequate resources for analytics efforts: The most frequently cited challenge to developing enhanced analytics capabilities, by far, is recruiting staff with the necessary skill set.
The next-most-common challenge is budget. Survey respondents offered such comments as “Top management has narrow vision, so it does not provide necessary resources” and “It is difficult to get funding to acquire and analyze data.”
It might be expected that when senior company executives champion enhanced analytics initiatives. However, survey data shows the opposite to be true
“It may be that when departments value analytics efforts, they prioritize it and ‘find’ the resources to support it,” IMA says. “On the other hand, when executives are championing the initiative, there may be a lack of coordination within the organization to commit the resources that are required.”
Alignment of analytics efforts: Responsibility for analytics can reside in various parts of an organization. Some argue that CFOs should own it, as they are the “impartial guardians of the truth” and can use analytics to “debunk myths or accepted wisdom that hold the company back.”
A slight majority of companies seem to agree: 51% of those surveyed said finance is at least a partial owner of analytics. Next were IT (30%), a dedicated analytics group (28%), having each department independently manage its analytics (25%), and operations (24%).
Notably, companies that see analytics as a tool for gaining a competitive edge are more likely to have a dedicated analytics group.