untitled
Big Data, Analytics and
the Path From Insights
to Value
W I N T E R XXXXXXXXXXV O L XXXXXXXXXXN O. 2
R E P R I N T N U M B E R XXXXXXXXXX
Steve LaValle, Eric Lesser, Rebecca Shockley,
Michael S. Hopkins and Nina Kruschwitz
WINTER XXXXXXXXXXMIT SLOAN MANAGEMENT REVIEW 21
IN EVERY INDUSTRY, in every part of the world, senior leaders wonder whether they are
getting full value from the massive amounts of information they already have within their organi-
zations. New technologies are collecting more data than ever before, yet many organizations are
still looking for better ways to obtain value from their data and compete in the marketplace. Their
questions about how best to achieve value persist.
Are competitors obtaining sharper, more timely insights? Are they able to regain market advantage,
neglected while focusing on expenses during the past two years? Are they co
ectly interpreting new
signals from the global economy — and adequately assessing the impact on their customers and part-
ners? Knowing what happened and why it happened are no longer adequate. Organizations need to
know what is happening now, what is likely to happen next and what actions should be taken to get the
optimal results.
Big Data, Analytics and the
Path From Insights to Value
How the smartest organizations are embedding analytics to
transform information into insight and then action. Findings
and recommendations from the first annual New Intelligent
Enterprise Global Executive study.
BY STEVE LAVALLE, ERIC LESSER, REBECCA SHOCKLEY, MICHAEL S. HOPKINS
AND NINA KRUSCHWITZ
THE LEADING
QUESTION
How are
organizations
using analytics
to gain insight
and guide
action?
FINDINGS
�Top-performing
organizations are
twice as likely to
apply analytics to
activities.
�The biggest chal-
lenges in adopting
analytics are mana-
gerial and cultural.
�Visualizing data
differently will be-
come increasingly
valuable.
Some of the best-performing retailers are using
analytics not just for finance and operational
activities, but to boost competitive advantage on
everything from displays, to marketing, customer
service and customer experience management.
T H E N E W I N T E L L I G E N T E N T E R P R I S E
COURTESY OF BEST BUY
22 MIT SLOAN MANAGEMENT REVIEW WINTER 2011 SLOANREVIEW.MIT.EDU
T H E N E W I N T E L L I G E N T E N T E R P R I S E
To help organizations understand the opportu-
nity of information and advanced analytics, MIT
Sloan Management Review partnered with the IBM
Institute for Business Value to conduct a survey of
nearly 3,000 executives, managers and analysts work-
ing across more than 30 industries and 100 countries.
(See “About the Research.”)
Among our key findings: Top-performing orga-
nizations use analytics five times more than lower
performers. (See “Analytics Trumps Intuition.”)
Overall, our survey found a widespread belief that
analytics offers value. Half of our respondents said
that improvement of information and analytics was
a top priority in their organizations. And more than
one in five said they were under intense or signifi-
cant pressure to adopt advanced information and
analytics approaches.
The source of the pressure is not hard to ascer-
tain. Six out of 10 respondents cited innovating to
achieve competitive differentiation as a top business
challenge. The same percentage also agreed that
their organization has more data than it can use ef-
fectively. Organizational leaders want analytics to
exploit their growing data and computational
power to get smart, and get innovative, in ways they
never could before.
Senior executives now want businesses run on
data-driven decisions. They want scenarios and
simulations that provide immediate guidance on
the best actions to take when disruptions occur —
disruptions ranging from unexpected competitors
or an earthquake in a supply zone to a customer
signaling a desire to switch providers. Executives
want to understand optimal solutions based on
complex business parameters or new information,
and they want to take action quickly.
These expectations can be met — but with a ca-
veat. For analytics-driven insights to be consumed
— that is, to trigger new actions across the organi-
zation — they must be closely linked to business
strategy, easy for end-users to understand and
embedded into organizational processes so that
action can be taken at the right time. That is no
small task. It requires painstaking focus on the
way insights are infused into everything from
manufacturing and new product development to
credit approvals and call center interactions.
Top Performers Say Analytics
Is a Differentiato
Our study clearly connects performance and the
competitive value of analytics. We asked respon-
dents to assess their organization’s competitive
position. Those who selected “substantially outper-
form industry peers” were identified as top
performers, while those who selected “somewhat
or substantially underperform industry peers”
were grouped as lower performers.
We found that organizations that strongly
agreed that the use of business information and an-
alytics differentiates them within their industry
were twice as likely to be top performers as lower
performers.
Top performers approach business operations
differently than their peers do. Specifically, they put
analytics to use in the widest possible range of deci-
sions, large and small. They were twice as likely to
use analytics to guide future strategies, and twice as
likely to use insights to guide day-to-day operations.
(See “The Analytics Habits of Top Performers,” p. 24.)
They make decisions based on rigorous analysis at
more than double the rate of lower performers. The
co
elation between performance and analytics-
driven management has important implications to
organizations, whether they are seeking growth, ef-
ficiency or competitive differentiation.
Three Levels of Capabilities
Emerged, Each with Distinct
Opportunities
Organizations that know where they are in terms
of analytics adoption are better prepared to turn
challenges into opportunities. We segmented
espondents based on how they rated their organi-
zation’s analytics prowess, specifically how
thoroughly their organizations had been trans-
formed by better uses of analytics and information.
Three levels of analytics capability emerged — As-
pirational, Experienced and Transformed — each
with clear distinctions. (See “The Three Stages of
Analytics Adoption.”)
Aspirational. These organizations are the fur-
thest from achieving their desired analytical goals.
Often they are focusing on efficiency or automa-
tion of existing processes and searching for ways to
cut costs. Aspirational organizations cu
ently have
ABOUT THE
RESEARCH
To understand the chal-
lenges and opportunities
associated with the use of
usiness analytics, MIT
Sloan Management Re-
view, in collaboration with
the IBM Institute for Busi-
ness Value, conducted a
survey of more than 3,000
usiness executives, man-
agers and analysts from
organizations located
around the world. The
survey captured insights
from individuals in 108
countries and more than 30
industries and involved or-
ganizations from a variety
of sizes. The sample was
drawn from a number of
different sources, including
MIT alumni and MIT Sloan
Management Review sub-
scribers, IBM clients and
other interested parties.
We also interviewed
academic experts and sub-
ject matter experts from a
number of industries and
disciplines to understand
the practical issues facing
organizations today. Their
insights contributed to a
icher understanding of the
data and the development
of recommendations that
espond to strategic and
tactical questions that
senior executives address
as they operationalize
analytics within their orga-
nizations. We also drew
upon a number of IBM
case studies to explore fur-
ther how organizations are
leveraging business analyt-
ics and illuminate how real
organizations are putting
our recommendations into
action in different organiza-
tional settings.
www.sloanreview.mit.edu
www.sloanreview.mit.edu
SLOANREVIEW.MIT.EDU WINTER XXXXXXXXXXMIT SLOAN MANAGEMENT REVIEW 23
few of the necessary building blocks — people, pro-
cesses or tools — to collect, understand, incorporate
or act on analytic insights.
Experienced. Having gained some analytic ex-
perience — often through successes with
efficiencies at the Aspirational phase — these orga-
nizat ions are looking to go beyond cost
management. Experienced organizations are devel-
oping better ways to collect, incorporate and act on
analytics effectively so they can begin to optimize
their organizations.
Transformed. These organizations have substan-
tial experience using analytics across a
oad range
of functions. They use analytics as a competitive dif-
ferentiator and are already adept at organizing
people, processes and tools to optimize and differen-
tiate. Transformed organizations are less focused on
cutting costs than Aspirational and Experienced or-
ganizations, possibly having already automated their
operations through effective use of insights. They are
most focused on driving customer profitability and
making targeted investments in niche analytics as
they keep pushing the organizational envelope.
Transformed organizations were three times
more likely than Aspirational organizations to indi-
cate that they substantially outperform their industry
peers. This performance advantage illustrates the po-
tential rewards of higher levels of analytics adoption.
Data Is Not the Biggest Obstacle
Despite popular opinion, getting the data right is not
a top challenge that organizations face when adopt-
ing analytics. Only about one out of five respondents
cited concern with data quality or ineffective data gov-
ernance as a primary obstacle.
The adoption ba
iers that organizations face
most are managerial and cultural rather than related
to data and technology. The leading obstacle to
widespread analytics adoption is lack of under-
standing of how to use analytics to improve the
usiness, according to almost four of 10 respon-
dents. More than one in three cite lack of
management bandwidth due to competing priorities.
(See “The Impediments to Becoming More Data
Driven.”)
Information Must Become Easier
to Understand and Act Upon
Executives want better ways to communicate
complex insights so they can quickly abso
the
meaning of the data and take action. Over the next
two years, executives say they will focus on sup-
plementing standard historical reporting with
emerging approaches that make information
come alive. These include data visualization and
process simulation as well as