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IBV Study on Analytics Part 2: Influencing value creation with big data and analytics

November 19, 2013

This is Part 2 of our series on the findings and text from IBM Institute for Business Value’s latest study and paper - “Analytics: A blueprint for value - Converting big data and analytics insights into results”.

In Part 1, we introduced the concept of nine levers that represent the sets of capabilities that most differentiated Leaders from other respondents in the study.  You recall that Leaders were identified as substantially outperforming their industry and market peers and attribute much of their success to analytics. 

In the course of the study, my colleagues Fred Balboni, Glenn Finch, Cathy Rodenbeck Reese and Rebecca Shockley found that some levers have greater influence on an organization’s ability to deliver value from the data and analytics available.  While all nine levers distinguish Leaders from other respondents, each lever does not impact value creation in the same way.  We identified three levels of value impact among the levers:

  • Enable: These levers form the basis for big data and analytics.
  • Drive: These levers are needed to realize value from data and analytics; lack of sophistication within these levers will impede value creation.
  • Amplify: These levers boost value creation.

Understanding how each lever creates value – whether as an Enabler, Driver or Amplifier – is important in developing an analytics strategy. For example, Enable levers need to be in place before value can be generated through Drive and Amplify levers (see Figure 1).

Enable

The Enable levers create the foundation for big data and analytics. These levers form the basis around which data analysis, discovery and analytic value creation can occur.  Levers at the Enable level are Source of value, Measurement and Platform (see Figure 2).

Because the Enable levers serve as a foundation, Leaders are setting the organizational direction for analytics by aligning their big data and analytics strategy with the enterprise strategy and investing in scalable and extensible information management capabilities. Through these investments, they develop a system to measure success and create a platform capable of embracing today’s rapid technological advances.

Source of value

Actions and decisions that generate results

Not every organization derives value from the same activities.  The spectrum of value outcomes ranges from cost management to revenue generation. Organizations that derive the most value have a clear understanding of the source of that value and target activities toward meeting specific objectives.

A majority of all respondents reported growth-driven expansion efforts as the source of value from their current analytics investments. Seventy-five percent of Leaders, and 70 percent of all other respondents, attributed the value of analytics solutions to their ability to increase revenues, increase the speed and accuracy of decisions, and generate innovative ideas. Only 25 percent of Leaders said the primary source of value was from cost-containment activities such as reducing operational costs and improving efficiency (see Figure 3).

One in eight organizations, however, experience a disconnect between how the source of value is realized within their organization and what the currently defined objective is for the use of analytics. In these organizations, respondents cited revenue-enhancing activities as the source of value; however, elsewhere they noted the organizations’ current objectives were primarily focused on cost controls.

Organizations that derive the most value will be those that clearly understand the source of value and target activities toward objectives associated with that value. For example, among the Leaders targeting revenue-generation objectives, more than one-third (37 percent) are focused specifically on activities designed to better know, understand, interact with and engage with customers. These kinds of activities often require consolidation and analysis of vast stores of customer data before value creation can get underway.

In Part 3, we will look at evaluating the impact on business outcomes from big data and analytics with a look into the second of three Enable levers – Measurement.