Financial rigor in the analytics funding process
This is part nine of our series on the findings and text from the IBM Institute for Business Value’s latest study and paper “Analytics: A blueprint for value - Converting big data and analytics insights into results” from my colleagues Fred Balboni, Glenn Finch, Cathy Rodenbeck Reese and Rebecca Shockley.
In part eight we discussed Amplify, the final level of impact and the first of its three levers: Sponsorship. The Amplify levers provide the momentum and capabilities to transform insights into actions that positively impact an organization’s bottom line. In this part we will discuss the second Amplify lever: Funding.
Organizations that derive the most value from analytics take a disciplined approach to performance and implement processes to manage and monitor analytic investments. While there is an implicit connection to the level of sponsorship, we find that the structure, formality and follow through associated with the funding process influences how much value the organization will derive from those investments.
Leaders use a rigorous evaluation process and pool resources to fund analytic investments. Leaders allocate funding for a shared roadmap and resources, and implement a metrics-based funding process that reviews forecasted cost-benefit analysis to evaluate investments.
Almost two-thirds of Leaders allocate funding to support a shared pool of resources and activities. To fund these activities, one-third of Leaders allocates analytics funding for cross-silo activities and resources without impacting business units' budgets, while the other third either have a funding arrangement whereby business leaders contribute to a shared funding pool to support those activities in advance, or through a chargeback model, whereby business executives fund a portion of the investments needed for these shared resources based on the amount of services they use. Only 15 percent of Leaders don’t have some level of shared resources. To decide how to utilize these shared resources, almost a third of Leaders require a cost-benefit analysis or self-funding plan prior to funding analytics efforts. One-quarter of Leaders require analytic investments to be justified by piloted or sandboxed results prior to full implementation (see Figure 12).
In part 10 we will discuss Expertise, the third and last Amplify lever dealing with professional development and access to skills and capabilities, and how Leaders vary significantly from others in the level of professional investment made in analytics resources.
Catch up on the entire series so far with parts one through eight: