Two Paths to Transformation

This is part 6 of 13 from “Analytics: The Widening Divide,” a report on the findings of the 2011 New Intelligent Enterprise Global Executive Study and Research Project.

While Transformed organizations serve as benchmarks for establishing analytics competencies, almost half of the organizations we surveyed are at the Experienced level, somewhere between the most basic and the most advanced segments.10 We took a closer look at this large transitional segment to better understand those organizations (see Figure 11).

We found that organizations, after starting, diverge in their approach to analytics. We characterize the alternative paths as Specialized or Collaborative, based on the way analytics is leveraged and deployed:

The Specialized path. Deep analytics expertise is developed within lines of business or specific functions using a wide array of analytical skills and techniques. Analytics is used to improve specific business metrics. Slightly more than half of the Experienced organizations took this route.

The Collaborative path. An enterprisewide information platform is created, enabling insights to be developed and shared across lines of business. Analytics is used to improve enterprise objectives. Slightly fewer than half of Experienced organizations took this route.

See Figure 12 for a comparison of the relative proficiency levels these paths exhibit for each of the three analytics competencies.

The Specialized Path Can Lead To Well-Defined Gains

With impetus coming from within lines of business, organizations on the Specialized path pragmatically focus on improving their operational metrics while growing revenue and increasing efficiency. They use their analytical prowess in advanced skills and techniques, such as predictive modeling, to focus on orchestrating marketing campaigns and finding the best match between individual customers and sales representatives.

FIGURE 11: Paths to Transformation

View Exhibit

In addition to the revenue gains resulting from these programs, the Specialized path takes organizations through a wide range of efficiencies and cost savings. Predictive scenarios and simulations, for example, make it possible to understand how changes caused by internal strategies and external forces will impact individual units in terms of resource allocations, revenue growth and operating costs. We found that organizations on this path increased their use of analytics over the last 12 months, but rarely as a core part of the overall business strategy.

The Specialized Path and the Three Competencies

1. Information management is siloed. Because advanced tools and techniques abound here, organizations on the Specialized path may well be the first to meet today’s newest data challenges: finding ways to mine real-time information from the Internet and unstructured content from e-mails, interaction logs and other internal documents. However, integrating and disseminating data across the enterprise is a hurdle they have yet to overcome. Functional and line-of-business leaders, for example, retain control of “their” information and may determine data definitions unilaterally.

On the Specialized path, identification and selection of projects is made within business units, often by using process-driven problem-solving methodologies like Six Sigma. Analysis takes place where and when insights are needed, or by analytics departments within the business lines. While this approach serves individual business lines well, it can create or deepen barriers to developing the information management competency, because collaboration for effectively integrating and sharing enterprise data is insufficient or lacking.

2. Improvement of analytical skills and tools is a passion. On this path, organizations are eager to keep up with new technical advances and apply them to the data they have on hand. To do that, they develop and cross-train a strong talent pool that can use a wide variety of analytical approaches to understand not just what’s happening, but why. Within their individual lines of business, these organizations have the capability to spot and analyze trends, patterns and anomalies.

FIGURE 12: Observed Competency Levels

View Exhibit

Passionate about a wide range of analytical tools, organizations on this path embark on a journey that takes them far beyond spreadsheets and basic visualization techniques. For budget planning and resource allocation, what-if scenarios are used to predict threats and opportunities. Algorithms automate tasks ranging from mundane report development to complex data analysis. And a wide range of discrete business processes, such as automatic inventory replenishment or call center assignments, are optimized by embedded algorithms.

3. Data-oriented culture will require extra momentum. On the Specialized path, organizations are open to exploring new analytical techniques and applying them liberally within discrete areas of the business. However, when it comes to taking an enterprise approach, most respondents considered the organizational challenges extremely difficult to confront and resolve. Political constraints and a lack of cohesion within the organization can be major barriers to integrating data and using analytics for enterprisewide objectives.

Unless these hurdles are overcome, the Specialized path to analytical transformation may reach a point of diminishing returns as siloed programs impede establishment of analytics as a core enabler of business strategy and operations. Either a strong push from senior leaders or grassroots momentum from individuals at many levels will likely be required to create a culture that is open to new ideas and ready to move forward on the basis of fact-based insights.

References

1. Organizational performance is a self-assessed measure that delves into the organization’s competitive position relative to its industry peers. Respondents are asked to select one option from five choices: substantially outperforming competitive peers, significantly outperforming competitive peers, on par with competitive peers, slightly underperforming competitive peers, or significantly underperforming competitive peers.

2. LaValle, Steve, et al. “Analytics: The New Path to Value.” MIT Sloan Management Review and IBM Institute for Business Value knowledge partnership. October 2010.

3. ibid.

4. IBM Institute for Business Value. “Capitalizing on complexity: Insights from the 2010 IBM Global CEO Study.” May 2010.

5. Corporate Executive Board, “Internal Audit’s Role in ERM,” referenced 21 October 2011.

6. Torok, Robert. “Improving enterprise risk management outcomes.” APQC. 2011.

7. Clanton, Brett. “Chevron stayed busy while idling in deep water: Staying busy while idle – Confronting a deep-water slowdown in the Gulf, Chevron worked to get more from its data.” Houston Chronicle. July 11, 2011.

8. ibid.

9. Teerlink, Dr. Marc and Dr. Michael Haydock. “Customer analytics pay off: Driving top-line growth by bringing science to the art of marketing.” IBM Institute for Business Value. September 2011.

10. Our findings on the two paths are based on response patterns from a representative sample of Experienced organizations using a subset of key questions from our survey.

i.Looking at Robert Bruce’s Two Huge Healthcare Bets,” Guru.com. September 6, 2011. Accessed on October 17, 2011.