The Reason So Many Analytics Efforts Fall Short7 September, 2016 / Articles
Given the role analytics has played in reshaping industries and rewarding innovative adopters over the last two decades, it is surprising how frequently we are asked: “Does this analytics stuff really work?” More often than not, the reason for the skepticism is prior efforts that did not produce the expected competitive advantage.
Such skepticism led us to study the impact that analytics has had on our clients over the last 20 years. Our surprising finding: Efforts to adopt analytics upset the balance of power in the C-suite, and this shift often had a negative impact on analytics initiatives.
Given the myriad other factors buffeting companies at any given time, the design of our assessment was intentionally simple. We only included companies that had implemented a major analytics initiative with an innovation or similar agenda. Our team examined each organization over at least a four-year timespan. Success was measured quantitatively by the firm’s performance (profit and growth) vs. that of its competitors, and also qualitatively by interviews with senior executives who were involved, but not deeply invested, in the efforts (typically the CFO).
Frankly, the results surprised us: Only a little more than one in three of the three-dozen companies that we studied met the objectives of their analytics initiatives over the long term. Clearly, driving major innovations with analytics was harder than many executives expected.
Further study of the less-successful cohort revealed that leadership issues were often at the heart of the problems.
Shaped by history, personalities, and events, levels of influence among the members of the C-suite were not all equal. But in order to function effectively, the rivalries and politics had evolved to a tacit equilibrium. While skirmishes occurred constantly on recurring allocation matters (i.e., budgets and plans), the balance of power proved to be quite resilient. This benefited these organizations in many ways, including providing a stable direction for employees.
But the commitment to advanced analytics disrupted this equilibrium. Since there was no natural owner of analytics within the traditional organizational structure, multiple executives competed hard to own the new capability. While not every C-suite member wanted to manage such a high-stakes opportunity, the most powerful members were eager to oversee an influential new pool of talent and command more time on the board’s agenda.
With the exception of the “winner,” a feeling of vulnerability settled over the other executive team members when the analysis conducted by the analytics group revealed inefficiencies and missed opportunities in their respective functions. For these individuals, the triple whammy of ceding budget to the new initiative, having your turf “scanned” for innovation opportunities, and then being assessed on whether you have the skills to manage in a new data-driven environment was disruptive, to say the least.
In all too many cases, the CEO devoted little time to trying to manage this dynamic. As we mentioned in an earlier article, the CEO must play a leading role in establishing the analytics function in his or her organization.
What should a CEO do? Anticipate the reaction. Start by talking openly about the journey and the inherent sense of vulnerability executives are bound to feel as the business model changes. Being transparent about the level of expected change moves the dialogue above the table. It also helps executives think through the new skills they will need to use.
Next, while CEOs should certainly champion the importance of analytics, they should not overlook the people whose hard work is actually funding the investment, and they must model the level of needed collaboration. Discovering and creating the future requires many eyes and total collaboration. CEOs should identify the executives most vested in the status quo and proactively manage their resistance.
Essentially, this requires a running one-to-one dialogue to make sure resistors are either on board or, if not, at least are doing no harm. In our research, we saw that the firms of leaders who successfully managed the disruptions in the C-suite benefitted from the innovations that analytics helped deliver.
Managing the power shifts in the C-suite that analytics can spark is arguably one of the most important and most difficult challenges that CEOs face. But it is one they must get right if their companies are to use analytics to innovate and gain an advantage over competitors.