EY: Only third of businesses use big data strategically

21 January 2015 Consultancy.uk

Although most companies recognise the added value of big data analytics for their business, only a third have operations to ensure that big data is at the heart of every business decision, research by EY shows. This underlines, according to the firm, the divergence between these companies’ data ambition and current reality, which should be addressed by setting up the right data structures and governance.

Professional services firm EY, in collaboration with independent community Nimbus Ninety, recently released a new report, titled ‘Becoming an analytics driven organisation to create value’. This research provides new insight on big data trends and challenges and on how companies are using big data to measure, create and protect value across their businesses. The research is based on a survey conducted among 270 senior executives active in big data projects who responded to questions on all aspects of their data strategy.

EY and Nimbus Ninety

The vast majority of respondents, 81%, believe that data should be at the heart of every business decision. The most cited drivers to implement big data analytics are ‘to understand customers better’, with 73% believing this will create value for their company, closely followed by ‘to improve products and services’ (72%).

“In essence, analytics can enable an organisation to effectively grow, optimise and protect value. Firstly, big data has become an invaluable tool for creating value in a business. Secondly, big data can help organisations protect value based on effective risk mitigation and compliance with ever-changing regulations. Thirdly, analytics can help organisations find and measure intangible sources of value more effectively, bringing together hard facts from the balance sheet with a range of qualitative evidence,” explains Herman Heyns, EY’s Head of Big Data and Analytics, UK & Ireland.

Top 10 drivers to implement big data analytics

The research, however, also reveals that while almost all businesses now recognise the power of analytics to grow, optimise and protect value, the majority of these businesses still use data analytics in an ‘isolated way’. By addressing specific business issues, instead of as an overall strategy, the potential value to increase performance and efficiency is limited, the consulting firm states.

Strategic decision making
For companies to be able to collect and analyse data and deliver insight, the right organisational structures, processes and governance frameworks should be in place. Of the 81% that believe data analytics should be used strategically, only a third (31%) has restructured their operations to help big data be at the heart of every business decision. In addition, while the importance of ‘cross-functional working’ for delivering successful big data projects is recognised by 41%, just 23% of organisations have implemented an organisation-wide data strategy. According to EY, this shows a major gulf between companies’ big data ambitions and their current achievements.

Organisation-wide data strategy

“Data can be the lifeblood of an organisation if it is allowed to flow freely across the entire ecosystem. As our research shows, building the right organisational structure and governance framework to support value-driven decision making remains a challenge for many businesses out there. Businesses need to invest on the necessary skills, structure and data governance that will help them build a data strategy that is trusted, valued and supported by key stakeholders,” concludes Heyns.

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Pre-emptive business transformations show prevention better than treatment

18 December 2018 Consultancy.uk

An extensive business transformation can be one of the most daunting tasks to face an executive in modern business, causing many to put off until tomorrow what they could achieve today. However, a new analysis has unsurprisingly found it is better to jump before you are pushed, as those who transform early do so more quickly, and with less restructuring costs.

While business transformations can seem like long and arduous processes, the fact remains that in a crowded market, the early adoption of new technologies could offer priceless opportunities for companies to pull away from the competition. Illustrating this, a recent survey from the McKinsey Global Institute found that leaders in AI adoption could expect an overall output gain of 135% compared to -44% among those who held back on their transformation efforts.

Now, new analysis from The Boston Consulting Group has shown that getting a transformation programme underway early, even pre-empting a need for transformation, can improve outcomes quickly. The research, based on more than 600 companies whose market capitalisation breached at least $5 billion between 2010 and 2014, found that in almost all industries, quicker was better.

In most industries pre-emptive transformations creates more value

The only industry not to enjoy a positive boost in value creation from pre-emptive transformation was the financial services sector, in which rushing to innovate without a business need could see value fall by 3.3%. At the other end of the spectrum, however, operators in the materials segment could benefit from a 9.5% improvement in value, if they were to pre-emptively transform.

Largely, then, BCG’s research suggests that the earlier a company transforms, the better its future performance will be. If a company takes a reactive standpoint to change and transforms later, it will likely see a stagnation in performance at best, while pre-emptive transformers could see an improvement in performance of as much as 6%.

The earlier a company transforms the better

More than meets the eye

The results serve as a caution for those business leaders who believe a change completed at any moment will yield the same results, only later. According to BCG’s paper, this is because there are a number of secondary benefits to pre-emptive transformation.

The time required to transform in a pre-emptive move is found to be two months shorter – 12 instead of 14 – which in turn means the average restructuring cost also tends to be lower. In a pre-emptive change, just 1.5% of revenues go towards the transformation, compared to over 1.8% in reactive cases, while there is also 5% less likelihood of leadership change. 21% of reactive firms face leadership changes during a transformation, and unplanned leadership changes like this often have negative impacts on business outcomes as well.

Pre-emptive transformation takes less time, costs less and increases stability

In spite of these figures, however, BCG found that pre-emptive transformations remain relatively uncommon. In any given year, the researchers estimated that only 15% of outperforming companies embark on transformations, while a slightly higher 20% of underperformers and 25% of severe underperformers do so.

To an extent, this could be said to show that success breeds complacency, but it should also serve to put a fire under all three groups. For those struggling, the opportunity is clear; they can make ground on successful firms if they transform now. At the same time, successful firms should be wary of previously troubled competitors, who could suddenly be breathing down their necks if they transform sooner rather than later.