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Why Analytic Organizations Do Everything Better
Information Management Magazine, July 2008
More than Just Winning Decisions
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At any given moment within an organization, hundreds or perhaps even thousands of critical decisions are being made. These decisions will affect the organization’s ability to generate revenue, control expenses and manage risk while also having a direct impact on both on top and bottom lines, market and mind share.
Because one of the principle activities of high-value knowledge workers is making these critical decisions, it is increasingly being recognized that they should have the tools needed to make the best decisions possible. As the importance of analytics and business intelligence (BI) to all parts of the enterprise grows, the set of business processes being addressed by BI and analytics tools is also expanding. But BI can only be truly pervasive when the tools become a seamless part of the business users’ day because they are so embedded into business processes that they completely disappear into everyday functions.
This does not happen overnight, but happily for organizations that are just getting started, there are substantial benefits to be realized along the road to truly pervasive BI. While the value of streamlined and more efficient business processes is important and not to be underestimated, it is just one benefit. Another, perhaps underestimated, advantage is the growth and development of an analytically minded business culture. By altering the cultural mind set of an organization, implementation of analytics opens the door to efficiency and effectiveness beyond just optimization of business processes.
Organizations with an analytic culture simply do everything better. They develop better plans because they are accustomed to asking and answering tough questions. They execute against those plans more effectively by using data, often interactively and in real time, to fine-tune and manage projects. They hire better people because they are better attuned to what makes a key person valuable, and they provide an atmosphere that encourages results-oriented assessment.
Sounds like a pretty good situation, doesn’t it? But are there disadvantages to being an analytically focused organization? Once everyone starts thinking like a number cruncher, is there a danger that the organization will become less creative or spontaneous? While it’s possible, it is by no means likely, and depends on whether or not you foster an analytic culture within the organization.
Characteristics of an Analytic Culture
An analytic culture is much more than simply trusting the numbers. The guiding principle of businesses with analytic cultures is that they see things as they are. When something sounds too good to be true, they investigate further. They insist on looking closely at available data and challenging assumptions and commonly held biases before leaping to conclusions. This culture of fact-based decision-making is a key to these businesses’ success – and not just success in the cases where they have applied analytics to their business processes, but throughout their organizations.
In addition to tendency to look deeply into the information available, analytic organizations are also better equipped to make decisions when little information is available. It’s true that a fact-based decision-making process is not at its best in the face of limited data, but analytically minded professionals - like their nonanalytic colleagues - are still able to make gut decisions. Despite their commitment to fact-based decision-making, they know that always having perfect information is unrealistic in today’s business world and that decision speed can be critical to a project’s or organization’s success. However, when they make decisions under conditions of uncertainty, they are acutely aware that those decisions were made without full information and that as new information becomes available their conclusions should be subject to revision. This leads to a more flexible business that reacts appropriately as facts change but is not always the case in less-analytically focused organizations.
Similarly, an analytic mind-set is not a barrier to creativity or spontaneity. Thinking analytically is about much more than number crunching. Developing hypotheses for surprising data, finding ways to test those hypotheses, and interpreting and applying the results in the context of business needs are intellectually challenging and essentially creative endeavors. With the right tools to help, there is a certain art to presenting data in a way that allows front line business users to draw the correct conclusions easily. There’s nothing about such analytic thinking that prevents brainstorming - it simply means that decisions are made on facts and not assumptions.
Delivering on the Promise
This concept raises the question: can an organizational, analytic mindset be created where it does not already exist? Fostering an analytic culture potentially can require some changes in attitude at the top levels of a company. Managers who reward fact-based decision-making typically see their organizations flourish, but this type of change requires consistent encouragement. There can also be cultural resistance and other challenges that create barriers for organizations undertaking such change – and frankly, it’s not possible to know how each organization will take to such change. However, the potential advantages of analytic thinking and decision-making are well worth the effort.
Decades of BI and analytics innovation have brought us to this point. Analytic organizations embody the future of business planning and execution, and the analytically minded business cultures that thrive in such organizations are part of their strength. Industry leaders from around the globe are increasingly realizing the benefits of using data to align their current actions with their future objectives. If they’re smart, they will realize that the benefits of pervasive BI are not found only in the tools and processes they enable, but also in the ideas and mind-set which they foster.
In his role as an analytics evangelist for Spotfire, a division of TIBCO Software Inc., Tim Wormus is responsible for tracking and analyzing analytics and business intelligence trends, as well as advocating their use and acceptance at Global 200 companies.
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