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Preparing to Compete in the Digital Age

June 17, 2019
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Preparing to Compete in the Digital Age

 

By Raef Lawson, CMA, CSCA, CFA, CPA, CAE

The Digital Age is upon us, bringing with it challenges and opportunities for businesses. Using advanced analytics, businesses are able to glean new insights from their data. The collection, assessment, interpretation, and use of data are enabling companies to create new business models and make existing ones more efficient. Most organisations now believe that enhancing their digital and analytical capabilities is critical to their continued success and survival.

Yet a forthcoming study by IMA® (Institute of Management Accountants) found that implementation of leading-edge analytics remains very much a work-in-progress for most organisations, with few having completely executed their goals in analytics techniques and technologies. Reasons for this include the wide variety of technologies that are being adopted, the varying stages of maturity of those technologies, and the benefits that can be realised by each technology, among others.

Becoming Data-Driven

There are four essential elements in establishing a data-driven organisation: data-savvy people; quality data; appropriate tools; and processes and incentives that support analytical decision- making. IMA’s study found that organisations attempting to adopt leading-edge analytics often face challenges in each of these dimensions. The result is an inability to effectively support managerial decision-making through the use of analytical technologies.

Becoming a data-driven organisation requires creating structures, processes, and incentives to support analytical decision-making. It requires the organisation to resolve to be data-driven and define what it hopes to accomplish through the use of Big Data and analytics. The top leadership of the organisation needs to describe how analytics will shape the business’ performance.

Identifying Key Factors

Our study identified six key factors for successfully establishing a data-driven organisational culture:

  • The right tone at the top. Setting the right tone at the top is critical for most organisational initiatives, including developing a data-driven culture. In most organisations, executives are championing the use of leading-edge analytics, although in some companies, the initiative is being led from the bottom up, with various departments being first to embrace it.
  • Strategies for the effective use of technology. Companies whose decision-making is reactive to the competition are less likely to have developed strategies for the effective use of techniques and technologies. Being reactive instead of proactive implies that these organisations lack the ability to predict trends or to turn customer data into useful insights that can be used to enhance the organisation’s business.
  • A commitment to collecting and using data from both internal and external sources to support analytics efforts. To harness the potential of leading-edge analytics, organisations need to utilise a wide variety of data sources, especially when it comes to strategy development and execution. In this regard, about half of organisations use data from both internal and external sources. Of concern is that the other half of organisations are only using internal data, only using data to validate strategy post-execution, or (in a few cases) not using data at all!
  • Using both monetary and non-monetary rewards to promote analytical decision-making. Slightly more than half of organisations use incentives to promote analytical decision-making. These can be monetary, non-monetary, or both. Yet nearly half of organisations aren’t doing so. This may be a mistake: The use of incentives is key to conveying the importance of developing enhanced analytics capabilities throughout an organisation.
  • Willingness to adequately provide resources to the analytics efforts. Organisations often are facing resource challenges concerning the development of enhanced analytics capabilities. By far, the most frequently cited challenge is the ability to find staff with the necessary skill set. The next most common resource challenge is budget. A third challenge is a lack of staffing resources and competing priorities.
  • Alignment of analytics efforts throughout the organisation. Responsibility for analytics can reside in various parts of an organisation. It’s been argued that CFOs should “own” analytics as they are regarded as impartial “guardians of the truth.” Most companies seem to agree, with finance being an owner (although often not the sole owner) of analytics. Other popular options include analytics being owned by IT, a dedicated analytics group, or operations, or having each department independently maintaining its own analytics capabilities.

The benefits of implementing a data-driven culture are clear – organisations possessing such cultures more effectively perform key business processes such as strategy formulation and performance evaluation. In implementing such a culture, establishing processes and incentives that support analytical decision-making (i.e., organisational intent) is critical.

When deciding to implement leading-edge analytics, evaluate the extent to which the six factors discussed above are present in your organisation. By ensuring that they are, you can improve the chances of successful implementation and achieving the competitive benefits that come with being data-driven.

Copyright 2018 by IMA®, Montvale, N.J., www.imanet.org, used with permission.