Improving your data analytics capability can boost profits by as much as 60 per cent, but only if it is done in a strategic way.
That’s according to new research from Melbourne Business School and consulting firm A.T. Kearney which analysed the analytics programs of more than 400 companies across 34 countries, with average revenue of $US3.8 billion.
Overall, the Analytics Impact Index report found that a strong data analytics strategy (or lack thereof) had significant impact on revenue.
The more mature the use of data, the more profit a business stands to make. However, only 8 per cent of the respondents qualified as “leaders”. The rest of the companies were divided into explorers (36 per cent), followers (46 per cent) and laggards (10 per cent).
The leaders possessed a well-defined analytics strategy, leadership impetus behind analytics, and embodied data-driven decision making across the organisation.
The Index also found the biggest differentiator between ‘leaders’ and ‘laggards’ was an appetite to experiment and learn. Companies lagging behind with data analytics stand to boost profits by as much as 60 per cent if they improve their data strategies and culture.
Australia in focus
According to IDC, top Australian companies are estimated to spend approximately $2.7 billion in 2018 on building analytics capabilities within their organisations. However skills shortages and risk averse attitudes mean Australia is lagging behind the rest of the world in data analytics.
The 50 Australian businesses analysed in the Index scored lower across the board than global counterparts, attributed to risk-averse cultures and reluctance to experiment, their approach to using data in the business, and lack of recruitment and training of data specialists.
According to the report, Australian businesses extract 12 per cent less value from analytics compared to the rest of the world, and are 14 per cent less mature in their approach.
Whereas Chinese companies are leading the world in both maturity and impact, according to the report.
In terms of industries, oil and gas, industrial and technology companies were the most advanced users of analytics, ahead of government, energy and utilities, mining and others. Key use cases include making data-driven business decisions and optimising customer experience.
Framework for success
To best extract value from data analytics, the researchers argued, organisations should focus on strategy and leadership, culture and governance, talent and skills and data ecosystem.
Without an appropriate strategy, throwing money at technology and data infrastructure could have a detrimental effect.
According to the report, companies that spend too much money on their data ecosystem without strategic leadership tend to have lower profit than firms with strategic leadership guiding the use of technology.
While almost half (46 per cent) of respondents use analytics in some capacity, analytics are not being strategically used to optimise business decisions, and there isn’t a broad-based analytics culture in the organisation driven by top management.