The 2011 MIT Sloan Management Review and IBM study, Analytics: The Widening Divide showed how organizations that promote a data-driven analytics culture can create competitive advantage.
The hallmark of a data-driven culture is an expectation that all significant decisions are based on analysis of data. A cultural norm in most organizations is decisions based on intuition or “gut” are as acceptable as data-based decisions. Not surprisingly, the less data-oriented culture is unlikely to document cause-effect outcomes of its decisions so learning from experience is hindered.
A data-driven culture is more likely to make fact-based decisions that lead to increasingly effective actions. Decisions and their outcomes are captured as data about “what worked” and “what did not work” which supports subsequent decisions. Resulting outcomes become increasingly more effective.
Data-driven organizations are more likely to challenge the status quo and innovate. Such innovation creates competitive advantage.
Data-driven cultures do not arise spontaneously. They are based on foundations of structure, discipline, and cooperation created by leaders with a clear and comprehensive vision of what needs to be achieved.
At a minimum, leaders need to provide the basics:
- Provide the organization with the comprehensive, timely, and accurate data
- Provide the proper data management and analysis tools
- Teach employees how to make data-driven decisions using these tools
Most importantly, however, leaders need to become champions for a data-driven culture. With a combination of carrot and stick tactics, the organization must be moved toward a fundamental attitude change that places greater emphasis on data-based decisions.
Competency #3 – Data Oriented Culture – In a data oriented culture behaviors, practices, and beliefs are consistent with the principle that business decisions at every level are based on analysis of data. Leaders within organizations that have mastered this competency have an expectation that decisions must be arrived at analytically, and explain how analytics is needed to achieve their long-term vision.
Organizations with this culture are likely to excel at innovation and strategies that differentiate them from their peers. They typically benefit from a top-down mandate and leaders clearly articulate an expectation for analytical decision making aligned to business objectives. Transformed organizations in fact are nearly 5 times more likely to do this than Aspirational organizations.
In these data-driven cultures, expectations are high. Before giving the green light to a new service offering or operational approach, for example, leaders ask for the analytics to support it. They express their conviction in the value of faster and more precise decisions by using analytics to support it. They express their conviction in the value of faster and more precise decisions by using by using analytics to guide day-to-day operations. Employees are confident they have the information to make data-based decisions. They are encouraged to challenge the status quo and follow the facts in order to innovate. Transformed Organizations are more than likely as Aspirational groups to be receptive to new insights.
Transformed organizations act on the data:
Capability: Fact-driven leadership
- open to new ideas that challenge current practices 77% vs 39%
- Individuals have data for decisions 63% vs 16%
Capability: Strategy and operations guided by insights
- Guide future strategies with analytics 72% vs 15%
- Guide day-to-day operations with analytics 67% vs 15%
Capability: Analytics used as a strategic asset
- Use analytics as core part of business strategy and operations 72% vs 15%
- Increased use of analytics in the past year 70% vs 34%