Operational analytics offers large value, yet maturity still is low

29 March 2016 Consultancy.uk

Companies are increasingly turning to operational analytics, not only as a means to bolster productivity levels, but also to support better client-facing activities. Maturity across the board is, however, still low – yet, with billions in value untapped and up for the grabs, it is expected that transformations geared at boosting the adoption of operational analytics will be on the rise.

Given that digitisation had such a transformative effect on customer behaviour and relationships, it is perhaps not surprising that in the early stages of digital transitions many organisations focused their efforts on the customer experience front-end. A study conducted by MIT Sloan Management Review in 2013 found that at the time around 40% of digital initiatives were focused on the customer experience, while 26% were aimed at bolstering the performance of operations, spanning among others production, supply chain and internal processes.

However, new research by Capgemini Consulting shows that the momentum is shifting from the front-end to the back-end. The firm’s survey – held among more than 600 executives from the US, Europe and China – finds that today over 70% of organisations put more emphasis on operations than on consumer-focused processes for their analytics initiatives. “Times are changing”, write the authors.

When it comes to the adoption of operational analytics, the US, China and France lead the pack, followed by the UK and the Netherlands. 

According to the analysis, the shift follows from a simple economic equation: the size of the prize on offer, with the manufacturing industry taken as an example. By utilising data, players in the industry can realise benefits of up to $371 billion globally. $117 billion stems from data-driven operational improvement, while consumer facing processes account for “just” $38 billion.

The disparity in these benefits can, according to the consulting firm, be explained by the sheer spread of improvements that can be delivered from operational analytics: reduced downtime, improved productivity, better capacity utilisation, accurate forecasting capability, and higher flexibility in response to external events. In-depth cases studies conducted across industries – from retail to public sector or oil & gas – show that the conclusion “holds across sectors”, state the authors.

The report further concludes that the world between customers and operations is blending, in particular at the back-end of the spectrum. Increasingly the impact of operational analytics and more streamlined performance of operational processes is bolstering the customer experience offered. For example, Tesco is using analytics for its supply chain processes and to date this has delivered the retailer massive cost savings in its value chain (~£100 million). Yet the use of cutting-edge supply chain statistical models to predict customer behaviour is also benefiting consumers – as it stands Tesco clients have a 97% chance that they in-store and online can find what they are looking for. Years ago, the retailer’s so-called ‘Out of stock’ performance was poorer.

Despite the value of operational analytics, the researchers find that, in practice, uptake remains low. According to the survey, only 39% of organisations have extensively integrated their operational analytics initiatives with their business processes. Moreover, only 29% have so far successfully achieved the desired objectives from their operational analytics initiatives, with 40% of respondents saying that they have achieved only moderate success. These findings are consistent across geographies and industries.

In order to capture the value hidden within value chains, the management consultants have drafted a number of recommendations. Firstly, leaders in operational analytics – Capgemini Consulting dubs this group of players ‘Game Changers’ – have an integrated approach for data management, and one that is uniformly available, a feat which leads to a ‘single version of the truth’, down the line improving decision-making, collaboration and realisation of benefits. Leading firms also apply techniques to enhance data, including enrichment with external and unstructured data. “We found that 59% of leaders routinely collected unstructured data to improve the quality of data, compared to only 27% for Laggards.”

Thirdly, making analytics an essential part of the decision making process in operations is key, highlight the authors, and leaders significantly outperform peers in this respect. More than half (52%) of ‘Game Changers’ have integrated analytics in their decision-making process within operations, in the case of Laggards the percentage is 28%. In addition, the authors conclude that leaders are more effective in executing strategies and insights that stem from operational analytics, which ultimately, represents a key driver for benefit realisation.

Based on the findings of the study, Capgemini Consulting concludes that across industries and organisations there still is a distance to run. Around 18% of organisations have what it takes in terms of maturity and have the privilege to call themselves Game Changers, the rest still either has a long or a shorter way to go. Either way, the road is one with a strong business case, state the authors, and one that deserves boardroom attention in the months to come.

‘Laggards’ are introducing analytics initiatives in their operations. They have mostly implemented proof of concepts and are struggling to realise benefits from their analytics initiatives.

‘Optimizers’ have typically realised early benefits from their analytics initiatives in a limited number of areas within their operations.

‘Strugglers’ have integrated analytics in most of their business processes; however, lag behind in realising benefits.

‘Game Changers’ have integrated most of their analytics initiatives with their business processes and have realised the desired benefits from their analytics initiatives.