Data Analytics and the Benefits of Ignoring Gut Instincts (Part 1)
While the ascent to the ranks of the C-Suite may have historically been propelled by leaning on “gut instinct” fueled by experience, that trend is changing as executives increasingly depend on data-driven decision making.
Senior executives have long been consumers of the output from data analysis but those involved in the creation of the insight that can be gleaned from big data are more successful than their counterparts who are not.
That’s according to a new study from the Aberdeen Group that finds that 70% of the top performing companies have strong executive champions for data analytics.
The most important characteristics of an effective analytical environment are easy access to necessary data, timely delivery of information and the existence of easy-to-use tools.
In a survey of 116 senior level executives, the best performing companies have strong levels of satisfaction in all three of these requirements.
For example, 75% of executives from leading companies (defined by user satisfaction, customer responsiveness and operating profit growth ) report a high satisfaction with the analytical capability in place compared to 29% of executives from lower performing companies.
In addition, 93% of executives from leading companies report an increase in customer responsiveness in their firms compared with 42% of their peers in lower performing companies. Finally, 27% of those from the top performing group report growth in operating profit compared to 4% of their peers.
“Leading executives champion a corporate environment that vales data-driven decisions and effective analytical capability,” according to the report. “Having the right insight in-hand at the right time enables decisions to be made quicker, and in the best interest of the customer base. Additionally, with this effective data-driven environment in place, companies are able to arm their operational executives with more relevant insight on a tactical level, at the point of decisions, in order to boost efficiency and drive more profit to the bottom line.”
The report notes that what differentiates top performing companies from others is the mindsets and infrastructures that senior executives promote.
The report finds that:
- 64% of executives from leading companies have time-tested processes in place for defining and communicating key performance indicators (KPIs) compared to 45% at lower performing companies.
- 64% of leading companies have single central sources of operational performance information in place compared to 47% of less successful firms.
- 56% of executives from leading companies note that they have established policies in place for governing/controlling end-user data access compared to 36% of others.
“Leaders are much more likely to have a layered approach to KPIs, where the company strategy is supported within each function by specific metrics,” according to the report. “In order for these metrics to be effective, they need to be crystal clear in their definition, thoroughly communicated to the workforce and consistently measured.”
The report recommends that companies:
- Develop a formal data strategy that addresses accessibility, governance, cleanliness and timeliness of data.
- Leverage a strong KPI framework – “Tactically speaking, the value of analytics is in its ability to recognize and alert users when adjustments need to be made. The effectiveness of those adjustments is predicated on a clearly communicated, frequently measured and consistently updated set of KPIs that ultimately map to the company strategy,” according to the report.
- Explore different delivery modes – The report finds that leading executives should explore alternative ways to get the right insight into user hands including embedded analytics, cloud based BI or mobile BI.