Study: Top-Performing Companies Choose Analytics Over Intuition for Decision Making

CAMBRIDGE, Mass., Nov. 11, 2010 /PRNewswire/ -- Top-performing companies are three times more likely to be leading users of analytics according to a new report today released by IBM Institute for Business Value (NYSE: IBM) and MIT Sloan Management Review. To better understand how organizations are approaching analytics today, the study sampled nearly 3,000 executives and business analysts from 108 countries and 30 industries.

(Logo:  http://photos.prnewswire.com/prnh/20090416/IBMLOGO)

(Logo:  http://www.newscom.com/cgi-bin/prnh/20090416/IBMLOGO)

The survey found a clear connection between users of analytics technology and the ability to achieve competitive differentiation and performance. Top performers are five times more likely to apply analytics rather than intuition across the widest possible range of decisions. They are two times more likely to shape future business strategies and guide day to day operations based on analytics.

"The correlation between performance and managers who use analytics has important implications for organizations whether they are seeking growth, efficiency, or competitive differentiation," said Fred Balboni, global leader, Business Analytics and Optimization Services, IBM.  "This study shows that when organizations use analytics to tackle their biggest challenges, they can overcome seemingly intractable challenges."

"Interestingly, the top performers also turn out to be the organizations most focused on improving their use of analytics and data, despite the fact that they're already ahead of the adoption curve," said Michael S. Hopkins, editor-in-chief, MIT Sloan Management Review. "We discovered that the more managers know about analytics-driven management—and see how it can create value—the more they know that they want to know more."

The study found that despite popular opinion, organizations today are far less concerned about data deluge issues but rather feel hindered by traditional management practices. Respondents cited the top three obstacles to widespread analytics adoption in their organizations as: lack of understanding about how to apply analytics to improve their business, lack of bandwidth due to competing priorities, and lack of skills in the line of business.

The data shows that many organizations are facing a similar challenge. They are getting better at generating insights from information and analytics, but they face real difficulties in driving those insights to action.

To overcome these obstacles to using analytics in managing, the study identifies a series of steps organizations must take, including:

Tackle biggest challenges first: Organizations too often wait for complete data or perfect skills before they take on the opportunity to apply analytics to high-value opportunities.  Consequently, they stay stalled in investment mode.  Talent, however, flocks to big challenges, which command attention and incite action – increasing the odds of success.

Flip the equation in the approach to data and insights: Many organizations start new initiatives by gathering all of the available data on a topic and then extracting whatever insights they can get. Instead, the first step should be to identify what specific insights are needed, and then identify those pieces of data needed for answers.

Adopt techniques and tools best suited to business leaders:  Respondents identified a strong shift in the types of analytic tools and techniques that would provide the greatest value in the next few years. Data visualization, simulation tools and techniques that help them anticipate the consequences of their decisions, explore alternative approaches and tradeoffs came out on top. Techniques like these do not require superior skills to use and can be applied by business leaders at any point in the organization.

Demonstrating that using analytics to create opportunities is central to growth and success, the study showed that leading organizations are focusing their efforts to enact meaningful and enduring business transformation while reducing the time required to do so. Organizations that use a "selective" approach to analytics are able to focus resources and efforts narrowly – generating insights critical to immediate needs and overcoming the business challenges currently holding them back from driving insights to action.

For access to the full study report, including findings and case studies, please visit: http://www-935.ibm.com/services/us/gbs/thoughtleadership/ibv-embedding-analytics.html, or for the report and additional material including interviews and research articles, visit: http://sloanreview.mit.edu/analytics-report.

Published at the MIT Sloan School of Management, MIT Sloan Management Review's mission is to lead the conversation among thinkers, professors, and managers about the coming sea changes in management practice that will transform how people innovate and lead.  MIT SMR captures the creativity, excitement, and opportunity created by rapid societal, economic, and technological change, and brings it home to thoughtful managers. Visit http://sloanreview.mit.edu.

For more information about IBM, visit: www.ibm.com/gbs/bao.

SOURCE IBM