The Value of Analytics
Investing in analytics can yield substantial returns, but only a small fraction of companies are extracting the full potential of their data.
Organisations across the globe are investing in analytics in the hope of gaining a competitive advantage in an intensifying market. However, spending more doesn’t deliver value for the business. Without a well-defined strategy and strong leadership as well as supportive culture and governance, the right talent and skills, and the appropriate data ecosystems, companies cannot expect to capture the most value from their analytics.
To quote Canadian entrepreneur and angel investor Salim Ismail, “An exponential curve looks relatively flat until the inflection point.” Having been a source of insight and impact for centuries, analytics is now ubiquitous. Although some might describe analytics as a nascent scientific domain, it may simply be that they don’t see either the past or the rapidly approaching inflection point.
In this evolving environment, C-suite executives are unsure about best practices and are wrestling with an array of questions. How does our analytics capability compare with our regional and global peers? What business areas see the most value? Is the organizational operating model designed to have maximum impact? Do we have the right talent? Are we investing enough and in the right areas? And most importantly, is the impact on the bottom line big enough to justify the required investment?
Although attempts have been made to answer these questions, most efforts have focused on an organization’s maturity, especially regarding technology and infrastructure. There has been little research on the profit impact of analytics, which is of greater interest to businesses. With an eye on filling this void, Melbourne Business School and Kearney launched the Analytics Impact Index in 2018 to determine the potential impact on profitability and identify areas of opportunity.
Based on input from more than 350 companies across the world, the 2019 Analytics Impact Index pinpoints the bottom-line impact and the structural elements required to maximize returns. This year’s study reveals that the leaders—just 6 percent of the companies we surveyed—generate as much as 83 percent more profits than the laggards. And this gap is widening. These leaders have clearly defined strategies with metrics that guide their analytics journey. Their strategies, along with leadership support, fuel and enable a more powerful impact across three dimensions: culture and governance, talent and skills, and the data ecosystem.
This year’s Analytics Impact Index covers a more global sample of organizations than in 2018, most notably from the United States, Europe, the Middle East, and Africa. We also offer new insights into analytics investments, a view of returns for a variety of business areas, and a deeper analysis of what creates a financial impact. In addition, we identify the essential structural elements and behaviors that organizations can adopt to move up the maturity curve to become analytics leaders.
Building on last year’s successful launch, the 2019 Analytics Impact Index gives organizations a better understanding of the potential of analytics as well as the capabilities required to capture maximum value. To create the Index, Melbourne Business School and Kearney surveyed more than 350 companies from 46 countries and 27 industries with a median revenue of US $745 million (see figure 1). The Index compares organizations on two factors: maturity of the analytics operating model and impact of analytics on the organization’s profitability.