Research: 83% Higher Profit Margin for Companies with Mature Analytics
CHICAGO, IL, September 19, 2019 — Melbourne Business School and global management consulting firm A.T. Kearney today released their second-annual Analytics Impact Index, which measures how organizations use data analytics, the impact of analytics on profit, and ways to extract the most value from analytics.
Conducted over six months, the The Value of Analytics in 2019 report is based on surveys of more than 350 companies across 46 countries and 27 industries, with a median revenue of $745 million. U.S. Respondents from participating companies span mostly the C-Suite and Director level.
Patrick Van den Bossche, a partner, board member and global lead of advanced analytics with A.T. Kearney, said, “While many companies continue to invest in hiring talent and data/analytics infrastructure, it is often done in isolation to strategy and conducted by managers, who while passionate, don’t have the skills or authority to drive the necessary whole of company strategy in relation to analytics. Boards should be asking their executives ‘How is analytics making a difference to our business/’ and CEOs should be ensuring they have the right capabilities around them to realize the promise of analytics.”
Overall, while only 6 percent of companies surveyed globally extract the full potential of analytics, the report re-establishes that analytics maturity correlates directly with greater profit. Companies at different levels of analytics maturity are characterized as Laggards, Explorers, Followers and Leaders, and the research suggests that those who have yet to achieve the status of leader would be able to generate up to 83 per cent more profit if they were to adopt the processes and behaviors of Leaders. Additionally, Leaders invest 2.6 per cent of their revenue in analytics, which is three to 16 times more than other companies.
While the research found that U.S. companies are the world’s Leaders in analytical maturity, it also discovered that they are 10 percent less likely to invest in data privacy than the rest of the world. U.S. companies are also 20 percent less likely to invest time and resources to make their data management processes compliant with the General Data Protection Regulation (GDPR).
Mr. Van den Bossche explains the severity of this finding: “This is somewhat alarming especially given the recent issues around data privacy globally, and what is shared with other companies and countries. It has two main implications, first being that U.S. companies are adhering less to data privacy and secondly, that if similar GDPR rules were brought to the U.S., companies would take far longer to transition than companies in other regions.”
U.S. companies are still, however, leading their global peers in maturity and impact from their analytics functions, referring to how developed their analytics capabilities are and how much value their analytics operations add to the bottom line. These organizations are more mature in their analytics approach, scoring 5 to 10 percent higher in analytics practices and processes than the rest of the world and extracting greater returns from analytics.
Even so, there is a discrepancy between industries in the United States in terms of maturity of use—with the health industry, including pharma and healthcare—outperforming the least mature industry—energy and process industries including oil and gas, mining, and utilities—by 21 percent. The health industry performed best in class in data management, while energy and process industries lagged in analytics strategy and culture.
In addition, analytics teams led by C-suite execs generate more than twice as much profit as those led by managers. Without strategy and leadership properly implemented within the analytics function, companies cannot get the most out of their systems and talent, which many spend a great deal on. Analytics professionals are in high demand, with organizations worldwide struggling to retain talent.
Professor Kayande, founding director of the Melbourne Business School’s Centre for Business Analytics, noted the importance of talent in the overall equation, but that’s not enough. “The picture is incomplete without also focusing on culture and governance, data ecosystems, and strategy and leadership,” he said. “All of these things together make analytics operations effective.”
Both the 2018 and 2019 Analytics Impact Indexes show that strategy and top-level leadership are essential to extracting the full value from analytics. “Effective analytics strategies require buy-in at every level—at senior levels to ensure they’re approved and at lower levels to be implemented,” Kayande said. “Analytics teams led by C-suite executives are more likely to get the representation and support they need to secure this buy-in and in turn deliver a greater impact. In addition, analytics teams that are further down the line may lose sight of the bigger picture and focus on areas of lower priority and less impact.”
About A.T. Kearney
A.T. Kearney is a leading global management consulting firm with offices in 40 countries. Since 1926, we have been trusted advisors to the world’s foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues. To learn more about A.T. Kearney, visit www.atkearney.com.
About Melbourne Business School
Melbourne Business School is Australia’s leading provider of business education and insight, offering a range of MBA and other postgraduate degrees, short courses for professionals, and custom learning solutions for organizations. To find out more, visit mbs.edu. The Centre for Business Analytics was founded in 2014 to address the worldwide demand for analytics research and knowledge. It has launched several initiatives including the master of business analytics and master of analytics management degrees. To find out more, visit cfba.mbs.edu.
Source: A.T. Kearney and Melbourne Business School