From Data to Decisions — Moving Past the Hype 04-09

From Data to Decisions — Moving Past the Hype


The 2016 Data & Analytics Report by MIT Sloan Management Review and SAS finds that analytics is now a mainstream idea, but not a mainstream practice. Few companies have a strategic plan for analytics or are executing a strategy for what they hope to achieve with analytics. Organizations achieving the greatest benefits from analytics ensure the right data is being captured, and blend information and experience in making decisions.

The hype around data and analytics has reached a fever pitch. From baseball to biomedical advances, the media highlights one money-making or money-saving corporate experience with analytics after another. Stories abound about data scientists applying their wizardlike talents to find untapped markets, make millions, or save lives. Pundits have been talking up the promise of data in grand terms for several years now: Data has been described as the new oil, the new soil, the next big thing, and the force behind a new management revolution.

Despite the hype, the reality is that many companies still struggle to figure out how to use analytics to take advantage of their data. The experience of managers grappling, sometimes unsuccessfully, with ever-increasing amounts of data and sophisticated analytics is often more the rule than the exception. In many respects, the hype surrounding the promise of analytics glosses over the hard work necessary to fulfill that promise. It is hard work to understand what data a company has, to monitor the many processes necessary to make data sufficient (accurate, timely, complete, accessible, reliable, consistent, relevant, and detailed), and to improve managers’ ability to use data. This unsexy side of analytics is where companies need to excel in order to maximize the value of their analytics initiatives, but it is also where many such efforts stall.

Moving past the hype takes a measure of resolve that few companies demonstrate. A 2015 survey of more than 2,000 managers conducted by MIT Sloan Management Review and SAS Institute — as well as more than a dozen interviews with executives at global companies — reveals insights about the unglamorous but necessary actions required to improve decision making with analytics.
Five key findings came from this research:

• Competitive advantage with analytics is waning. The percentage of companies that report obtaining a competitive advantage with analytics has declined significantly over the past two years. Increased market adoption of analytics levels the playing field and makes it more difficult for companies to keep their edge. In addition, many organizations are in the early stage of their analytics initiative.

Many managers in organizations that have difficulty obtaining a competitive advantage are still experimenting with what they can do with data, and have yet to capitalize on data use across the enterprise. The transition from pilots to organization-wide deployments can be difficult given costs, effort required, and broader questions about whether the analytics will be used consistently by decision makers. Silicon Valley Bank is one company that’s making the transition. “We’ve gone from experimenting with some analytics tools to deploying one visualization tool across the entire enterprise,” says Allan. “Every person has access to data reports and the ability to look at the data from the exact viewpoint they would like. If you had told me two years ago I was going to shift that tool out from a small group of people to all 1,400 employees, I would have said, ‘I highly doubt it.’”

• Optimism about the potential of analytics remains strong, despite the decline in competitive advantage. Most managers are still quite positive about the potential of analytics. They’ve seen increased interest in analytics over the past few years, and they expect its use to continue to grow in their organizations. In addition, use of analytics for innovation remains steady.

• Achieving competitive advantage with analytics requires resolve and a sustained commitment to changing the role of data in decision making. This commitment touches many aspects of organizational behavior, from revamping information management to adapting cultural norms.

• Companies that are successful with analytics are much more likely to have a strategic plan for analytics, and this plan is usually aligned with the organization’s overall corporate strategy. These companies use analytics more broadly across the organization, and they are able to measure the results of their analytical efforts.

• Most companies are not prepared for the robust investment and cultural change that are required to achieve sustained success with analytics, including expanding the skill set of managers who use data, broadening the types of decisions influenced by data, and cultivating decision making that blends analytical insights with intuition.

Our research suggests that companies more advanced in their application of analytics view the collection, management, and use of valuable data in terms of strategic ends, not merely operational goals. These analytically advanced companies pursue their hard-won success with leadership and execution, not by leadership fiat or simply by hiring new analytics talent. Companies that have not been able to use analytics for competitive advantage — or those that have lost their analytical edge due to rapid advances in the marketplace — need to understand the level of commitment and hard work required to execute and sustain a successful analytics strategy. At the conclusion of this report, we identify four key organizational issues that managers need to address when planning for success with analytics.

Competitive Advantage From Analytics Is Down

For the past six years, MIT Sloan Management Review has asked managers to what degree analytics creates competitive advantage for their companies. For the first few years, the percent of managers reporting a competitive advantage from their use of analytics increased dramatically. In 2013, the steep incline flattened, and in the last two years, there has been a significant decline. Down from a high in 2012 of 66%, just 51% of survey respondents in 2015 indicated that analytics creates competitive advantage for their organizations. (See “Competitive Advantage From Analytics Is Declining.”) This decline is taking place across all industries, with energy and health care reporting the steepest declines, and manufacturing reporting the lowest decline.

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Figure 1: Competitive Advantage From Analytics Is Declining

The percentage of organizations gaining competitive advantage from analytics declined significantly in 2015



This decrease in the percentage of organizations reporting a competitive advantage from analytics might suggest that analytics is losing its luster. After all, the original hype around analytics was that it helped organizations compete more effectively. In addition, now there is more data, better technology to capitalize on it, and increased focus on analytical skills. So what’s behind this dramatic drop-off?
One factor in this downward trend is the increase in adoption of analytics across the corporate landscape. As more companies develop analytic capabilities, it is becoming harder for some companies to gain an edge with analytics. “Analytics used to be a competitive advantage, but now it’s becoming table stakes,” says Steve Allan, head of analytics for Silicon Valley Bank. Surprisingly, many managers report that they are innovating with analytics at about the same rate as managers in previous surveys — suggesting that companies are using analytics to stay competitive, but are having difficulty pulling away from competitors.

Beyond the increased use of analytics among companies, there is no single source of the decline that might suggest a simple fix. Among companies not obtaining a competitive advantage from analytics, the reasons varied. (See “Difficulties Gaining an Edge With Analytics.”)

Figure 2: Difficulties Gaining an Edge With Analytics

Many organizations not gaining a competitive advantage from analytics are just beginning to apply analytics and need more experience.

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Figure 2: Difficulties Gaining an Edge With Analytics

Many organizations not gaining a competitive advantage from analytics are just beginning to apply analytics and need more experience.

Many managers in organizations that have difficulty obtaining a competitive advantage are still experimenting with what they can do with data, and have yet to capitalize on data use across the enterprise. The transition from pilots to organization-wide deployments can be difficult given costs, effort required, and broader questions about whether the analytics will be used consistently by decision makers. Silicon Valley Bank is one company that’s making the transition. “We’ve gone from experimenting with some analytics tools to deploying one visualization tool across the entire enterprise,” says Allan. “Every person has access to data reports and the ability to look at the data from the exact viewpoint they would like. If you had told me two years ago I was going to shift that tool out from a small group of people to all 1,400 employees, I would have said, ‘I highly doubt it.’”

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