Survey: Cos. Lack Business Intelligence Capabilities

Despite a growing push in business intelligence tools by software vendors, most companies are still lagging in the analytical skills that help drive better decision making.

That’s according to a recent survey of more than 1,900 technology executives and business professionals conducted by Deloitte during a recent Webcast poll. The findings revealed that approximately one-third of the participants either didn’t know if their company used business analytics or if they had business analytics capabilities at all.

John Lucker, a principal with Deloitte Consulting, and a leader of its Advanced Analytics and Modeling practice, called the findings “mind-boggling.”

Overall, the responses showed that most companies are “still struggling with fundamental technical and business process foundations that will allow their organization to implement and use business analytics in a strategic and sustainable way,” said Lucker.

Business analytics is the practice of using data skills, technologies, and methods to drive business strategy and performance. It requires a range of capabilities—from looking backward to evaluate what happened in the past, to forward-looking approaches like scenario planning and predictive modeling.

The adoption of business analytic practices presents enormous potential value for business leaders to make more informed, fact-based, and ultimately better business decisions, analytics experts say.

The results of the Deloitte poll, thus, raise one obvious question: Why aren’t more companies adopting these capabilities?

One likely reason, as also revealed by the survey, could be explained by the siloed approach that many companies appear to be taking. When asked to describe the scope of data management across their organization, the plurality of respondents (31 percent) answered with “limited, cross-functional interaction,” while the second highest number of respondents (21 percent) answered, “departmentally siloed.” Only 20 percent said they take an enterprise-wide approach.

Masud

The survey results are somewhat troubling, because “these activities should not be performed in isolation,” said Mo Masud, a senior manager of Deloitte Consulting, who also spoke during the Webcast. Instead, he said that strategy, governance, technology, processes, and people all need to work in conjunction with one another throughout the organization.

The problem with operating in buckets is that you’re only able to achieve application-specific benefits, or benefits specific to a business unit, said Lucker. Defining it at the top and embedding it within all levels of the organization can really create “significant value,” he said.

Achieving that, however, “really requires a shift in how companies have historically used data,” said Masud. Over the last two decades, businesses have invested heavily in process-orientated systems that streamline operations, creating significant amounts of organized and structured data.

“Never before have companies been able to gather so much information in so many ways in every aspect of their business.” but still lack an integrated view.

—John Lucker,

Principal,

Deloitte Consulting

Even today, companies continue to collect growing amounts of information about their customers, their transactions, and interactions generated through Customer Relationship Management & Sales, Enterprise Resource Planning, and other systems. “Never before have companies been able to gather so much information in so many ways in every aspect of their business,” but still lack an integrated view, said Lucker.

Business Analytics Defined

Companies need a more efficient way to analyze all that structured data, and that’s where business analytics comes into play. Lucker described it as a pyramid, made up of four key capabilities:

Data management;

Business intelligence;

Performance management; and

Advanced analytics.

At the foundation of that pyramid is data management, which Lucker described as the development and execution of technical architectures, policies, practices, and procedures that manage the collection, quality, standardization, integration, and aggregation of data across the enterprise.

Above that is business intelligence, which essentially is the means by which companies slice and dice data to monitor and mitigate risk. In the event of an adverse situation, business intelligence helps answer such questions as: What happened and where? How often is it occurring? What actions are needed?

Second highest on the pyramid is performance management, an umbrella term to describe the methodologies, metrics, processes, and analytical applications used to monitor and manage the business performance of an enterprise. Examples include:

Budgeting, planning, and forecasting;

Profitability modeling and optimization;

Scorecard applications; and

Financial reporting and consolidation.

With so much data to keep track of, analytic experts agree it’s easy to suffer from “analysis paralysis”—the act of over-analyzing a situation to the point that no decision or action is ever taken. But as long as error in data quality isn’t systemic and there’s no bias in data that occurs, it’s important to realize that analysis always creates an answer of some kind, stressed Lucker.

Lastly, at the pinnacle of the pyramid is advanced analytics, which is the use of modern data mining, pattern matching, data visualization, and predictive modeling tools to produce analyses and algorithms that can help businesses make better decisions. Advanced analytics answer the questions: Why is this happening? What if the trends continue? What will happen next? What is the preferred outcome?

In the Deloitte poll, 40 percent of respondents said that “improving operational efficiency” is the number one priority in applying business analytics. “Customer segmentation and target marketing” was ranked as the second leading priority at 17 percent.

DRIVEN STRATEGIES

The following chart, “Business Analytics: Driven Strategies,” from Deloitte shows the basic business analytics tools that drive complex strategies:

Business Analytics capabilities range from basic fundamentals like data management and

business intelligence to more sophisticated capabilities such as performance management,

predictive modeling, asset intelligence, automation, and more.

These more advanced capabilities move up

the stack in terms of value potential and

speed—and across the organization to drive

faster, deeper adoption.

Engage the full spectrum of people,

processes, technology, and governance

Look ahead to faster, smarter choices

Use automation to reduce latency

Apply change management tied to

embedded capabilities and outcomes

Create a culture that thrives on fact-based

decisions

Source: Deloitte.

Lucker noted that it doesn’t matter what department any of these four capabilities on the pyramid scale reside, adding that it will vary by company. At times, data management resides heavily in IT, while business intelligence and analytics are spread throughout the organization.

Just don’t make the mistake, as many do, of making business analytics a purely IT function, he said, adding that the technical and business aspects need to be balanced.

Making the Case

Deloitte experts stressed that three powerful trends are driving the adoption of a new approach to business analytics: “an unforgiving demand for performance, a wake-up call for better risk management in the face of tougher regulatory enforcement, and exponentially increasing amounts of data to process, comprehend, and react to.”

Lucker

Therefore, communicating the value of business analytics, while a common challenge, is more important than ever. Make sure people stay focused on the business objective, said Lucker. Executives want answers and results and don’t necessarily care about the technical aspects of how you got there, so communicating it from a bottom-line perspective is the way “to create real linkage in getting executives to understand the value of this,” he said.

Many respondents to the Deloitte survey also noted the value in implementing business analytics. Thirty-one percent said increased profitability is the most important value proposition that can be achieved, while improved competitiveness and market position ranked second at 25 percent.

Said Lucker: “With economic upturns and downturns and the various cycles that we’re experiencing in various industries, the need for companies to become and remain competitive is even more important than ever.”