A.T. Kearney: The best use of analytics boosted profits by 83%

Advanced analytics are an indispensable part of doing business in the 21st century, but few businesses are leveraging the full potential of their existing analytics capabilities, with just a fraction achieving the substantial cost savings and profitability improvements that digital transformation and advanced analytics have to offer, according to A.T. Kearney’s “Value of Analytics in 2019” study.

It revealed that just 6% of businesses surveyed have adopted the methods and mindset required to be an analytics leader, including C-suite commitment to an analytics strategy aligned with the broader business strategy, real-time data availability, and an entrenched culture of data-driven decision making. Those organizations saw an increased profitability of up to 83% relative to counterparts who made minimal use of their data and had yet to integrate analytics into their company culture, the study said.

A.T. Kearney and the Melbourne Business School in Australia surveyed over 350 companies across 27 industries with a median revenue of $745 million to measure the maturity of their analytics program and the impact it has had on their business.

What is analytics maturity?

Analytics maturity was determined by measuring dimensions of strategy and leadership, culture and governance, talent and skills, and the data ecosystem maintained by a given organization. Strategy and leadership analytics maturity were greatly impacted by developing and maintaining an up-to-date analytics roadmap that integrates an understanding of the mechanics of key performance indicators. The survey revealed that while 91% of businesses that were leaders in analytics development had such a roadmap, just 11% of those at a lower maturity level had the same.

Culture and governance had an outsized impact on both analytics maturity of an organization and dollars invested into analytics projects. The survey said that 100% of respondents at leading organizations said they felt an organization-wide appreciation for analytics, while just 20% of respondents at lower levels of maturity felt the same. This measure was also tied strongly to C-suite engagement that generated additional interest and integration of analytics projects with the overall business strategy, as well as greater investment in prototype or trial projects that could eventually lead to cost savings or enhanced products and processes.

Talent retention was difficult for all respondents, but leaders had the best results thanks to a strong commitment to high quality data infrastructure that encompassed the entire business.

Analytics professionals were much more willing to stick with a given company when they made significant investments in high quality data gathering and warehousing solutions that made analytics roles more impactful and enjoyable for top talent.

Getting your ROI

Companies with the greatest analytics maturity attributed an average of 9% of profits to their analytics activities, with none reporting less than 5%. By comparison, businesses with the lowest maturity attributed 5% to 0% of their profits to analytics activities.

When applying analytics to their organizations, survey respondents found the greatest short-term impacts came from investments in supply-side activities, like operations, and finance activities, like cash flow analytics, predictive maintenance and scheduling optimizations. Crucially, organizations with high analytics maturity saw significantly lower payback periods for their investments of six to 24 months, with an average of about 12 months, the survey said.

Organizations with the lowest level of maturity took much longer to get a return on investments — with their payback periods averaging 20 months. Leading businesses also saw substantial additional ROI on analytics-driven projects averaging 24% when investments in analytics were targeted to align with the overall business strategy, compared to making level investments in all analytics projects.

In an earlier study this year, Paul Derstine, of Elder Research, also performed a review of analytics ROI studies and identified a host of additional examples of how data analysis can enhance operations, reduce fraud and generate additional ROI for all kinds of businesses.

In analytics, leadership matters

A key finding of the A.T. Kearney analytics study was the importance of having analytics teams led by C-suite executives. The study found that these teams delivered more than twice as much profit as those led by mid-tier managers and were far more likely to have an effectively integrated analytics roadmap and robust data infrastructure.

The effect is attributed largely to buy-in, where support for analytics initiatives is as strong from the top as it is on the operational level. Teams led by C-suite executives also benefited from a high-level commitment to shifting to a data-driven culture within their organization, and the teams were more often provided the resources to experiment and pursue more long-term analytics goals.